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Friday, June 25, 2004

Will RFID Spark the Next Revolution in Retailing? via Knowledge@wharton

Wal-Mart is introducing radio frequency identification (RFID) tags to its products - small devices that emit radio waves containing information about product size, price, etc. Though this scenario is still far in the future, such tags could let the world's largest retailer add up the prices of purchased goods as shoppers leave the store and deduct the tab directly from their accounts. Whether such futuristic practices materialize or not, one thing is certain: RFID has begun to acquire a buzz that positions it as the next revolution in the world of retailingFans say that RFID technology promises to revolutionize the supply chain through real-time item tracking. Its goal is to keep goods on the shelves, garner more efficiency through better inventory management, enhance safety through smart recalls and cut theft, known as "shrink" among retailers. This is made possible by the fact that when RFID tags emit radio waves, that information is absorbed by a reader, which can then compile and share it with a company's enterprise software. Suppliers can benefit from real-time inventory management that keeps goods on the shelf. Consumers may not immediately see a lot of major changes, but they would certainly benefit from better in-stock levels."RFID could put more goods on the shelf," says William Cody, managing director of Wharton's J.H. Baker Retailing Initiative. "It would certainly be better than having a skeleton crew walking around filling empty shelves. You could eliminate goods being lost in the back room."Today, inventory processing requires line of sight for bar code scanning. Bar codes aren't going to disappear, but they do have disadvantages compared with RFID. Notably, bar codes introduce human errors, can only encode limited and static information, don't offer read/write capability and cannot read multiple codes.Cohen explains the difference between current inventory management and RFID enabled systems this way: In current systems, you may know there are 10 items on the shelf, and that information is compiled in an enterprise planning software system. With RFID, you know there are 10 items, their age, lot number, expiration date and warehouse origin.“It’s like knowing there are 1,000 people in a city,” says Cohen. “With RFID, you know their names.”Most of the benefits from RFID at present will be tied to the supply chain and within three- to five-years electronic tags carrying product specific codes should be common, according to EPCglobal, the organization creating standards for the electronic product codes carried on RFID tags. Currently, RFID mindshare is the highest and is perhaps the most talked about technology today in business circles - we have to see in Jan 2005, when walmart partially rolls out this technology in a large scale. The potential benefits are unquestionable for business. I reckon that once this technology is seen to be commercially viable, i foresee a major IT investment push in upgrading and modifying the enterprise systems - not just the retail systems - RFID's reach would change the way all resources including men get utilised and may lay out new level of process structures and efficiencies across the enterprise necessitating substantial changes in the technology systems and infrastructure. The upside could be similar to the Y2K upgrade felt by several service providers

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