Woolworths has delayed plans to introduce radio frequency identity (RFID) tagging after deciding it can achieve better returns from other investments.

The retailer has been testing RFID since 2002, tagging about 16,000 components through its supply chain to improve stock visibility as goods are delivered.

Geoff O'Neill, Woolworths' head of central logistics for ecommerce, says the trial was a success, but it was put on hold in February for the foreseeable future.

'We have limited spending every year so we have to allocate our funds very carefully. Our chief executive has decided to prioritise other things right now,' he told delegates at the Retail Fraud conference in London last week.

O'Neill says the retailer has learnt valuable lessons from the trial that will be useful when it does decide to roll out smart tags (see box). But he says the technology still has room for improvement.

'RFID is part of our supply chain strategy for the future. We will get around to it and the technology will be even better then. A two to three year wait may not be a bad thing,' he said.

'As RFID gets more robust it will be a priority, but it isn't a priority as yet. When it comes around we'll know how to do it.'

But O'Neill says other organisations may reach a different decision.

'It should be decided on a case by case basis. If the business case is there, then do it now,' he said.

The trial linked the company's warehouse and management information systems with parts of its supply chain, to track goods as they moved across the country.

The pilot also involved barcodes, GPS systems and GPRS-connectivity, all of which combined with the RFID data to provide better visibility of stock.

Analyst Gartner G2 says most companies will take until 2007 before they understand how to implement RFID properly.

RFID Recommendations

* Understand that RFID alone isn't the answer * Know your key business processes * Don't forget legislation, such as the Data Protection Act * Be ready to deal with an enormous volume of data * Be careful about privacy concerns