The history of RFID in logistics has been brief but tumultuous. The technology was thrust into the spotlight in 2003, when Wal-Mart and the U.S. Department of Defense issued their now-famous supplier mandates. At the time, RFID was hailed as an innovation that would transform the supply chain world and make out-of-stock problems a thing of the past. Within a few years, however, the hype had died down and some critics had begun to dismiss RFID as an oversold, overpriced version of the bar code.
So how have things really worked out? Has the RFID revolution gotten off the ground? How widely is the technology being used in logistics operations today? These are not easy questions to answer. While there's plenty of anecdotal evidence indicating that shippers and service providers have tried the tags on all manner of products with varying degrees of success, research on the actual implementations has been limited, making it tough to gauge the true extent of RFID adoption.
To get some answers, DC Velocity, Baylor University, and Bryant University surveyed the magazine's readers on their use of RFID in logistics and supply chain operations. The online survey, which was conducted in August and September of 2010, was completed by 175 respondents. One-third (33 percent) of those respondents said they worked in warehousing or distribution, and nearly the same percentage (32 percent) worked for manufacturers. The remainder worked in the third-party logistics services sector (14 percent), merchandising/retail (10 percent), material handling (6 percent), and transportation services (5 percent). Respondents' main areas of responsibility were warehouse operations (39 percent) and logistics management (33 percent).
The survey queried them about their use of RFID—whether they've deployed it and if they have, how they're using it, why they're using it, what barriers they've encountered, and what benefits they've gained (or hope to gain). What follows is a brief look at some of our findings.
Far from dead
Perhaps the most notable finding of our research was the indisputable evidence that reports of RFID's death have been greatly exaggerated. Nearly one-third of the survey respondents are already using, piloting, or in the midst of implementing RFID technologies in their logistics operations. Another 27 percent are considering implementing RFID in the next two years. That leaves a little more than 40 percent who are not using the technology or planning an RFID implementation in the near future.
While it's clear that RFID is far from a failed technology, it has yet to effect the sweeping supply chain transformations envisioned back in 2003. Our study suggests that this may be partly because users are deploying the technology a bit differently than originally expected.
For example, Wal-Mart intended to use RFID to automate inventory replenishment systems by tracking cases and pallets, while the Department of Defense (DOD) sought to track pallets and high-value parts at the unit level. The overarching objective in both cases was to improve overall supply chain performance.
Those goals have not been abandoned, but our study revealed that many users are implementing RFID with other aims in mind. Rather than focusing on streamlining overall supply chain performance, they're primarily using RFID to streamline and improve their **ital{internal} operations. Indeed, 59 percent of the survey respondents who already have some sort of RFID experience are focusing their implementations on internal improvements. Sixteen percent of them said that they view RFID implementation as a tactical move to improve efficiencies of specific processes within the company, and 43 percent see it as a strategic move to improve efficiencies of multiple, connected processes within the company. Meanwhile, only 27 percent consider it to be a strategic move that involves using RFID across the entire supply chain.
The list of tasks respondents are carrying out with the aid of RFID supports the idea that most of these implementations are aimed at internal improvements. They include the following (in descending order based on the extent of implementation):
In some cases, though, implementations were mostly about meeting mandates. Fourteen percent of the respondents who are currently using RFID said their company's management viewed their implementations as "reactive"—that is, driven by a trading partner's request or demand.
Benefits of RFID implementation
What did respondents who have experience with RFID (or plan to implement it soon) see as the main benefits? In terms of general categories, improvements in productivity and customer service were ranked highest, followed by communication and asset management. As far as specific operational benefits, "tracking of supply" came out on top in the rankings, with 85 percent of the respondents indicating they expected to see moderate to strong benefits from the use of RFID for tracking. Also highly ranked: reductions in fulfillment errors, improvements in the efficiency of order delivery/fulfillment, improvements in customer order tracking, and higher levels of customer satisfaction with the delivery fulfillment processes and outcomes. Respondents also said that RFID has enhanced the accuracy and availability of information in the supply chain, resulting in better inventory visibility, better visibility into supply chain processes, improvements in productivity, and reductions in operating costs.
One of our most interesting findings regarding benefits can be seen in Exhibit 1, which shows how respondents' perceptions of the potential benefits vary depending upon where they stand on the implementation continuum. Survey participants were asked to indicate, on a scale from "weak" to "strong," the level of benefit their company "may receive" from implementing RFID. Their answers showed that respondents whose companies are piloting the technology have higher expectations of the potential benefits of RFID than those who are in the process of implementing it or have already implemented it. As the chart shows, expectations in all four categories decline once a company gets past the pilot stage and moves into actual implementation.
Barriers to adoption
For all the benefits users have seen from tagging, it's clear that the RFID revolution is still in its early stages. What's holding companies back? According to the survey respondents, the primary barrier is cost (see Exhibit 2). This was no surprise, considering the high initial investment required to implement a comprehensive, cross-functional RFID system and the continuing concerns about return on investment (ROI). Other barriers included a lack of understanding of what RFID is (and is not), followed by technical issues and privacy/security concerns.
Once again, a respondent's implementation status affects his or her perception of the barriers' significance. In general, the more experience companies have with RFID, the less weight they're inclined to give those barriers. The exception is technical and privacy/security concerns in the piloting phase. We surmise that as users begin to work directly with RFID systems, they encounter unexpected technology problems, and data integrity issues become more important.
The good news is that as respondents moved from the piloting stage to completed implementations, their attitude toward the barriers began to change, with the obstacles taking on diminished significance. This indicates that organizations are able to overcome RFID-related problems and resolve any issues that arise during the pilot phase.
Take it slow
Perhaps the main takeaway from the study is that while plenty of barriers remain, companies are still forging ahead with RFID implementations and, perhaps more importantly, are finding these initiatives to be worthwhile. This is a significant change in perception from what we saw in our earlier studies, which found that respondents were unable to determine a business case or an ROI for RFID.
Furthermore, our research indicates that there is significant optimism regarding RFID implementation. Respondents who are already involved in RFID made it clear that the benefits to be gained from implementing this technology outweigh the obstacles and concerns. As an organization gains experience with RFID and moves into the pilot stage, the perception of benefits dramatically rises and the barriers start to seem less significant.
The key to a successful RFID implementation, according to many of our survey respondents, is to be selective about where it's used. While it may be tempting to jump in with both feet and try to implement it across the board, they say, companies would be better off identifying business processes that affect customer satisfaction and starting there.
Advice from the trenches
Thinking about implementing RFID in your own operations? Here's some practical advice from respondents who've been through the process.
"If you don't understand your input and output, you won't get accurate measurements. Be careful not to measure in too much detail. Step back from the problem and reconsider what information you really need."
"The important thing to understand is that RFID is not merely a bar code substitute, but a way to transform your products into wireless, identified objects. The benefits are just becoming known, and like the Internet, we can't predict how it will revolutionize our lives."
"Try to avoid one-off pilot projects and instead select a small-scale initial implementation and characterize it as such. 'Initial implementation' communicates commitment, whereas 'pilot' implies experimentation."
"Determine the greatest business needs that can be addressed by using RFID before recommending it as the solution to every problem. And be sure to consider the entire supply chain when calculating ROI."
"Implement RFID for the purpose of making a process improvement—use it to implement change. Conduct strategic communications and change management both internally and externally. Consider employing a trusted consulting firm that is 'product agnostic' to help you decide what you need and to assist with communications and change management."
"Use an integrator for the first implementation, then bring it in house. Beware of pure-play vendor-led RFID discussions (i.e., only talking to a reader vendor when you need tags, pOréals, PLC interfacing, etc.). ... To do them right, most jobs should be a hybrid of many different technologies (active, passive, LF, HF, UHF, access control, mobile, etc.). The focus should be on the business problem you are trying to solve. Find a partner that knows the 'physics of RFID' and can perform implementations as well as talk about operations and infrastructure."
Jeremy Van Puffelen grew up in a family-owned contract warehousing business and is now president of that firm, Prism Logistics. As a third-party logistics service provider (3PL), Prism operates a network of more than 2 million square feet of warehouse space in Northern California, serving clients in the consumer packaged goods (CPG), food and beverage, retail, and manufacturing sectors.
During his 21 years working at the family firm, Van Puffelen has taken on many of the jobs that are part of running a warehousing business, including custodial functions, operations, facilities management, business development, customer service, executive leadership, and team building. Since 2021, he has also served on the board of directors of the International Warehouse Logistics Association (IWLA), a trade organization for contract warehousing and logistics service providers.
Q: How would you describe the current state of the contract warehouse industry?
A: I think the current state of the industry is strong. For those that have been focused on building good client relationships over the years, I think it’s a really exciting time. Coming out of all the challenges of the past few years, I think there’s a lot of opportunity for growth and deeper partnerships. It’s fun to see the automation and AI (artificial intelligence) integration starting to evolve [in a way that’s] similar to what we saw with WMS (warehouse management systems) in the early 2000s.
Q: You are now president of your family firm. Is it an advantage having grown up in the business as opposed to working elsewhere?
A: I definitely believe it was an advantage growing up in the business. Whether it’s working with family or someone else in the industry, there’s always an advantage when you have mentors[to guide] you. I’ve been blessed to have several mentors, some in the industry, others just in life, and I’m thankful that they were willing to mentor me and that I was willing to listen to them.
Q: What are the biggest challenges currently facing 3PLs, and how are you addressing them?
A: Labor and legislation are both tough right now. The two seem to have a lot to do with each other, and it can make it tough to find and retain people. So I think we’ll see more and more automation of processes industrywide.
Q: Third-party service providers often must handle a wide variety of products for a lot of different clients. Does this variety make it difficult to invest in automation and other new technologies?
A: It can make things more difficult when looking at certain automation, but it’s in the “difficult” that a lot of opportunities lie. It would be tough to find a single solution that fits every client’s needs, but there are always opportunities to improve in certain areas. It just takes a bit of vision and commitment, and a willingness to invest in your own long-term success.
Q: As a 3PL, what do you look for when selecting the clients you work with?
A: Quality relationships that will last a long time. When both parties are happy and working together in the same direction, everyone wins.
Q: You’ve been a board member of the International Warehouse Logistics Association since 2021. Why is your involvement with this organization important to you?
A: I think it’s important to understand what’s happening in the industry. IWLA is a great resource for staying up to date and getting a solid education when it comes to the latest logistics trends. I also think it’s important to give back and pass along what we’ve learned to those just getting started in the business. As important as it is to have a mentor, it’s just as important to mentor and help others.
“While there have been some signs of tightening in consumer spending, September’s numbers show consumers are willing to spend where they see value,” NRF Chief Economist Jack Kleinhenz said in a release. “September sales come amid the recent trend of payroll gains and other positive economic signs. Clearly, consumers continue to carry the economy, and conditions for the retail sector remain favorable as we move into the holiday season.”
The Census Bureau said overall retail sales in September were up 0.4% seasonally adjusted month over month and up 1.7% unadjusted year over year. That compared with increases of 0.1% month over month and 2.2% year over year in August.
Likewise, September’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.7% seasonally adjusted month over month and up 2.4% unadjusted year over year. NRF is now forecasting that 2024 holiday sales will increase between 2.5% and 3.5% over the same time last year.
Despite those upward trends, consumer resilience isn’t a free pass for retailers to underinvest in their stores by overlooking labor, customer experience tech, or digital transformation, several analysts warned.
"The 2024 holiday season offers more ‘normalcy’ for retailers with inflation cooling. Still, there is no doubt that consumers continue to seek value. Promotions in general will play a larger role in the 2024 holiday season. Retailers are dealing with shrinking shopper loyalties, a larger number of competitors across more channels – and, of course, a more dynamic landscape where prices are shifting more frequently to win over consumers who are looking for great deals,” Matt Pavich, senior director of strategy & innovation at pricing optimization solutions provider Revionics, said in an email.
Nikki Baird, VP of strategy & product at retail technology company Aptos, likewise said that retailers need to keep their focus on improving their value proposition and customer experience. “Retailers aren’t just competing with other retailers when it comes to consumers’ discretionary spending. If consumers feel like the shopping experience isn’t worth their time and effort, they are going to spend their money elsewhere. A trip to Italy, a dinner out, catching the latest Blake Lively and Ryan Reynolds films — there is no shortage of ways that consumers can spend their discretionary dollars,” she said.
Editor's note:This article was revised on October 18 to correct the attribution for a quote to Matt Pavich instead of Nikki Baird.
The market for environmentally friendly logistics services is expected to grow by nearly 8% between now and 2033, reaching a value of $2.8 billion, according to research from Custom Market Insights (CMI), released earlier this year.
The “green logistics services market” encompasses environmentally sustainable logistics practices aimed at reducing carbon emissions, minimizing waste, and improving energy efficiency throughout the supply chain, according to CMI. The market involves the use of eco-friendly transportation methods—such as electric and hybrid vehicles—as well as renewable energy-powered warehouses, and advanced technologies such as the Internet of Things (IoT) and artificial intelligence (AI) for optimizing logistics operations.
“Key components include transportation, warehousing, freight management, and supply chain solutions designed to meet regulatory standards and consumer demand for sustainability,” according to the report. “The market is driven by corporate social responsibility, technological advancements, and the increasing emphasis on achieving carbon neutrality in logistics operations.”
Major industry players include DHL Supply Chain, UPS, FedEx Corp., CEVA Logistics, XPO Logistics, Inc., and others focused on developing more sustainable logistics operations, according to the report.
The research measures the current market value of green logistics services at $1.4 billion, which is projected to rise at a compound annual growth rate (CAGR) of 7.8% through 2033.
The report highlights six underlying factors driving growth:
Regulatory Compliance: Governments worldwide are enforcing stricter environmental regulations, compelling companies to adopt green logistics practices to reduce carbon emissions and meet legal requirements.
Technological Advancements: Innovations in technology, such as IoT, AI, and blockchain, enhance the efficiency and sustainability of logistics operations. These technologies enable better tracking, optimization, and reduced energy consumption.
Consumer Demand for Sustainability: Increasing consumer awareness and preference for eco-friendly products drive companies to implement green logistics to align with market expectations and enhance their brand image.
Corporate Social Responsibility (CSR): Companies are prioritizing sustainability in their CSR strategies, leading to investments in green logistics solutions to reduce environmental impact and fulfill stakeholder expectations.
Expansion into Emerging Markets: There is significant potential for growth in emerging markets where the adoption of green logistics practices is still developing. Companies can capitalize on this by introducing sustainable solutions and technologies.
Development of Renewable Energy Solutions: Investing in renewable energy sources, such as solar-powered warehouses and electric vehicle fleets, presents an opportunity for companies to reduce operational costs and enhance sustainability, driving further market growth.
A real-time business is one that uses trusted, real-time data to enable people and systems to make real-time decisions, Peter Weill, the chairman of MIT’s Center for Information Systems Research (CISR), said at the “IFS Unleashed” show in Orlando.
By adopting that strategy, they gain three major capabilities, he said in a session titled “Becoming a Real-Time Business: Unlocking the Transformative Power of Digital, Data, and AI.” They are:
business model agility without needing a change management program to implement it
seamless digital customer journeys via self-service, automated, or assisted multi-product, multichannel experiences
thoughtful employee experiences enabled by technology empowered teams
And according to Weill, MIT’s studies show that adopting that real-time data stance is not restricted just to digital or tech-native businesses. Rather, it can produce successful results for companies in any sector that are able to apply the approach better than their immediate competitors.
“ExxonMobil is uniquely placed to understand the biggest opportunities in improving energy supply chains, from more accurate sales and operations planning, increased agility in field operations, effective management of enormous transportation networks and adapting quickly to complex regulatory environments,” John Sicard, Kinaxis CEO, said in a release.
Specifically, Kinaxis and ExxonMobil said they will focus on a supply and demand planning solution for the complicated fuel commodities market which has no industry-wide standard and which relies heavily on spreadsheets and other manual methods. The solution will enable integrated refinery-to-customer planning with timely data for the most accurate supply/demand planning, balancing and signaling.
The benefits of that approach could include automated data visibility, improved inventory management and terminal replenishment, and enhanced supply scenario planning that are expected to enable arbitrage opportunities and decrease supply costs.
And in the chemicals and lubricants space, the companies are developing an advanced planning solution that provides manufacturing and logistics constraints management coupled with scenario modelling and evaluation.
“Last year, we brought together all ExxonMobil supply chain activities and expertise into one centralized organization, creating one of the largest supply chain operations in the world, and through this identified critical solution gaps to enable our businesses to capture additional value,” said Staale Gjervik, supply chain president, ExxonMobil Global Services Company. “Collaborating with Kinaxis, a leading supply chain technology provider, is instrumental in providing solutions for a large and complex business like ours.”