TELECOM Digest OnLine - Sorted: Retailers Plow Ahead With RFID Chips

Retailers Plow Ahead With RFID Chips

Brian Bergstein (
Sun, 21 May 2006 13:12:22 -0500

By BRIAN BERGSTEIN, AP Technology Writer

The roots of radio-frequency identification technology stretch at
least as far back as World War II, when transponders helped
distinguish between Axis and Allied aircraft. Over the years the
concept has been greatly miniaturized, landing RFID technology in such
settings as animal tags, toll-collection devices, passports, keyless
entry systems for cars and wireless credit cards.

But perhaps none of these projects will have as much impact for
consumers as the adoption of RFID in the supply chains of huge retail

Mega-retailers led by Wal-Mart Stores Inc. have gotten their biggest
suppliers to add RFID chips to pallets and cases shipped to
stores. Now, rather than having people with bar-code scanners walk
around to take inventory, RFID readers in warehouses can automatically
tally items on the fly.

RFID is expected to yield substantial savings largely by reducing the
frequency of the following scenario: A customer goes to a store for an
item, only to find its shelf empty, even though replacement stock
lurks somewhere in the back. It's one of the costliest problems in

Simon Langford, Wal-Mart's director of logistics, distribution and
replenishment systems, explains that a bar-code scanner can register
that certain items have entered a store's back room. But not until one
of the items gets scanned at checkout does the store typically get an
update. In between, the item might be on a store shelf or still
sitting among back-room clutter.

In the more than 500 stores where Wal-Mart has integrated RFID, radio
tags give additional insight -- they inform employees when supplies
enter the storeroom, when they leave it for the sales floor and when
their emptied cartons are taken to the trash.

A University of Arkansas study last year determined that these stores
saw a 16 percent reduction in the times that products were missing
from shelves. But Langford said that figure understated RFID's true
power, because the study included popular items that sales staffers
already were sure to replenish. When the research examined only items
that Wal-Mart sold less than 15 times a day, the out-of-stock
reduction was 30 percent.

Wal-Mart hopes to see even greater improvement soon by giving employees
handheld RFID scanners that will direct them precisely to cartons of
products they need to bring from the storeroom.

Eventually, individual products in Wal-Mart and other stores are
expected to get their own RFID tags to give stores even clearer views
of their inventory.

"That's really where the supply chain gets most messy," said Kevin
Ashton, who helped drive RFID development at the Massachusetts
Institute of Technology and now heads marketing for ThingMagic LLC, a
maker of RFID readers.

Some high-value items like TVs and pharmaceuticals already have their
own tags. But most item-level tagging is a decade away.

First, tag prices must drop below their current 5-to-7 cent
range. Work also still needs to be done to master wireless
interference issues that can arise in RFID-dense environments. And
developers have to assure the public and retailers that data on the
tags are secure and not invasive.

"We're seeing the RFID industry get a little bit more mature every
day," Ashton said. "We don't view the RFID market as some overnight

Copyright 2006 The Associated Press.

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