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RFID technology and its potential benefits are high on the agenda for many European retailers, food manufacturers, and logistic service providers, according to an international study undertaken by IT and wireless telecoms firm, LogicaCMG.
The majority of companies interviewed in the Netherlands, United Kingdom, Ireland, Germany, France, and Belgium said that RFID was currently their top priority in terms of planned IT investment.
The study, 'RFID on the Threshold of European Breakthrough', showed that half of the 50 companies interviewed in Europe have already deployed (or are planning to deploy) RFID pilot projects throughout 2004, with the majority planning to start implementing the technology within the next three years.
Item-level by 2008
A number of major retailers such as Tesco (UK) and Metro (Germany) have already committed to initiating a large-scale rollout of RFID technology. But while these projects are expected to be finalised by 2007, LogicaCMG's research suggests that companies will not begin to tag consumer products until 2008, when prices of tags will have naturally lowered.
As seen from the RFID mandates already issued by major retailers in the US, UK, and Germany, the main focus is currently on Returnable Transport Items (RTIs) such as crates and pallets. Tagging at this level will be standard by 2005, according to the survey.
European retailer issues
The research report also highlights when and how RFID is likely to be used on a large scale for RTIs within European retail supply chains, in which the large variety of RTIs traditionally makes management, recording and administration both complex and labour intensive. RFID will help reduce or eliminate such issues.
Because RFID technology has the potential to profoundly affect the processes and IT systems of any company implementing it, care must be taken in preparation. The use of RFID with RTIs can only take place if the financial benefits are greater than the costs. The cost/benefit analysis section of LogicaCMG's research found that, based on a tag price of Euro 0.50, the average handling cost per pallet could be decreased by 8.5%. This would lead to a return on investment within two to three years.
EPC Network preferred
Most of the companies surveyed that have already trialled RFID technology preferred the EPC (Electronic Product Code) Network as standard for information exchange, and UHF (Ultra High Frequency) as the frequency of choice.
But in the short term there are a number of issues that still need to be solved before RFID can be broadly adopted. To begin with, the EPC Network has not yet been finalised. Moreover, current limitations in European legislation mean that the use of UHF technology is somewhat restricted. And the software needed to integrate RFID technology into existing IT infrastructures is not yet mature. LogicaCMG anticipates that the main issues will be resolved by the end of 2004 and that, as volume deployments increase over the next few years, the cost of RFID tags will naturally decrease.
European breakthrough
"Our research shows that we are on the threshold of a breakthrough of RFID technology in the European market. The quick introduction of the EPC network is key for the broad acceptance and implementation of RFID," explained Paul Stam de Jonge, director of sales and marketing for LogicaCMG. "For this reason we, together with many organisations within the sector, have put a lot of effort into the definition of the EPC Network."
Since the whole supply chain is involved, the RFID implementations of the large retailers in 2005 will have a great impact on food manufacturers, logistics service providers, and retailers alike. According to LogicaCMG, the RFID implementations will lead to an irreversible process in the retail market; in the short term it is therefore of great importance that these companies gain knowledge and experience of RFID technology.
Retailers lead the charge
The dominant position of the retailers in the supply chain means that they have a leading role in the uptake of RFID. The study shows that retailers are particularly interested in tracking goods at an individual product level, while tagging at pallet level is not as crucial as they are often only used to transport the goods to the distribution centre (as opposed to throughout the entire supply chain).
The research was conducted by LogicaCMG in cooperation with EAN Netherlands and ECR D-A-CH, and was sponsored by Checkpoint Systems, Euro Pool System, Intermec, Omron, Zetes, SAS, and Container Centralen A/S. In addition to desk research, the study consisted of 50 in-depth interviews with potential users of RFID technology (including retailers, manufacturers, logistics service providers, and RTI pool organisers).
Source: LogicaCMG Plc
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