As head of Accenture’s radio frequency identification (RFID) practice lead for EMEA, Stephen Proud (pictured) would be expected to be somewhat gung-ho about the latest tech sensation. But, strangely, he seems keen to dampen expectations and deflate the hype that is threatening to engulf technology that’s being touted as turbo-charged barcodes.
Proud was a speaker at an international RFID conference in Dublin last week organised by GS1, a global body responsible for setting technology standards in the area of electronic product coding. The conference dealt with the potential of RFID to revolutionise the supply chain and the development of equipment conforming to the latest second-generation standards.
“There is a lot of uncertainty in the supply chain,” Proud explains. “Why does it take three days to get a product through the supply chain and the next day it takes six? RFID has the potential to shine a light into a very dark place and by providing that information you can get repeatability and optimise your supply chain.”
He believes RFID is here to stay but it won’t be the overnight success some people are expecting. It will start with retailers putting pressure on suppliers to tag their products. As demand grows more technology vendors will come into to the market and prices will start to fall. “So it does snowball but there are certain things that need to fall into place, such as that the standards are followed and that generation-two RFID tags meet expectations in terms of cost, performance and reliability. But we also need to temper our expectations. It took 25-30 years for the barcode to be adopted so therefore to expect something to catch on within three or four years is perhaps the wrong benchmark,” he says.
There are good reasons why RFID won’t happen overnight, he feels. One is the scale of the task at hand. Yes, retailers such as Wallmart, Metro and Tesco and consumer goods firms such as Gillette and P&G are running trials and placing orders for billions of RFID tags but this is still only the tip of the iceberg. “It’s like a product launch but it’s being done by multiple industries and multiple players within each industry,” Proud points out.
A second is that the technology itself is still in its infancy and very unsophisticated compared to what it will look like in years to come. “We’re still in the Commodore 64 era of RFID,” he says simply.
Another reason why RFID will grow only slowly is that the business case for investing in it has yet to be proven. While some companies can readily justify their investment in RFID many others still cannot. “There are questions being asked about where the return on investment [ROI] will come from,” states Proud. “Yes, people can see the benefits 10 years from now but is the implementation on the scale it is right now going to pay back in the short term?”
He also notes companies will engage with RFID at different levels. In the pharmaceutical and consumer electronics sectors for example, the products tend to be relatively high value so the big names in these industries can justify applying a tag to each item. In the consumer-packaged goods industry, it is not commercially viable to tag each item; so tagging remains at the case and pallet level — at least until such time as the price of tags falls.
“It’s fair to say that for some companies at the present point the ROI might be challenging; for others they can see a very clear ROI. Everyone can see that once the infrastructure — the RFID-enabled supply chain — is in place, it has huge potential at the case, pallet and one day at the item level,” says Proud.
The RFID projects currently under way are, naturally enough, focusing on the hardware — deploying the basic infrastructure of tags and readers — but such projects should not lose sight of the bigger picture, Proud cautions. “People are still focused on the read rate and the physics of it and have not given enough thought to the systems integration and process change work. It hasn’t hit the top of chief information officer’s agenda yet. The big message is that it’s about process change, ie there is work required over and above the technology layer and the systems integration layer.”
While RFID is generally seen solely in terms of supply chain optimisation, Proud argues that when infrastructure is fully built out RFID will open up whole new business opportunities. “In addition to the substitution agenda — why does RFID do things better than the barcode — at Accenture we’re asking the question: ‘What comes with scale?’ Will there be business-to-business applications or business-to-consumer applications that people see value in?” One example he gives is of consumers scanning products in shops using built-in RFID readers on their mobile phones to get promotional information and suchlike.
But all this is in the future and Proud is convinced it will be some time before these much-talked-about tags are as ubiquitous as barcodes are today. “There is a lot of sunk cost and investment in and comfort with barcode technology and it’ll be around for a very long time yet.”
By Brian Skelly