Ready or not...

A survey of more than 600 supply chain managers across Europe, sponsored by Intermec Technologies, gives us a snapshot of awareness and opinions of radiofrequency identification (RFID) technology and a genuine barometer of the speed of adoption. Stuart Scott, Intermecs director of marketing and business development, EMEA, reports.

77 per cent of respondents believed that improved profitability would be a justification for investment in RFID technology

A significant proportion of those interviewed are already involved in some way in early piloting and  adoption of the technology. Some 35 per cent of European supply chain managers had completed or were planning a trial of RFID technology. Industrial manufacturers were ahead of the curve with about 19 per cent having trialled RFID and now using it, with a further 12 per cent currently planning a trial. While retailers like Wal-Mart and Metro may be grabbing the RFID headlines, the sector as a whole appeared to be lagging behind the trend. Less than one in ten of retail-sector respondents said they had trialled and were using RFID, with the same number saying they were currently planning a trial.

But why are companies increasingly interested in RFID? Overall, 77 per cent of respondents believed that improved profitability would be a justification for investment in RFID technology for their company. Among those from the distribution and logistics sector, this figure rose to 83 per cent, while among retailers it was 78 per cent. Within the manufacturing sector those producing or processing consumer goods were more likely to believe profitability would be at the pallet and carton level (38 per cent), with just over one-third (34 per cent) thinking the greatest impact would be at the individual product level.

Many of the benefits of implementing RFID have yet to be fully and properly understood.

Improvements in customer service emerged as a further key driver for interest in adopting RFID with 80 per cent of respondents believing this would justify the investment for their company. In the distribution and logistics sector the figure rose to 85 per cent.

The third most frequently mentioned reason to justify investing in RFID technology was the full integration of data-stated by some 75 per cent of respondents overall. Among retailers, reduced inventory proved to be another prime motivator, with 82 per cent believing that it would justify their investment. Other benefits identified included innovation potential, the general likelihood that it would become standard, control over inventory, security advantages and potential for saving time.

Many of the benefits of implementing RFID have yet to be fully and properly understood. As more experience is gained from larger and more extensive implementations some benefits may appear that were not initially considered.

there was considerable doubt that Wal-Marts top 100 suppliers would succeed in meeting the mandates requirement to be supplying RFID-enabled pallets and cases by January of 2005.

If your application requires you to track inventory in trays by tagging the tray, there may be additional benefits in asset control of the tray, processing and washing of the tray and rental of the trays. RFID implemented specifically for one benefit, in conjunction with the right process and operational changes may yield benefit or areas of potential revenue that it was just not possible to exploit before.

In the survey there was considerable doubt that Wal-Marts top 100 suppliers would succeed in meeting the mandates requirement to be supplying RFID-enabled pallets and cases by January of 2005. Only one-in-eight of those expressing an opinion believed that all 100 suppliers would achieve it. Forty one per cent believed that 75 or suppliers more would, and 76 per cent thought that 50 or more suppliers still would not be ready 18 months after mandate had been issued.

80 per cent of supply chain managers in the consumer goods manufacturing sector believed that complying with customer mandates would be a justification for investment RFID for them.

Overall, 53 per cent of those expressing an opinion on the Wal-Mart mandate believed the company would gain competitive advantage from it. This perhaps suggests that the jury is still very much out on what the final impact and success of mandates from leading retailers like Metro (who are already using Intermec RFID tags and readers), Wal-Mart and Tesco will actually be.

A high 80 per cent of supply chain managers in the consumer goods manufacturing sector believed that complying with customer mandates would be a justification for investment RFID for them. As retailers are their primary route to market, these are of course the companies most likely to be affected by the retailer mandates. Nevertheless, this finding does suggest how influential retailer mandates may be in hastening the adoption of RFID in the consumer goods supply chain.

Many retailers are very interested in introducing RFID into their supply chains, and are therefore going to need the involvement of their suppliers. Given the power dynamics of retailers and their suppliers this will undoubtedly result in further mandates.

But it will not just be retailers forcing the pace of RFID adoption through mandates. The  upplier/customer power model is likely to be applicable across many industries including manufacturing.

very few people actually knew the cost of an RFID tag suggests that it is still early days when it comes down to practical details.

Awareness of the features and benefits of the technology appeared very widespread with survey respondents clearly identifying what difference they believed RFID could make to their business. But when it came to technical knowledge 56 per cent of those questioned admitted that their knowledge was limited. That said, 33 per cent of respondents believed they had a fair amount or more technical knowledge of RFID technology.

At a detailed level the fact that very few people actually knew the cost of an RFID tag suggests that it is still early days when it comes down to practical details. Ninety one per cent didnt know the cost. Typically the cost of a tag was in the range US$ 0.50 to 0.60 in 2003 and US$ 0.20 to 0.40 in 2004.

The sample of supply chain managers was drawn form the UK, Germany, France, Sweden, Spain and Italy. Four sectors were included: manufacturers of consumer goods including food and drink;  manufacturers in other sectors; transport distribution and logistics; and retailing.