RFID: Not Ready For Prime Time

A radio frequency identification (RFID) tag is like a barcode on steroids. A barcode printed on a cracker box may indicate that the box contains crackers and possibly identify the manufacturer, while an RFID tag carries a serial number that distinguishes that particular box of crackers from all others in the world.

Although some companies were doing RFID pilots in the 1990s, Wal-Mart was the first to jump on RFID technology in a big way. Earlier in this decade, Wal-Mart officials announced that the company’s tier one and tier two suppliers needed to adopt RFID technology by Jan. 1, 2006, if they planned to continue doing business with the biggest of the big-box retailers.

They believed that RFID tags on every pallet or case of merchandise in Wal-Mart warehouses and stores would provide detailed product movement information that is not available by using simple bar codes. They claimed that RFID would be the ultimate supply chain management tool, making it easier to manage inventory, know where products are at all times in the selling cycle, reduce shrink and avoid out-of-stocks.

While several hundred suppliers have complied with the Wal-Mart mandate, retail inventory management has not seen a rush to switch over to RFID technology. "It would be a great way to go, but the technology hasn’t made it," said Russ Bolitho, distribution director for Wesco Inc., which operates the On Your Way distribution business in Muskegon, Mich. "All vendors haven’t supported it."

In addition to supplying Wesco’s 52 c-stores, On Your Way supplies grocery, candy, tobacco and other consumables to dozens of stores throughout the Midwest.

Another RFID roadblock has been the required investment. "You have to look at the cost," said Bill Barnes of McLane, the Temple, Texas-based distributor serving grocery stores and the convenience store industry. "A lot of players, like McLane, have been around and have established warehouses. They would have to retrofit their warehouses with a new system."

"Our system keeps track of all inventory and vendors and knows where in the warehouse the inventory is," said Bolitho.

The Microsoft and PC-based system also keeps track of inventory levels so merchandise can be re-ordered as needed. "When shipments come in, they are checked in to ensure the order is correct. If there are variances in the order, corrections are made," he said.

Currently, On the Way’s 12 full-time pickers refer to paper documents when preparing the orders that come in from each store. "We do everything in one shift," Bolitho said. "We receive in the morning and rotate products. Then, we do the picking. Deliveries are made the next day."

A number of other convenience operations rely on Retalix software for inventory management, including Casey’s General Stores, which has more than 1,400 locations throughout the Midwest, and hundreds of 7-Eleven stores overseas.

"We use Vocollect," said Todd Nedergaard, manager of the Kwik Trip warehouse. "It’s a voice system where the person pulling product is communicating back and forth with the computer."

The pullers, wearing a headset and compact, portable computer, are talked through their various tasks as they build pallets of product for individual stores. When a puller completes a pallet, a label is automatically generated with the store delivery information and route number to be placed on the order.

"Then the pallet is shrink wrapped and staged for loading," said Nedergaard.

While RFID is Kwik Trip’s next step in warehouse distribution, "it’s expensive for what you get," said Nedergaard. "And it is kind of cumbersome at this point."

7-Eleven Inc. also uses a voice system to move fresh foods and perishable products from warehouses to the stores. Eventually, the system, developed by Voxware, will be used to pick all products in the company’s proprietary distribution network, which includes 25 facilities in the U.S. and Canada.

"We’re not a traditional warehouse system," explained Joe Macken, director of logistics strategy for 7-Eleven. "We’re a through-put system."

At 7-Eleven, store operators determine the fresh food items, such as sandwiches and pastries, needed for the following day. They prepare an order and submit it by 10 a.m. to one of the bakeries or commissaries that partners with the company. In the afternoon, products for all stores are delivered in bulk from the manufacturer to the area 7-Eleven distribution center where they are dispersed to the appropriate tote or pallet.

While most warehouses have designated locations for products, "we have designated locations for individual stores," Macken said. The Voxware voice-system directs the picker to the location of the appropriate store’s pallet or tote, and the picker deposits the correct number of items that the store operator requested.

By 8 p.m., the pallets are loaded on the delivery trucks. Drivers are on their way no later than 9 p.m. and most wrap up their tasks by 5 a.m. because the trucks must be out of the store parking lots before the coffee rush begins. This scenario is repeated seven days a week, 365 days a year.

The average 7-Eleven centralized distribution facility serves between 300 and 500 area stores. The Los Angeles facility has the heaviest work load, delivering to approximately 800 stores daily.

"This is a real fast replenishment system," said Macken. "We have a short window."

Computerized voice-activated technology systems, like those used by Kwik Trip and 7-Eleven, have been around about 15 years, and they continue to improve.

"It is flexible," Macken said of the Voxware system. "And you can track each picker’s productivity and accuracy. That’s the beauty of it."

The pick-to-light concept is a simple form of high tech. Totes move along a conveyor belt past various stations where products are located. At each location, the picker scans the order ticket and a light, embedded in the shelf above the tote, indicates the number of units required to fulfill that order. The tote continues traveling along the conveyor belt to the next station where more products are added until the order is complete and ready to be loaded on a truck.

Pick-to-light systems are popular because they are intuitive and easy to understand, allowing temporary workers to learn the job requirements quickly. In addition, the systems are flexible, and the light modules can be added or moved as needed.

"A system like this helps with quality control," Barnes added.

Logistics experts know it is the next big thing, and they are preparing appropriately. Already, McLane is using RFID technology at some of its 47 distribution locations, and eventually, the company will expand RFID to all facilities, according to Barnes.

7-Eleven has planned for the introduction of RFID, and all systems added to the company’s centralized distribution facilities are done so with the future technology in mind. Currently, 7-Eleven, Inc. is working with Motorola to determine how best to take advantage of RFID.

"We believe there’s a great need for it," Macken said of RFID. "We’re dealing in real time, and we’d don’t have time to count product."

Ideally, Macken would like to see RFID tags on every product. "That’s the beauty of RFID. It gives each product its own identify. But RFID tags would have to get below a cent per tag."

"I’m for anything that helps facilitate exchanging product from the milk guy and the consolidator," Macken said. "Minutes are critical to us." CSD