Australian retailers: RFID ready to go but let’s get the data right first

The big boost that RFID initiatives in Australia got from GS1’s recent gains can get diluted if retailers don’t get their data basics right first. Woolworths has clearly ruled out any big RFID initiatives because it wants to crack the humble barcode first, not quite literally, of course.

Here is an analysis of the state of the things including some ‘strange but true’ facts about the state of data integrity and synchronisation among the Australian retailers.

Two recent developments constitute a big step forward for the radio frequency identification (RFID) technology in the Australian retail sector. With 920-926 MHz and 4 watts, the industry gets what it wanted

The first development is somewhat dry news but it’s something that many in this sector had been looking forward to for quite some time. GS1, formerly known as EAN Australia, has obtained a national scientific licence from the Australian Communications and Media Authority (ACMA).

Simply stated, the development crystallises a standard. Here is how. The ACMA is a government body that decides who gets to use what part of radio waves in Australia.

The retailers and suppliers can now use the 920-926 MHz segment (UHF segment) for the tags and the RFID readers can transmit 4 watts of radiated power. The term ‘radiated power’ is used because the RFID tags generally have no power of their own and need to be stirred up by the readers for transmitting information.

While the UHF part was already there, the ACMA’ agreeing to 4 watts of power is a really significant development from the reading distance point of view. Hitherto, only 1 watt could be used to power tags.

Again to state it simplistically, the frequency part relates to the readability and the watts part relates to the reading distance. The thumb rule is that lower the tag frequency, lower the power required. It is to be remembered, however, that too many watts end up cooking things (ref: microwave). With the combination of 920-926 MHz and 4 watts, the field is wide open for the interested players to take a plunge with RFID trials.

The GS1 getting that license also means another thing. Those who want to set up a 4-watts RFID trial in their premises don’t have to worry about negotiating the bureaucratic maze. They can simply approach the GS1 Australia for a site licence. Come October and the real game starts

The other development is quite interesting and equally significant. Fiona Wilson, general manager, Standards Development at GS1 told gfq that her organisation is starting a national demonstration pilot to identify the precise benefits of the RFID technology for different types of participants. Aren’t these already known, at least at international level, we asked?

“Last year, we did a study with ECR Australasia and found that even if you are a big multinational involved internationally in an RFID pilot, the key learning from the head office were not necessarily flowing down here,” Ms. Wilson said.

The names of the participants in the pilot mentioned above are significant. These include Metcash in retailing, Visy in packaging, Chep in moveable assets, Linfox in 3PL, and the suppliers such as Capilano Honey (SME), Gillette and P&G. Here is the one line summary of what will happen in the pilot.

The products from the suppliers mentioned above will flow into Metcash DCs after they are packaged in Visy material and moved on Chep pallets in Linfox trucks.

On the project’s timeline, Ms. Wilson said, “We are currently purchasing the equipment, and by the end of September, we will start shipping products, which should run for 3-6 months, followed by reporting of the benefits incurred by each of the participants.” Woolworths and EANnet: From jury is out to the roll out

At the recently held Impetus 2005 conference, Woolworths’ e-business senior manager Peter Roebers ruled out any big RFID initiative saying that there were other things to be done first. And those other things don’t include selecting the right vendors for RFID readers.

These rather focus on getting the product data right, and by that we don’t mean the EPC (electronic product codes), the 96 bits of identification data that goes in the RFID tags. At the heart of the issue is the more humble UPC or the data in barcodes.

A term of some interest here is data integrity and synchronisation (DIS). The DIS has some noble aims such as the product data should not have to be keyed in twice and that when supplier says ‘Product X’, the retailers should not understand ‘Product Y’.

At the conceptual level, an easy way of doing this is that the suppliers maintain an electronic catalogue of their products which the retailers’ systems can read. The EANnet is one such catalogue even though it is not a 'cure all'.

Like all things real, it's a bit more complicated in practical terms even though there is a compelling case for adopting this route.

A study by the Efficient Consumer Response, Australasia said last year that the annual direct benefits of the DIS could be $70 million. It is to be noted, however, that the figure could be a simple extrapolation from ECR’s international studies.

In any case, it remains a fact that data integrity between suppliers and retailers is a huge issue especially when you consider the following ‘strange but true’ case.

Woolworths still has to key in more than 700,000 items every day because many of its supplies can not communicate with it electronically. It’s still a far cry from the retailer’s announcement in a trade show in early 2002 that it needed to clean up the records of 3100 suppliers within six months.

At that time, Ian McDonald, senior business manager, perishable had indicated that Woolworths might do its own thing for communicating with its suppliers electronically rather than relying on an industry catalogue such as EANnet.

Consider costs but do think about RFID

Con Vass, NCR vice-president, retail solutions division, South Pacific, agrees that these are significant developments but he warns that retailers need to be aware that RFID is a disruptive technology.

“We already know that RFID works, and that in the make, move, sell and use scheme of things, it working successfully in the make and move phase but please remember that the adoption of RFID technology invariably involves operational changes, process changes and people changes,” he said.

The technology also has some challenges inherent in it.

Take for example the fact that different applications (and different countries) use different frequency tags. Despite their low reading range, the low frequency chips have their own use because they are less prone to interference. This in turn means that the readers should be ready to read tags of all different frequencies.

In term of technology, that is already happening. Last year, Omron had reported success of its RFID reader/writer which read both UHF and HF (13.56 MHz) chips. This is a must for the imported products because different countries have allocated different frequency bands for RFID.

Mr. Vass said the bigger challenge is in terms of bringing the costs down. Contrary to the much touted ‘5cents a chip is the key’ mantra, courtesy Frost and Sullivan., the costs also have to come down in readers as well as applications that are needed to mine the bottomless data coming out of the readers.

Mr. Vass recommends that despite costs, the companies should not adopt wait and watch policy. “I would say, have a watching brief at least in contrast to doing nothing,” he said. “Someone in your company should be ready when the costs come down because that will happen.” Already there are lessons in what Wal-Mart has done so far

Writing in the Financial Times, the authors Dan Roberts and Jonathan Birchall capture four lessons that can be learned from Wal-Mart’s experience with RFID so far.

The story quotes Linda Dillman, Wal-Mart's chief information officer, saying that many suppliers still see the RFID tags as a matter of compliances rather than something that has a proven business case for them.

The first lesson is that this technology works even though within limitations. Secondly, the authors say the Wal-Mart experience shows that it pays to define goals. Thirdly, no matter what the smooth consultants lead you to believe, this is difficult ‘stuff’, and finally, it isn’t one time experiment.

Nothing illustrates the last point better than the advent of Gen 2 technology when many are thinking about starting pilots based on Gen1 technology.

Source