RFID - the price must be right

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A shopper takes a bottle of shampoo from the supermarket shelf, and a signal from a state-of-the-art smart tag is sent to staff, updating them on stock levels. RFID (radio frequency identification) is working and ready to replace conventional bar codes.

But not for at least 15 years, according to German retail giant Metro AG, the world’s fifth largest retailer, which since March 2004 has been introducing RFID in stages along its supply chain.

So far, it has 25 distribution centres using the technology, mostly on the wooden pallets which carry the goods; more than 40 suppliers now attach RFID tags to their pallets. In the coming weeks, the company will start using tags on individual cases of products.

The ultimate aim is to deploy RFID at all levels, including the individual item, at all of its 2,300 locations – but that day is years away, concedes Gerd Wolfram, managing director of MGI Metro Group Information Technology.

“We will see RFID increasingly replace bar codes for certain products but the technology won’t be used to identify all products for a good 15 years,” he says, citing high unit prices for the tags as one of the main reasons. Unit prices, Wolfram notes, will need to drop to €0.01 per tag or less to make RFID a viable alternative to a bar code.

Metro views RFID technology as a way to manage the huge flow of merchandise in and out of stores more effectively, while at the same time reducing inventory losses and labour costs. Wolfram says: “We firmly believe that we’ll be able to lower our operating costs with this technology and also provide our customers with a richer shopping experience.”

Since 2003 Metro has been testing RFID in a live retail setting at the Extra supermarket in Rheinberg, near Düsseldorf, as part of its Future Store Initiative.

Among the innovative smart tag implementations being tested at the store is the “smart-shelf,” which automatically informs staff to replenish merchandise. RFID tags are attached to packages of Gillette razor blades, Philadelphia cream cheese containers and plastic bottles of shampoo from Procter & Gamble. As customers pick up the tagged products, signals are transmitted via a wireless network to the merchandise management system, which tracks the number in stock and issues alerts to clerks carrying PDAs.

Metro is also carrying out development work on RFID at its RFID Innovation Centre in nearby Neuss, where it is testing more than 40 applications, most of which are focused on logistics, warehousing and retail operations but a few also involve consumers.

For instance, the “smart fridge” identifies products and informs household members when expiry dates are approaching.

In Neuss, around 20 technology partners, including IT industry heavyweights IBM, Intel and SAP are collaborating with Metro. EPCglobal, which has been leading the drive to establish a global RFID standard, has established its European performance test centre within the German centre.

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