RFID Still Struggling, Says New Report

Written by Evan Schuman
May 30th, 2007

Low tag read rates are still preventing RFID from gaining the necessary survival momentum as of mid-2007, even though the potential benefits are looking more attractive, according to a report issued Tuesday from U.K.-based RFID analyst firm IDTechEx.

“The tagging of pallets and cases to meet retail mandates is still struggling to take off,” said IDTechEx CEO Raghu Das. “This year, IDTechEx expect that only 375 million tags will be used for this sector, the main reason for this is that the read performance is still not satisfactory for most companies. For example, George Chapelle, CIO of Sara Lee, reports that on frozen and dry foods they achieve about a 70 percent read rate, and on chilled foods the read rates is about 30 percent using Gen 2 tags. With such poor read rates, they cannot realize internal benefits.”

As is always the case with retail and RFID, Wal-Mart always dominates. Although Wal-Mart is continuing to push its RFID efforts, Das said, it can only force the hand of suppliers so far.

Wal-Mart’s “aim is impressive. (Wal-Mart CIO Rollin) Ford reports that if RFID can resolve 10 percent of their out-of-stock problems and inventory inaccuracies, it would save the retailer and it’s suppliers about $250 million a year. However, with poor read rates, many suppliers have seen no ROI?let alone savings?above this,” Das said.

Not all suppliers are struggling with RFID, though. The report found Kimberly Clark?of Kleenex and Huggies fame?using RFID to good advantage with monitoring out-of-stocks.

“Shelf stock information is something that consumer good suppliers did not have good visibility of before RFID. The products it supplies are mostly RF inert, being mainly paper based, so read rates are good enough for the company to obtain significant paybacks. And significant they are: the firm discovered that out of stocks on the supermarket shelf were about twice (as bad as) they had expected,” the report said. Kimberly Clark has “deployed an RFID stock monitoring system to 500 stores and hope to expand it to all stores where their products are sold, even if those stores do not yet have RFID capability. However, to date, Kimberly Clark is unfortunately the exception rather than the rule.”

Procter & Gamble, for example, is quoted in the report as saying that the number of tags it ordered in 2006 were just “several million.” And $12 billion Sara Lee “will use only about 50,000 RFID tags in 2007 to meet retailer mandates,” the report said.

To be fair, these are the same concerns the industry has seen for a couple of years, but the fact that there seems to be little or no evidence of improvement is alarming. “The challenges faced by consumer packaged goods suppliers are not new, but as a result they are doing little more than slap and ship,” the report said. “UHF Gen 2 tag suppliers, therefore, have found the RFID market disappointingly slow, with many looking into other applications such as asset tracking and other closed loop applications, which is still one of the biggest growth areas in RFID and usually profitable for suppliers.”


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