retail news in context, analysis with attitude

One in a series of previews of the upcoming FMI MarkeTechnics Show…

Although most Radio Frequency Identification (RFID) applications are in the pilot stage, there are steps that organizations can take now to prepare. In a session scheduled for the Food Marketing Institute (FMI) MarkeTechnics Show in San Francisco later this month, Kathryn Cullen, a principal with Kurt Salmon Associates, will discuss what systems and processes should be in place, which team members and disciplines will be impacted and what technologies and equipment will be required.

In this exclusive e-interview, MNB asked Cullen about how organizations should position themselves for the RFID revolution.

MNB: Okay, let's assume that we're a small or medium-sized retailer with a modest IT budget. What's the first thing we need to do in order to get up to speed on RFID?

Kathryn Cullen: While it may be premature for a mid-size retailer to move to an RFID pilot right now, they should plan for RFID by forming and involving cross-functional teams. RFID touches most functions, from product development to returns. Working with a larger, diverse group, including DC, merchandising, and accounting associates, will help identify potential applications and required changes. This group needs to identify sources of business value by aligning RFID initiatives with current business objectives and strategic goals. They also need to establish metrics to justify the business value RFID will bring to the organization. And finally, they need to focus on the consumer - ensure consumer benefits and concerns are a focal point in the RFID evaluations and plans.

MNB: Is it absolutely essential that we do this? Are we risking irrelevance and a huge competitive disadvantage if we don't?
Kathryn Cullen: I think it is imperative that we do this, we consider this evolution to RFID as a significant technology breakthrough, as important as the development of the bar code in the early 50's. While it took industry over 10 years to adopt the bar code, we think it will take 5+ years for the same to happen with RFID/ePC. But if the adoption rate is greater, it can move faster. And this technology requires planning and significant dollar investment, so we are urging organizations to start that planning process now.

MNB: In your mind, what sorts of things are we spending money on know that we should stop spending on so that we can apply sufficient budget to RFID?

Kathryn Cullen: This is a difficult question. Because of the slow economy of the past few years, many retailers have been minimizing their IT investments and are now dealing with their organization's unmet needs from the past few years. Hence they are focused on POS upgrades, ERP installations, consolidating systems caused by mergers & acquisitions. All of which are activities that clearly need to take place. One area to consider minimizing investment is in current EDI processing and bar code technology. Where these tools have not already been implemented, consider 'leaping' over them and going directly to establishing Internet portals for suppliers to access data and conducting RFID pilots to receive and transport product.

MNB: Is RFID mostly a backroom issue? How will consumers see the impact or advantages?

Kathryn Cullen: RFID is initially a backroom effort but we expect consumers to see an impact, even before RFID reaches the item level and enables 'smart shelves'. The most obvious impact is in product availability, by better product tracking, even at the pallet and case level, retailers will be able to identify not only that they have product to sell, but more importantly, where it is. So out of stocks and lost sales should decrease.

MNB: There are those who think that RFID is Wal-Mart's master plan for bankrupting every other retailer so it can achieve its plan of world domination. Obviously, that's overstatement...but how do you address this issue with retailers who simply cannot make the commitment?

Kathryn Cullen: Wal-Mart is just responding to consumer demand for better product selection and availability. They have continued to push their supply chain operations for greater efficiencies and speed and in so doing have recognized the value that RFID technology can provide in product tracking. The reality is that when this technology is fully implemented and consumers see fewer empty shelves and a product assortment that meets their tastes and needs at a reasonable cost, they will expect the same level of service from all retailers. If a retailer chooses not to adapt to this changing situation, they will need to determine some other mechanism to differentiate themselves to the consumer, e.g. increased level of service, unique products, etc.

The RFID session is scheduled for Monday, March 1, from 10:30 – 11:30 am, at FMI's MarketTechnics Show in San Francisco.

You can learn more by going to:


http://www.fmi.org
KC's View: