Successful Use of RFID Requires the Right Infrastructure

Not a day goes by that 7-Eleven CIO Keith Morrow doesn’t dream about RFID technology. Like most CIOs in the retail industry, he believes that widespread RFID adoption is a sure thing and that the technology?which some day will enable him to track every single product, from manufacture to checkout (and possibly beyond), that the $33 billion convenience store chain sells?will revolutionize his business. He also knows that the biggest names in global retailing?Carrefour, Gillette, Home Depot, Marks & Spencer, Metro AG, Procter & Gamble, Tesco and Wal-Mart?are all lining up behind it. And with the holiday shopping season looming (a season coming in a stagnant economy that’s been squeezing retailers dry, forcing them to discount merchandise deeply in order to turn it), Morrow can’t help thinking about RFID’s promise of absolute inventory control, consequent cost reductions and increases in margin.

But to realize those savings and profits before the competition, to roll out the thousands of RFID readers and the millions of RFID tags that will give 7-Eleven Superman-like vision into its supply chain, Morrow has had to devote himself to RFID full time. He campaigns internally for top-level support for RFID by demonstrating the wonders of the technology at the tech fairs he mounts annually for his business colleagues. And for the past two years, he has been conducting pilots to figure out the cost of a full-fledged RFID implementation, its potential ROI and the impact of the technology on 7-Eleven’s existing systems.

Because, as he and everyone else knows, the cost will be high and the impact will be huge.

RFID’s Challenge

RFID technology is going to generate mountains of data about the location of pallets, cases, cartons, totes and individual products in the supply chain. It’s going to produce oceans of information about when and where merchandise is manufactured, picked, packed and shipped. It’s going to create rivers of numbers telling retailers about the expiration dates of their perishable items?numbers that will have to be stored, transmitted in real-time and shared with warehouse management, inventory management, financial and other enterprise systems. Applications of RFID technology are also going to need to rely on a new kind of computing architecture known as edge computing, in which vast amounts of processing will take place at the edges of the enterprise’s network rather than in corporate data centers.

RFID, experts agree, is a transformational technology.

"If this goes all the way to the product level," says Morrow, "RFID will require levels of bandwidth and access and storage such as we’ve never contemplated."

And even though a variety of technical, economic and social issues (see "Retailers to Customers," this page, and "Customers to Retailers," Page 82) are currently inhibiting widespread RFID adoption, CIOs are keeping close tabs on its development. Whether they’re contemplating implementing RFID technology now, in 18 months or in three years, whether they’re thinking at the pallet, case or item level, they realize now’s the time to begin assessing the changes they will need to make to their IT infrastructures. They know that the future success of RFID will hinge upon how well they prepare the ground now.

"RFID has some prerequisites," says Bill Homa, CIO of Hannaford Bros., a New England grocery store chain. "People are getting the impression from reading the trade press that RFID solves all your supply chain problems. If you have a pretty good supply chain now, RFID will make it better. If you’re not able to accept advanced shipping notices electronically and match them with your purchase order, RFID isn’t going to help you."

So executives such as Homa, Morrow, Kathleen Starkoff of Limited Brands, and Saks’s Bill Franks are positioning their companies, through pilots and feasibility studies, to take advantage of the technology, and they’re trying to do so without breaking the bank and without having to overhaul their infrastructures.

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