RFID Progress in Retail to Mid 2007
IDTechEx
May 2007
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IDTechEx has recently travelled to major RFID events in Europe and North America. Here are our conclusions on industry progress so far until mid 2007.
May 29, 2007
The tagging of pallets and cases to meet retail mandates is still struggling to take off. In Q3 2005 many companies announced loss-leading tag prices in anticipation that it would overcome cost barriers and drive adoption of RFID in this sector, enabling them to turn profitable as the demand of tags reached billions each year. By mid 2007, we see this has not been the case.
This year, IDTechEx expect that only 375 million tags will be used for this sector, the main reason for this is that the read performance is still not satisfactory for most companies. For example, George Chapelle, CIO of Sara Lee, reports that on frozen and dry foods they achieve about a 70% read rate, and on chilled foods the read rates is about 30% using Gen 2 tags. With such poor read rates they cannot realize internal benefits.
George reported that tag performance is more important than the cost, feeling that if better read rates can be achieved (and he stated that this means close to or definitely 100%), this would drive adoption, more than tag cost has, and it would drive benefits which would enable a return on investment (ROI). It is so extreme that a major retailer and Consumer Packaged Goods (CPG) company reported at the IDTechEx RFID Smart Labels USA event in February that they would even consider frequencies other than UHF if it meant they could achieve 100% read rates.
Wal-Mart continue to roll out RFID, currently in about 1,000 installations, with a further 400 being added in 2007. Their aim is impressive - Rollin Ford, CIO of Wal-Mart, reports that if RFID can resolve 10% of their out of stock problems and inventory inaccuracies it would save the retailer and it’s suppliers about $250 million a year. However, with poor read rates many suppliers have seen no ROI let alone savings above this.
Some suppliers however, are faring better. Kimberly Clark, which supplies products such as Kleenex tissue paper and Huggies nappies is using RFID to monitor out of stocks at retail stores. Shelf stock information is something that consumer good suppliers did not have good visibility of before RFID. The products it supplies are mostly RF inert, being mainly paper based, so read rates are good enough for the company to obtain significant paybacks. And significant they are - the firm discovered that out of stocks on the supermarket shelf were about twice as worse than they had expected. They have deployed an RFID stock monitoring system to 500 stores, and hope to expand it to all stores where their products are sold, even if those stores do not yet have RFID capability. However, to date, Kimberly Clark is unfortunately the exception rather than the rule.
May 29, 2007
The tagging of pallets and cases to meet retail mandates is still struggling to take off. In Q3 2005 many companies announced loss-leading tag prices in anticipation that it would overcome cost barriers and drive adoption of RFID in this sector, enabling them to turn profitable as the demand of tags reached billions each year. By mid 2007, we see this has not been the case.
This year, IDTechEx expect that only 375 million tags will be used for this sector, the main reason for this is that the read performance is still not satisfactory for most companies. For example, George Chapelle, CIO of Sara Lee, reports that on frozen and dry foods they achieve about a 70% read rate, and on chilled foods the read rates is about 30% using Gen 2 tags. With such poor read rates they cannot realize internal benefits.
George reported that tag performance is more important than the cost, feeling that if better read rates can be achieved (and he stated that this means close to or definitely 100%), this would drive adoption, more than tag cost has, and it would drive benefits which would enable a return on investment (ROI). It is so extreme that a major retailer and Consumer Packaged Goods (CPG) company reported at the IDTechEx RFID Smart Labels USA event in February that they would even consider frequencies other than UHF if it meant they could achieve 100% read rates.
Wal-Mart continue to roll out RFID, currently in about 1,000 installations, with a further 400 being added in 2007. Their aim is impressive - Rollin Ford, CIO of Wal-Mart, reports that if RFID can resolve 10% of their out of stock problems and inventory inaccuracies it would save the retailer and it’s suppliers about $250 million a year. However, with poor read rates many suppliers have seen no ROI let alone savings above this.
Some suppliers however, are faring better. Kimberly Clark, which supplies products such as Kleenex tissue paper and Huggies nappies is using RFID to monitor out of stocks at retail stores. Shelf stock information is something that consumer good suppliers did not have good visibility of before RFID. The products it supplies are mostly RF inert, being mainly paper based, so read rates are good enough for the company to obtain significant paybacks. And significant they are - the firm discovered that out of stocks on the supermarket shelf were about twice as worse than they had expected. They have deployed an RFID stock monitoring system to 500 stores, and hope to expand it to all stores where their products are sold, even if those stores do not yet have RFID capability. However, to date, Kimberly Clark is unfortunately the exception rather than the rule.
Companies Mentioned:
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