The use of radio frequency identification (RFID) tags is providing a payoff to some manufacturing firms despite some technology hiccups and high price tags.
Users at the RFID World conference here last month said that as the technology matures, it is starting to show a solid return on investment. Indeed, some said the technology is delivering a unique look into the manufacturing supply chain.
James Jackson, director of vendor relationship management at clothing manufacturer VF Corp. in Greensboro, N.C., said that RFID technology is helping his company ensure that merchandise tied to time-sensitive events like the Super Bowl is on store shelves at the right time. Since implementing its RFID system, VF can notify stores when tags report that inventory is stockpiled in back rooms instead of being on the sales floor.
The RFID program will help VF reduce the amount of payments it makes to Wal-Mart Stores Inc. in the form of fees that the retail giant charges suppliers when it says it hasn't received an item ordered. The tags let VF verify when items are shipped and arrive at the stores.
Some users at the conference warned their colleagues that RFID can still carry a significant price tag despite the benefits.
"In reality, it costs money," said Jim McMasters, senior vice president of information systems at Tandy Brands Accessories Inc., a maker of fashion accessories.
Jackson noted that the RFID effort at VF was slowed early on as the company waited for RFID costs to drop.
J. Kevin Brown, director of information systems at Daisy Brand Inc., which makes sour-cream products, said that his firms's use of RFID technology to track inventory can allow it to keep abreast of how long perishable goods are in the supply chain.
Dallas-based Daisy Brand uses RFID technology from Alien Technology Corp. in Morgan Hill, Calif.
Brown also said the RFID system can help prevent thefts and track the success of new products.
Bob Berg, senior business systems manager at DHL Worldwide Express in Scottsdale, Ariz., is working to implement an RFID system to improve the security of goods in transit, help protect perishables from spoiling and improve supply chain performance for customers.
DHL is rolling out the RFID system to help its customers comply with Wal-Mart's mandate that its suppliers use RFID technology.
Wal-Mart offers RFID update
Wal-Mart continues to update its RFID initiatives, adding new uses for the technology and getting more suppliers and partners to comply with its mandates.
The Bentonville, Ark.-based retailer implemented its RFID system in January 2005 after completing pilots at distribution centers in Dallas, said Carolyn Walton, vice president of information systems.
Sitting on a panel at the RFID World conference here late last month, Walton said the number of Wal-Mart suppliers using RFID technology has more than tripled since the effort began. More than 300 suppliers now feed RFID-tagged goods to 500 Wal-Mart facilities, she said.
By January 2007, the company expects that 600 of its suppliers will be using RFID technology and that the number of Wal-Mart stores capable of handling RFID-tagged items will have doubled to about 1,000.
Walton noted that Wal-Mart has seen a return on its RFID investment -- even before any extensive process changes have been put in place.
For example, she said, out-of-stock items carrying RFID tags are being replenished three times faster than they were before the project began. However, she didn't disclose how much money Wal-Mart has saved by using RFID.
One RFID project that's still in a proof-of-concept phase involves adding sensor tags to perishable goods such as fruit. Wal-Mart is using a special tag to track just how long a crate of, say, bananas has been in transit, so it can ensure that it's sold when the fruit is ripe, Walton said.
Later this year, Wal-Mart will launch a pilot project that tests whether RFID tags can be used to improve the efficiency of unloading boxes from trucks, Walton said.