Retailers are seeing returns from RFID

As M&S increases its RFID usage, other companies are also benefiting

Retailer Marks & Spencer (M&S) has scanned its 10-millionth radio frequency identification (RFID) food tray.

That milestone, which was reached last week, comes at a time when many companies are evaluating the benefits of RFID tracking and auditing projects throughout the supply chain.

M&S became an early adopter of RFID in autumn 2002, using tags embedded into standard trays used to transport fresh food from suppliers to depots.

‘We decided to trial RFID because we have a vision of stock accuracy throughout the supply chain achieved in a very efficient and cost-effective manner,’ said James Stafford, M&S head of RFID projects.

There are now 4.5 million trays in the M&S supply chain, used by 100 food suppliers. This makes 90 per cent of its food supply RFID-compliant, and allows for produce from multiple suppliers to be scanned at the same time.

‘By saving time it saves money,’ said Stafford. ‘And we are continuing to move away from fixed solutions to mobile ones, using a mobile receiver that we can move to the receiving door.’

The data collected is used to confirm deliveries and automate procurement four times more quickly than previous barcode scanning methods, with 100 per cent accuracy.

The retailer built on the success of the food trials by launching in April a project to RFID-tag items of clothing.

Stafford says this application of the technology is particularly valuable for tracking complex products, such as bras or men’s suits.

‘We decided to use the RFID tags at item level, where we can use it to try to drive better availability for customers,’ he said.

Handheld, wireless RFID scanning devices now enable employees to carry out stocktakes 20 times faster than traditional methods, supplying data into M& S systems for automated replenishment.

But Stafford says the firm continues to refine its use of the technology in readiness for a larger trial, in 53 stores, that is due to begin in spring 2006.

‘We are mandating our suppliers to label the garments at source around the world with a combined passive tag and barcode label on the price tag,’ he said. ‘This drives down the cost of the technology.’

Furniture retailer Ikea is using RFID tags to track the trolleys used in its home-delivery operation, from processing an order in its customer distribution centre to delivering via a third-party logistics supplier that returns the trolleys to the Ikea depot.

‘Our home deliveries make up 20 per cent of our business,’ said Ikea deputy project manager Jesper Samuelsson.

‘If our trolleys are not fit for purpose they can damage the goods we send out. But the business case was that we had these metal cage trolleys and they disappeared – simple as that.’

Tagged trolleys are logged on their way out of the depot and checked in on their return.

Samuelsson says Ikea has already achieved a return on its initial RFID investment by recovering any expense from replacing lost trolleys. Suppliers now pick up the cost of trolleys that are lost in transit.

‘We are really satisfied with what RFID can do for us,’ said Samuelsson. ‘And we are continuing testing and learning from the technology. We have moved the cost to our carriers, the next stage is to involve them, too.’

RFID is also being used at the earliest stages of product development. Pharmaceutical giant GlaxoSmithKline (GSK) is using the radio tags for tracking in its research and development department.

‘Everybody in the lab can use their imaginations to relate to what we can potentially do with RFID,’ said Jeff Veitch, GSK project manager.

For example, labelled vials or test tubes exchange data with a reader integrated with the technology controlling the relevant piece of scientific equipment in use, so that as chemicals are blended, each scientist can trace the precise ingredients used.

‘There is potential for this application to be used on equipment in heavily regulated processes. Item-level tagging can be very important in proving compliance,’ said Veitch.

AMR Research analyst Nigel Montgomery says the results of such projects show RFID has passed the early-adopter phase, but he says most trials are limited to closed environments that involve areas still under the control of the company.

‘We’re in more of an early increase of RFID use, where most projects are still being developed in a closed-loop scenario,’ he said. ‘In the case of M &S, those food and clothing manufacturers involved work for M&S only.

‘Fewer projects have gone for an open loop. But differences in technology standards and product definitions between different retailers and pharmaceutical manufacturers, for example, don’t help this.

‘But we are past the stage where companies are saying RFID technology looks like a good idea, and on to them saying: “Now let’s prove the business case for it”,’ he said.

Tips for trialling RFID

Source: Forrester Research