Item Level RFID

The Mount Everest of the RFID industry is tagging individual items. New research by IDTechEx finds that up to $200 Billion annual investment is needed to satisfy this requirement for retail, post, military, books and other operations, yet savings could exceed $300 Billion annually as a result. Whereas tagging vehicles and conveyances provides only a modest number of benefits and little the consumer will recognise, we list over 60 paybacks from item level RFID including many that will greatly attract consumers. Retailers have the most to gain with increased sales, reduced operational costs but the military and postal services benefit hugely from major operational and cost improvements.

However, in Consumer Packaged Goods (CPG) supply chains, there is an unequal share of gain and cost - retailers gain a 2% increase in sales and 10% reduction in costs, yet pay a quarter of the total system cost in comparison to their suppliers who gain little or no increase in sales and face cost savings less than 10%, yet pay for the rest. Even so, our analysis and interviews with leading CPG companies show that they can achieve a return on investment when tagging all pallets and cases at 5 cents per tag, and tagging all items at one cent per tag, despite having to pay for the cost of the tags and their infrastructure. Indeed, with high value goods where alternatives are not usually acceptable to the customer - such as apparel and DVDs - the trials in Japan, Europe and the US have been so successful just on the basis of reducing stockouts that rollouts will now be rapid, providing considerable increases in sales and competitive advantage.

Indeed, in other sectors, item level tagging is already with us and proceeding apace. 150 million items such as library books, laundry items, beer barrels, gas cylinders are already tagged and airline baggage is now being tagged in large numbers e.g. McCarran Airport Las Vegas order for 100 million RFID tags. The first cellphones have appeared with RFID tags or readers in them to provide added value services and the benefits of potentially tagging two billion blood bags and samples yearly are now well proven. Wal-Mart, which gained its prominence by heavily investing in IT over the last decade, is continuing this strategy and has been the first to mandate item level RFID tagging - in this case to its top drug suppliers for Type 2 (narcotic) drugs at item level. The FDA recommends this for all drugs just on the basis of reducing counterfeits and this may become a mandate before long.

IDTechEx discovered the lack of basic RFID education at prominent user companies, even ones which need to use RFID at pallet and case level for retailers within 6 months. The suggestion that CPG and drug suppliers fit the tags only when ordered to do so and without using them i.e. "Slap and ship" is a weak proposition and ill advised causing failures and loss of profit. Suppliers can obtain many paybacks from RFID. For example, in less than eight months Hewlett Packard, already a considerable user of RFID in its factories, went from internally deciding to follow Wal-Mart's mandate to rolling out the technology across multiple distribution centers in Asia and the US, ensuring they also benefit from the technology. Early adopters are winning - some of those first to tackle RFID now sell their expertise to others, earning yet more from their investment, examples being International Paper, Air Liquide and Trenstar.

Giant service companies, such as Hewlett Packard, Oracle, SAP, Sun Microsystems and Microsoft have now entered the RFID market in a major way because they see big returns when highest volume item level tagging takes place. Our Item Level RFID report covers how these and many other companies are aligning themselves in this explosive market. We see oversupply in some parts of the value chain and undersupply in others. We see vacillation and repositioning even amongst the giants.

 

 

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