Evan Schuman's StorefrontBacktalk

With the $81 Billion Euro retail giant Metro Group having formally gone into full-fledged RFID deployment, a senior executive there says the efficiencies the chain saw in trials was too compelling to not deploy.

The chain has informed all of its suppliers that they need to ship all RFID pallets to Metro fully RFID tagged by October 1, 2007, said Gerd Wolfram, an IT managing director for the chain.

The initial phase of the full rollout will impact about 180 locations, Wolfram said, including about 60 Cash & Carry stores, nine distribution centers, some wholesale locations and 100 Real stores.

One of the key hurdles to full-scale RFID deployments with U.S. retailers has been low read accuracy rates, but Wolfram said that wasn’t what his people found in European testing. “It’s not a problem at all on the pallet level,” he said, adding that pallet-level read rates were “about 100 percent.”

It’s only slightly weaker on the case level, Wolfram said, describing that read-rate accuracy “at around 95 percent to 100 percent.”

But Wolfram argues that even at the lower accuracy rate, the efficiency they found from RFID would have easily made up the difference. “Our business people, they benefit even from 95 percent,” he said, “compared to the process we have today, with people running around the pallet and counting every case on the pallet” manually.

It’s much more efficient for a few reasons, he said. First, errors creep into even accurate manual reads of typing errors. Secondly, the manual checks were random spot checks compared with the automated RFID checks that theoretically count every case in every shipment.

“Then (factor in) the time we need to do it manually and that this is better data quality,” Wolfram said. “We now know exactly what is in the stores” and those products are easier to find.

The Metro move is likely to be a key domino in global retail RFID support, with Wolfram predicting that his U.K. neighbor will be next. “Tesco will follow with an even bigger rollout,” he said. “There is now movement in the market and it will go forward.”

In the U.S., Wolfram says Wal-Mart will be joined by more aggressive efforts from BestBuy and Target. “In Japan, they do a lot of things with item-level, but they don’t talk a lot about it in public.”

But mere support of RFID will not deliver most of its benefits and this technologically change needs to be accompanied by a business process change, he said.

“This is basic innovation in retail. This is the next step forward. But the real innovation is that we must change the process,” Wolfram said, adding that many of the dire predictions for RFID have been based on a lack of comprehension. “People have minor understanding what RFID really means in a retail environment,” Wolfram said. “Even the IT management does not have the knowledge, they don’t see the potential. Therefore, they answer very pessimistically about RFID.”

Also to be blamed are trials that are run by technologists only. “Sometimes IT is doing the trial only. If you don’t have the business people on the trial, it’s useless,” he said.

What about unenthusiastic suppliers, that seem to be doing the bare minimum to be RFID compliant? “We also have these kinds of suppliers. We have to educate them and we have to push them harder,” Wolfram said, adding that they are going to be strict requirements for things such as advanced ship notices. “We will punish those in the future” who do not cooperate.

Metro will be using Intermec RFID starter packs along with Reva Systems’ Tag Acquisition Processor products.