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Retailer to follow RFID test with full rollout

Germany's Metro Group tested radio tag inventory control for a year and found it good enough to deploy--but not perfect.

Retail chain Metro Group has about 240,000 employees and stores in 28 countries, with a turnover of 54 billion euros--more than $64 billion. It's one of the first multinational companies planning an RFID rollout. So how's it going?

Gerd Wolfram, project manager of Metro's Future Store Initiative, where the radio frequency identification technology is on trial, said the experiment turned in some impressive results but wasn't without its problems.

The pilot has been going for about a year and started off with a logical progression, Wolfram said. "What we did there...was to test the tech first--whether it works," he said, then the company moved on to developing a business case and seeing where the technology could be applied.

Applying the tracking tags gave the retailer the best results in supply chain visibility, he said, and was a huge advance from the traditional bar code.

"We did the test in the store itself...You knew (exactly) where the delivery was," he said. "With bar codes, you know it's in the store, but you don't know where. Is it in the store room or in the back room? If it is in the back room, you don't know whereabouts."

Metro has analyzed the results of the Future Store Initiative and believes that process efficiency rose by 12 percent to 17 percent with RFID. Losses and theft were down 11 percent to 18 percent, and merchandise availability increased 9 percent to 14 percent, the company found.

The retailer is obviously impressed with the results. It plans to start a full rollout shortly. The first wave starts in November, with the rollout going on until December 2005, taking in 100 suppliers, 269 stores and eight distribution centers.

Does that mean that the pilot was flawless? Of course not.

"We had some technology problems with item-level tagging. Not every item was read on the shelf. There were so-called blind spots (on the on-shelf RFID readers)," he said, with metal and liquid products presenting problems. "There's also a cost factor," he added. The cost of the tags and readers, as well as the engineering and cabling needed to install full supply chain RFID tracking, is prohibitive, even for the bigger retail chains.

Item-level tagging--in contrast to case and pallet level--is still a long way off for retailers, Wolfram said--10 to 20 years before individual products will carry the chips.

That will certainly come as welcome relief for privacy and civil liberties groups. Metro, in particular, has felt the wrath of campaign group Consumers Against Supermarket Privacy Invasion and Numbering (CASPIAN), which protested outside the Future Store when RFID tags were found in loyalty cards.

However, some believe that it's a case of when, not if, for item-level tagging. "Undoubtedly, item-level tagging will come," said Simon Merriott, senior manager of RFID applications at consultants Kurt Salmon Associates.

Privacy aside, RFID might still be unable to dodge the bullets of controversy. A study by analyst house The Yankee Group predicted that 4 million jobs will be affected by the technology in the United States alone, as process automation changed retail workers' roles or made them redundant.

Wolfram quoted figures of a labor reduction of 17 percent but said no jobs would be lost. "There won't be a reduction of labor--it will be a shift of labor," he said, with workers reassigned to different duties.

Jo Best of Silicon.com reported from London.