Proof of Progress
The EPCglobal community has been very active in moving RFID technology forward. Hot off the heels of the International Standards Organization's (ISO) approval of the UHF Generation 2 standard, CGT talks with Mike Meranda, president of EPCglobal US, to get his perspective on how the consumer goods industry is progressing.
What significant changes occurred over the past few years that enabled RFID to move forward?
Meranda: We have come a long way in a short period of time, and a lot of the progress can be tied to the development of standards for EPC/RFID. In late 2003 through the end of 2004, the global community of end users and more than 60 technology companies worked on our foundational standard for RFID tag and reader communication.
It's called EPCglobal UHF Generation 2 standard. It's already been accepted as an ISO standard and, most importantly, it gives vendors and solution providers the confidence they need to invest in developing new products, and gives end users the confidence that the products they buy will work.
Since Gen 2 was ratified, we have also seen a dramatic decrease in the price of RFID tags -- dropping from around 45 cents each a couple of years ago to 10 cents to 15 cents now -- and many new suppliers and a variety of products entering the market. For consumer packaged goods, we are seeing the development of hand-held readers to find items on shelves and fork-lift enabled readers that can read the pallets as they are being moved.
Can you share examples of how EPC/RFID is being used today in the consumer goods industry?
Meranda: The consumer goods industry is already seeing value from implementing EPC/RFID programs for tracking products through the supply chain --- all the way from the manufacturing floor to the store shelf. One of the biggest benefits has to do with a reduction in out-of-stocks, inventory management and promotions.
Wal-Mart conducted study of 24 stores using EPC and realized a 30 percent reduction in out-of-stocks at the shelf. Out-of-stocks for products with EPCs were replenished three times faster.
Gillette conducted a study when it launched a new razor last year. EPC reads indicated that 33 percent of the displays were not moved to sales floor in time to meet the promotion start date. Late execution of the promotion resulted in 19 percent less sell-through for stores that did not move the products to the floor in time for the promotion.
In addition, item-level tagging is moving much faster than we anticipated in part due to the urgency in the pharmaceutical industry to ensure the safety of patients and the authenticity of drugs. The consumer goods industry will benefit from the business requirements that are generated from the work the pharmaceutical industry is doing. That could lead to better platforms to manage store front ends, inventory on the shelves and eventually for point-of-sale and Electronic Article Surveillance (EAS).
As the technology moves from the backroom to the store front and gets closer to the consumer, it will provide retailers with a whole new set of applications that will enhance their business and relationships with customers.
How are global standards for EPC/RFID progressing?
Meranda: The EPCglobal Gen 2 standard was just recently accepted as an RFID standard by the ISO, which further solidifies it as a global standard. Since 2003, EPCglobal has ratified eight standards for product development and we have several more in process.
We continue to modify and develop new standards as new industries come on board with different supply chain challenges. So far, 15 products have been certified as Gen 2 compliant (11 readers and reader modules as well as four silicon chips).