Spar News

"Keeping Tabs" (RFID article) - GroceryHeadquarters.com, September, 2007

RFID technology is tracking everything from produce in the field to promotional displays on the sales floor.

By Kim Ann Zimmermann

In the waning days of the Cold War, President Ronald Reagan had a "trust but verify" strategy for dealing with the Soviets. In some respects, this is also an apt description of the relationship between retailers and suppliers.

Grocers want assurances that the products they are putting on the shelves have been handled properly, from the field to the time they are unloaded from the truck at the back door. In turn, consumer goods manufacturers want to know their merchandising displays don't languish in the supermarket's back room or meet an untimely demise in the box crusher.

Many CPGs and retailers are turning to radio frequency identification technology as a way to seamlessly share information such as when a display was actually displayed or the origins of a head of lettuce should there be a recall.

While deployment of the technology has been a bit sluggish due to cost and accuracy issues, among other roadblocks, RFID is getting a serious look again as prices come down and the next generation of the technology is rolled out.

"Grocers and manufacturers are looking at RFID as a way of solving multiple business problems, and that has sparked some growth as everyone takes a fresh look at the technology and figures out ways to apply it," says Michael J. Liard, research director for RFID and contactless at ABI Research in Oyster Bay, N.Y.

PUSHING PROMOTIONS

According to industry observers, CPGs have reason to be concerned that their promotions are not reaching the sales floor in a timely manner. Experts note that between 15% and 40% of stores fail to move displays to the sales floor, missing time-sensitive promotional windows and the opportunity to increase sales.

While CPGs invest an estimated $17 million on promotional displays, retailers also have a financial stake in making sure promotions are properly executed. "One study reveals that stores that execute promotions on time experience a 19% sales lift over those that don't ," says Paul Cataldo, vice president of marketing for OATSystems, Inc., an RFID technology provider in Waltham, Mass. "There is a definite value for the retailer to getting these displays out on time." Earlier this year, Kimberly-Clark Corp. announced that it had deployed OATSystems' mobile RFID tagging system to improve the execution of in-store product promotions.

"RFID-enabled promotional display execution is a win-win-win for the retailer, the manufacturer and, most importantly, the shopper because it meets the expectation of having the right product in the right place at the right time," says ABI's Liard.

REAL-TIME TRACKING

The technology brings automation to the manual process of managing displays. Because time is of the essence, the ability to track displays in real time is a key benefit, enabling a quick response when a store is found to be out of compliance.

"RFID provides us with a whole host of Internet applications and reporting capabilities we didn't have before," says Kori Belzer, chief operating office for SPAR Group, Inc. in Tarrytown, N.Y. The company provides merchandising services to manufacturers and retailers. RFID enables us to focus our efforts on the exceptions and quickly rectify the situation," Belzer says.

Another issue facing retailers and CPGs is the challenge of matching supply with demand for promoted items. Retailers and consumers become frustrated when a product is heavily promoted with in-store merchandising but is not available on the shelves.

Liard says RFID can help ensure that retailers don't run out of promoted items. "For example, CPG companies can use RFID data to determine when promotion products arrived at a store too early and if the store staff has raided the promotional inventory to restock shelves, thereby leaving that inventory short during the promotional period. RFID data can also show that the product leaving regular shelves was not counted as promotional consumption, thus distorting the promotion's results."

While some of the flashier uses of RFID are piquing interest among retailers and consumers, the supply chain is where deployment is taking hold. Wal-Mart has been pushing suppliers to implement RFID for the past several years, and grocers are taking note.

Earlier this year, the European grocer Metro Group, Inc. announced an RFID deployment that, in its initial rollout, will be primarily used to streamline its distribution and store receiving processes. Metro officials say they anticipate more efficient operations, better customer service and improved inventory management.

"People will get on board [with RFID] when there is a reason to do it from a sales standpoint," says Peter Blair, director of marketing for Reva Systems, a technology firm in Chelmsford, Mass. "They'll do it when it makes sense from a customer standpoint, and these systems are demonstrating that they can improve freshness and move product to the shelves quicker. In addition to making it easier to track inventory, RFID can help identify when items are where they shouldn't be, like sitting on a loading dock outside when they should be refrigerated."

Distribution centers and warehouses are prime targets for the technology, experts note. "It really starts upstream in the supply chain," says John Beans, vice president of marketing for Blue Vector Systems, a technology firm in Palo Alto, Calif. "You can't be successful if you aren't sending the right products to the stores, and RFID has excelled at smoothing out the supply chain from above. RFID at the dock doors helps ensure that the right stuff is loaded on truck. In a busy distribution center if a box goes 10 feet from where it is supposed to go, it can end up on the wrong truck and travel 500 miles in the wrong direction. RFID can help to reduce those occurrences."

When perishable items are in transit, RFID can be used monitor the temperatures, humidity levels and other storage parameters as the product makes its way to the stores.

"There is a fair bit of work being done concerning the efficacy of RFID for monitoring any breaks in the cold chain," says Devon Ferreira, head of RFID and pervasive technology consulting for retail at Infosys Technologies Limited, a consulting firm with offices in Fremont, Calif. He notes that RFID can signal an alert if an item has been out of a set temperature range, for example.

INFORMED CHOICES

"This is very useful information for the retailer," Ferreira says. "Even if two truckloads took a similar route and arrived at about same time, one truckload may have sat in the parking lot for a few more hours. Armed with that information, the retailer can move those items out to the sales floor first. This really allows the retailer to effectively control movement of goods through the cold chain."

While the industry is not at the point of putting an RFID tag on a can of peas, the technology is stepping up to help manage inventory at the case and pallet level. In addition, it is being deployed to track expensive cuts of meat and seafood. Other potential applications include prepared foods and floral.

RFID can be used to monitor inventory levels, including expiration dates. Rather than having to do a physical inventory of the entire meat case, the system can alert the back room that there are four packages of sirloin steaks that are going to expire tomorrow. Then a worker can mark down those packages for quick sale.

"Retailers need a better way of keeping track of these high-value items on shelves," says Chris Kelley, director of RFID for Intermec, a technology provider in Everett, Wash. He notes that there is increased interest in tracking time-sensitive items such as produce and seasonal products.

RFID can help prioritize inventory in the back room, making it easier to follow the "first in-first out" rule. "Say you've got someone taking out a case of bananas. If there is an RFID tag and a reader at the door, it can send a signal if the stock person is not putting the oldest inventory out on the floor," says Beans of Blue Vector Systems.

While tracking the products is one use for RFID, the technology can also be employed on plastic pallets, bins and other items used to move product through the supply chain.

"It is a simple application, but can really boost efficiency," says Sam Liu, director of marketing for Intelleflex Corp., a technology firm in Santa Clara, Calif. "We're working with a retailer on a project to helps streamline their internal supply chain, and one of the issues is asset management. They have plastic totes and metal cages that they use to move product from their distribution centers and warehouses to retail outlets. One of the problems is that if these assets don't make their way back from the store to the distribution center, it can slow down the flow of goods. Yet no one is really responsible for managing the totes and wire cages, so it gets pushed far down on the list of things to do. RFID helps them track these assets without much intervention."

CREATIVE THINKING

Observers note that technology improvements, along with price reductions, are driving retailers and suppliers to imagine uses for RFID that were unthinkable even a few years ago.

"Passive tags can be found for 18 cents a tag and below 10 cents a tag when purchased in quantity," says Reva's Blair. Passive tags do no have any internal power supply and get their power from the RFID reader. This requires that they be close to the reader to send data, usually within 20 feet. A typical passive tag application involves a reader mounted at the dock door to scan tags on pallets and boxes.

Active RFID tags, which cost three to five times as much, have a battery that provides power to transmit data on the chip 100 feet or more. These tags typically come with a plastic housing and are reused.

The cost of readers is also falling significantly. A reader that cost $2,500 to $3,000. several years ago now sells for $1,000 to $1,800, and prices are expected to drop again in the coming year.

Technology developers are also working on semi-passive, or "hybrid," tags that incorporate a thinner battery to provide limited data logging in a more disposable format. "The fact that you're getting some data logging while still having a product that is affordable and disposable has a lot of potential in the food industry," says Matt Ream, senior manager of RFID for Zebra Technologies Corp., a maker of RFID and other printers in Vernon Hills, Ill.

Accuracy has been an issue with RFID, but manufacturers have worked to address those concerns over the past few years. Accuracy and read ranges have improved with the latest iteration of the technology, known as Gen 2, which was introduced several years ago. "With Gen 2, we're getting well into the 99% read accuracy rate," says Reva's Blair.

He also notes that readers are becoming more intelligent. If a tag gets close to several dock doors equipped with readers, for example, the system can now pick up which door the item is supposed to pass through and record the information only once. "It was like a conference call and everyone was talking at once, but now it is much more manageable," Blair says.

Gen 2 technology also helped push many toward a standard platform, according to observers. Proprietary systems had been a deterrent to some retailers and suppliers seeking to adopt RFID, but Gen 2 enables the same readers and tags to be used in North America, Asia, Europe and Latin America.

WHAT'S NEXT

While retailers and suppliers don't anticipate item-level RFID tags any time soon, there are some interesting applications currently in development. One is using RFID to present consumers with targeted messages as they make their way through the aisles.

"The true value of RFID for supermarkets will come when they can use the technology to connect with consumers at the point of relevance," says Ferreira of Infosys. If a shopper has a cart with an RFID tag on it and enters the baking aisle, for example, she can be presented with information on new products and relevant coupons and recipes.

"Retailers are looking for ways to get targeted messages to consumers while allowing them to continue to shop the way they normally do," Ferreira says.

Kiosks are another area where RFID could be used to engage consumers, according to Reva's Blair. "We're seeing a lot more interest in consumer-facing, RFID-enabled kiosks," he says. "If the consumer came near the kiosk with an item with an RFID tag, they could be presented with a wealth of product data and related information."

RFID-equipped store shelves are also a bit further down the road, but the idea offers the potential for more accurate inventory management. RFID readers on the shelves could send an immediate alert if an item is out of stock.

"As RFID prices approach the two- and three-cent range, item-level tagging may make sense down the road," says Blair.

About SPAR Group

SPAR Group, Inc., a diversified international marketing services company, provides a broad array of services to help manufacturers and retailers improve their sales, operating efficiency and profits at retail worldwide. Services include in-store merchandising and event staffing, RFID and other technology and research, covering all product classifications and all classes of trade, including mass market, drug store, electronic store, convenience store and grocery chains. The company operates throughout the United States and internationally in Japan, Canada, Turkey, South Africa, India, Romania, China, Lithuania, Australia, Latvia and New Zealand. For more information, visit SPAR Group's Web site, www.sparinc.com