Improving business efficiency is likely to be the primary driver for adoption of RFID (radio frequency identification) technology in the UK, according to supply chain standards authority, E.Centre.
E.Centre's evaluation study of RFID technology in the music industry supply chain, CD.id - RFID's Greatest Hit, was based on one of eight Home Office sponsored demonstrator pilots, and involved the tagging of music CDs through a typical supply chain.
The research report concluded that business efficiency is most likely to be the main driver of RFID adoption throughout UK supply chains. And, despite the fact that Benetton seems to have taken a step back from RFID-tagged apparel (see 19 Mar. 2003), the report suggests that the UK pioneers (the early adopters) may include logistics units and high-value, low volume product lines such as mobile phones, consumer electronics, and clothing.
The project that E.Centre studied involved the music supply chain between EMI (the record label), Handleman UK (the wholesaler), and Asda supermarkets (the retailer).
The audio CDs were all fitted with RFID tags that uniquely identify each CD, enabling them to be tracked right through the supply chain to the point of sale.
The tags were also used to track returns from consumers back through the supply chain to the point of manufacture, greatly improving the 'visibility' of items within the chain.
The report found that achieving this degree of visibility of assets has the potential to significantly improve supply chain efficiency and make the physical movement of CDs much easier to manage.
What's in a tag?
An RFID tag contains a tiny silicon chip that carries an identity number, and an antenna that is able to transmit its number to an RFID reader device. The reader can then provide real-time information about stock movement.
The resulting improvements in inventory management and replenishment practices led to a marked reduction in lost sales through items being out of stock, and allowed Asda to meet customer demand more accurately and responsively.
Commenting on the report, Asda trading loss prevention manager, Kate DeFraja, said: "The biggest potential benefit the trial identified for us was supply chain integrity - helping us to identify and reduce the number of discrepancies between supplier invoices and goods physically received."
"The other big benefit will be the automatic updating of the inventory system as the product enters the back of the store," added DeFraja.
Among the many applications of RFID tags embedded in retail goods, crime reduction was highlighted by the report, as the tags enable retailers to control stock 'shrinkage' and theft.
However, the report found that the current cost of the technology and infrastructure would mean that the mass application of RFID at single unit level would be difficult to justify.
Global standards needed
The report also notes that an agreed international standard (specifically the EAN.UCC standard) will be crucial to the adoption of RFID technology across supply chains.
"If an RFID application is to develop, it will require a global standard based on customer requirements," commented EMI Distribution director, Bill Manktelow.
According to E.Centre, it is quite possible - in perhaps as little as ten years - that products could travel through the entire supply chain with little or no human intervention.
"It's this enhanced capability for automation that really gives RFID its appeal," said Stuart Dean, RFID project manager for E.Centre. "Our report proves that there is a long-term future for RFID, and that business is willing to support its adoption with the understanding that it is regulated through EAN.UCC standards."
Boosting business efficiency
And, according to new research from technology services firm, Accenture, auto-ID solutions could save manufacturers and retailers billions of dollars each year.
'Auto-ID' is the term used by Accenture to describe the combining of embedded RFID tags and electronic product codes (EPCs) in packaged consumer goods. The technology can significantly improve production operations, asset utilisation, forecasting, inventory accuracy, and customer satisfaction, by pinpointing the location and status of products as they move through the manufacturing and retail value chain.
Such improvements in operational efficiency could increase the quality and efficiency of the entire supply chain, leading to big savings in areas including inventory and labour costs.
"Our research found that, by 2005, many manufacturers (especially those in the consumer electronics and grocery sectors) are likely to be using RFID technology to track products at the pallet and case levels," explained Jeff Smith, global managing partner for Accenture's retail & consumer goods practice. "And retailers (particularly in the consumer electronics, pharmaceutical, and apparel industries) should be among the first to use RFID tagging at item level."
Accenture has recently published three white papers on the subject, entitled Auto-ID on the Line (geared to the manufacturing industry), Auto-ID in the Box: The Value of Auto-ID Technology in Retails Stores, and If You Build It, They Will Come: EPC Forum Market-Sizing Analysis.