))) The New Wireless Supply Chain

Lisa Valentine
September 26, 2003

"Wal-Mart sees some very large efficiencies to be gained from moving away from bar-code scanning to [an] RFID chip-reader system," says spokesperson Tom Williams. He likened the move to the leap from the telegraph to the Internet.

Although it has gotten all the hype, RFID (radio frequency identification) is just one component of the "lights out" supply chain -- a supply chain that is so automated, it needs little or no intervention by humans. Wireless technologies other than RFID can have a positive bottom-line impact on supply chain management as well, says Matthew Bilodeau, senior analyst, AMR Research.

They include Wi-Fi networking, PDAs, cells phones, GPS (global positioning system) and electronic sensors. "People thought RFID would be this island," Bilodeau told CRMDaily.com, but the reality is that a combination of devices brings the most value.

Woolworth's UK is using RFID, GPS and wireless handhelds to lower costs and reduce inventory levels. RFID tags on pallets allow items to be tracked as they move through the distribution center to the shipping area. Once the pallets are loaded on a truck, GPS is used to monitor the vehicle as it moves toward a Woolworth store. Upon delivery, the driver reads the RFID tags with a handheld scanner, and the store confirms that it has received the pallets it was supposed to receive.

Using RFID along with GPS enables real-time tracking of goods, people and assets anywhere. A limitation to RFID is that the tag must be in close proximity to the reader, though. While RFID works well in a defined space, such as a port, warehouse or distribution center, it is unable to track items moving out of range, says Bilodeau.

Still in the Warehouse

But in dusty warehouses and on bulky shipping containers, RFID and other wireless technologies are making a real impact. Although there are some interesting applications of RFID tags being placed on actual items — such as Prada gowns and other high-cost merchandise — it will be several years, at least, before the tags are widely used, analysts predict. Even setting aside the growing concerns over privacy protection, the cost of using the tags makes them impractical.

"Would you put a 30-cent RFID tag on a 69-cent can of soup?" asks Bill Allen, marketing communications manager for Texas Instruments (NYSE: TXN), a maker of RFID tags. Some in the industry believe that the cost of RFID tags will need to hit one cent before they are considered viable for most consumer goods.

Wal-Mart (NYSE: WMT) discontinued its pilot program that involved putting RFID tags on items shelved at a suburban Boston store, but the retailer nevertheless is very bullish on using RFID in its supply chain to track the billions of packages moving through its 100+ distribution centers every year. Wal-Mart announced in June that initially, it will require its 100 top suppliers to deliver products on RFID-enabled pallets and cases. By 2006, all of the company's suppliers are expected to comply.

"We've made a huge commitment to move forward with [RFID]," Tom Williams, Wal-Mart spokesperson, told CRMDaily. Although he would not quantify expected savings, he said that "Wal-Mart sees some very large efficiencies to be gained from moving away from bar-code scanning to [an] RFID chip-reader system," likening the move to the leap from the telegraph to the Internet.

RFID Trend To Continue

Texas Instruments sees a continuing trend toward companies using RFID technology to drive costs out of the supply chain. TI has just celebrated the sale of its 300 millionth RFID over a 15-year period, and it expects to add 200 million units to that figure by 2005. Supply-chain uses will fuel a lot of those sales. "Supply chain has always been one of those 'holy grail' applications because the number of 'things' that go into the supply chain is astronomical," says Allen.

The movement of goods from overseas amid terrorism concerns is another supply-chain application well-suited to wireless technologies. RFID already can be used to track containers being shipped as freight, and the technology will become even more useful once sensors measuring such variables as temperature, radiation and light are attached. That will enable officials to determine very quickly if a shipment has been tampered with. "The easiest way to get bad things into the U.S. is in a container," warned Bilodeau.