Adopt RFID before customers make you

New Zealand needs to adopt RFID (radio frequency ID) quickly, before the large international chains force us to do hastily, said Gary Hartley, strategic initiatives manager at GS1 New Zealand (formerly EAN NZ).

GS1 seeks to establish standards for information exchange in international trading and was the force behind the adoption of barcodes.

Giant U.S. retailer Wal-Mart Stores Inc. already requires its top 100 suppliers to use RFID and this year will be extending that to the top 200. That will include some New Zealand suppliers, said Hartley.

It is possible for a supplier to put RFID tags on its goods purely for the sake of compliance. "An approach we call 'slap and ship'," Hartley said. But, clearly, it would make more sense for the local company to use the tags productively in its own supply chain.

GS1 has an interested group of more than 40 of its participating companies — including manufacturers, packaging firms, transport companies and retailers — and some of these will be asked to organize into mini-supply chains, smartening up their existing links by adding the RFID element. Trials will then be run for six to 12 months.

The major output is expected to be in the form of education and information. Key performance indicators for the trial are still being planned, Hartley said, but are likely to include published papers and seminars.

Improvements in efficiency for the participating companies are also of interest, said Hartley. But these are difficult to predict in advance.

"As you get into the process, you tend to find efficiency improvement in areas where you weren't expecting it," he said. Obvious areas, though, will be in time-saving through hands-free operation (not having to scan barcodes manually); efficiencies in labor costs and in warehouse management, with a resulting decrease in loss, shrinkage (a euphemism for in-house theft) and misplacement of goods.

Hartley said it's hard to put a finger on reasons for the slow progress of RFID adoption in New Zealand. Small market size is probably a factor. But, sensitivity to cost is probably another. RFID tags and readers are perceived as expensive, but, in the past year, or so have fallen dramatically in price as improving technology and economies of scale begin to bite.

"About a year ago, a tag would still have cost 40-50 US cents on average," he said. "Now that's down to about 10 cents."

GS1 NZ is hoping for a government grant, and expect a decision in the next two weeks.

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