RFID 'will bring benefits' says UK industry

Related tags Rfid

The increasing use of radio frequency identification - or RFID as
it is more commonly known - to track products through the entire
supply chain will inevitably lead to cost savings for most players,
according to the optimistic findings of a new survey from the IGD
think tank in the UK.

With both Wal-Mart and Tesco recently announcing that they will implement RFID with their top suppliers, RFID is fast becoming a vital part of the modern supply chain, despite concerns from smaller companies about the cost of implementing the system and the lack, thus far, of any industry-wide standard.

The IGD survey revealed some interesting facts.

The UK retailing and grocery industry is at least aware of what RFID is and how it works - although only 45 per cent of those questioned said they had above average or excellent understanding. However, just 2 per cent had no understanding of the system at all.

Moreover, the majority (68 per cent) said they believed that RFID would deliver better benefits for the industry, including greater speed and efficiency in the stock operations, better tracking of products throughout the chain and enhanced forecasting.

However, only 39 per cent of respondents said they had currently been approached by a trading partner to undertake RFID, suggesting that most companies are still at the very early stages of assessing the likely benefits to their own business.

When respondents were asked what the most important factors were for RFID, perhaps not surprisingly it was cost which came out on top. In addition, and going some way towards explaining the relatively low take up of the system at the current time, 53 per cent said that the cost of RFID currently outweighed the benefits, with a further 32 per cent as yet undecided.

"This is creating the main barrier to wider adoption, as there seems to be lack of understanding of the return on investment and quantifying the true cost of implementing an RFID tag,"​ the IGD said.

Despite the concern about cost, 65 per cent of respondents think RFID will be widespread in between three and five years - a recognition of the time required for the technology costs to come down, for the standards for the tag to be fully adopted and for the technology to be fully tested in a live trading environment.

Consumer opposition to RFID technology (which opponents fear would allow companies to 'track' individuals and their purchases even once they have left the store) has already led to some protests against some retailers (such as Tesco and Metro in Germany), but most of those questioned by the IGD (63 per cent) said that consumers would ultimately benefit from the roll out of RFID tagging, not least in terms of product availability.

Other potential benefits were also cited. For example, RFID could trigger automated payment systems in-store, eradicating the need for consumers queuing up at the checkout, in turn reducing the average time spent on shopping, while some early trials with DVDs at Tesco have made it easier for consumers to find the right product in the store.

Nonetheless, most of those questioned felt that RFID would be of greater benefit to themselves than to their customers, with just 35 per cent of respondents planning to implement RFID to satisfy their customer requirements.

"The potential for RFID is tremendous but as we've learnt from experience, each technology has its teething problems. We now need to bridge the gap between pilot testing and mass application. I think we can guarantee it won't always go smoothly but with perseverance, RFID will start to transform the supply chain,"​ said Joanne Denney-Finch, chief executive of the IGD.

Further details of the IGD's survey will be published at the end of June.

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