RFID in the retail supply chain: Issues and opportunities

Introduction In June 2003, Wal-Mart asked its top 100 suppliers to begin using RFID tags on pallets and cases shipped to the Dallas, Texas region by January 2005. This announcement, coupled with initiatives by companies such as Metro, Tesco, and Albertson's, propelled the RFID industry forward. In the period since that announcement, companies have worked feverishly to understand and utilize RFID in their supply chain in order to meet retailers' requirements and, more importantly, create business value for themselves. Initial RFID implementations predominately affected only a small portion of the supply chain (from retailer distribution center to store backroom) and focused on tagging pallets and cases. Given this limited supply chain exposure, determining the payback and, ultimately, creating business value have proven challenging. Early research is, however, providing evidence that, even under the aforementioned restrictive conditions, RFID is yielding a positive return: (1) Gillette found that RFID makes a difference in the tracking and managing of promotions [1]; (2) MIT's work on electronic proof-of-delivery (ePOD) at the retail distribution center revealed a valuable use of RFID [2]; and (3) results from a Wal-Mart-supported University of Arkansas study suggested that RFID can help reduce out-of-stocks [3]. Given the limited scope – i.e. retailer distribution center and store; pallets and cases only – it is very encouraging that solid business cases have already been found. In reality, these preliminary uses of RFID in the supply chain are merely the tip of the proverbial iceberg.