Food companies and not retailers are likely to be the first adopters of radio frequency identification (RFID) technology in Ireland, according to Jim Bracken, director of GS1 Ireland.
Bracken, who was speaking at an RFID — Supply Chain Evolution conference in Dublin on Friday, said the early adopters of RFID in Ireland would be leading food companies that supply international retailers. “This is only natural because for retailers the introduction is a very major change and at this stage of the technology’s development the financial payback is not as compelling.”
RFID is set to cut costs for companies by streamlining their supply chain processes and reducing product out of stocks.
The event was the first-ever EPC Global conference to be held in Ireland. EPC Global (a division of GS1) is the organisation leading the development of industry-driven standards for the Electronic Product Code to support the use of RFID.
Organised by GS1 Ireland, the conference was addressed by representatives from companies such as Gillette, Metro Group, SAP, IBM, Intel, Nestle and Accenture on topics such as the benefits of RFID for the manufacturing and retail sectors, how to devise an RFID adoption strategy and how to realise value and return on investment from RFID deployment.
Stephen Proud, European RFID practice lead at Accenture, emphasised RFID was a long-term development and it would probably be many years before the technology achieved mass adoption. He also cautioned that RFID technology was at a very early stage of development and businesspeople should adjust their expectations accordingly or risk disappointment. “As a colleague said to me recently, RFID is still only at the Commodore 64 stage in terms of sophistication. The technology is only going to improve.”
Proud also pointed out that while the consumer packaged goods sector is being touted as a key beneficiary of RFID, other industry sectors such as the pharmaceutical and consumer electronics industries have as much or perhaps even more to gain. He felt that these sectors could make the business case for putting RFID tags on individual items rather than just cases or pallets.
Representing the retail community was Gerd Wolfram, managing director of group IT at Germany’s Metro Group, who spoke about a project pilot being conducted by the retailer in conjunction with 26 of its suppliers across Germany. He said the project had been so successful that Metro planned to extend it to 100 suppliers and 250 locations in Germany by the end of 2005. Wolfram stressed the importance of standards in deriving full benefit from RFID. “If you don’t take a standards approach, you won’t achieve economies of scale,” he warned.
Dick Cantwell, chairman of the EPC Global board of governors and vice-president global value chain with Gillette, was the keynote speaker at the event. Cantwell noted RFID had the potential to greatly reduce out of stocks, a major cause of inefficiency in the supply chain. It is this issue more than any other that is driving RFID within Gillette, he said. “Gillette is a US$10bn company. Even it out of stocks were causing us to lose 1pc of revenue, it would be a US$100m problem. That’s why we’re designing the supply chain of the future.”
According to Cantwell, EPC will transform business processes in the supply chain. “Through close collaboration and sharing of data, manufacturers and retailers can reduce out of stocks, increasing retail availability of all products and improving shopper satisfaction using the Electronic Product Code. EPC Global makes all this possible by managing EPC standards and bringing industry together to realise collaborative business benefits,” he said, adding that 90pc of the benefits from RFID will come from collaboration between retailers and their suppliers.
He also noted that while the technology issues surrounding RFID were gradually being resolved, justifying an RFID investment is still not easy for firms. “The business case remains the biggest challenge. Where are the returns you’re going to get from your investment?”
He advised businesses embarking on RFID to focus on business benefits rather than the technology implementation itself. “It’s not about the data, it’s about how you use it to drive business process change.”
Cantwell also stressed the importance of gaining CEO buy-in for a project; assembling a cross-functional team; developing a detailed project plan and conducting a pilot in conjunction with a number of business partners.
By Brian Skelly