Radio Frequency Identification

INTRODUCTION

If you were to ask me what my dream job is, it definitely wouldn’t be taking over the operation of a floundering grocery chain. Yet, that’s exactly what former General Electric executive Lawrence R. Johnston did in 2001. Not only did he take over the company, he turned it around. His inventive management style and new ideas have begun to revive the company. Johnston knew that he couldn’t compete head to head with the retail giants such as Wal-Mart (Holmes, 2005). He has spearheaded the addition of technology to Albertsons, to improve the speed of checkout and customer service. These changes are evident in that the 18% increase in earnings for the third quarter of 2005 was mostly due to cost saving measures not increased sales as was hoped (Holmes, 2005). He has also had a few issues with the employees. For example, a four-month strike at the Southern California stores cost the company an estimated $1.2 billion in lost sales. That figure doesn’t even begin to estimate the cost of the ill will of the employees (Holmes, 2005). Even though the strike was a definite setback it also proved the resolve of the management to have things their way. Johnston believes the strike has helped to speed the signing of new contracts in other areas of the country (Holms, 2005). All in all, he seems to be exceeding expectations. I wonder if I could perform as well as Johnston.

MY TURN

Imagine that I were hired instead of Johnston. What would I do differently? Well, the biggest thing would be to implement Radio Frequency Identification (RFID). Basically, RFID is using radio frequencies to track and inventory shipments. If you’ve watched television in the last year you’ve probably seen the IBM commercial where a couple of truck drivers are lost. The point of the commercial is that the boxes “told” the help desk that they were going the wrong way. Now, is RFID going to cause someone to be sitting in the middle of the road to tell the drivers their going the wrong way? No, probably not. However, RFID could possibly generate a phone call from the dispatcher to enquire about the intentions of the driver. The RFID system is different from the GPS systems in that it is used by major trucking companies. The GPS communicates with the trucking company and RFID communicates with the supplier, receiver, or both. This technology is becoming very important and is now required by the suppliers of Wal-Mart, Tesco (UK), Metro (Germany), and the US Department of Defense (Byrne, 2004). This widespread use of the RFID technology indicates its usefulness. With these companies leading the way, other companies will inevitably follow suit as the cost of RFID is driven lower. Unlike other dot-com era innovations, RFID seem to be here to stay. In June 2004, the editor of the RFID journal was quoted as saying: “This is a lot like what the internet was in 1995. We are on the verge of a major change in the way companies do business (Higham, 2004).” This single statement is indicative of the importance of utilizing RFID in streamlining the supply process in businesses throughout the world. RFID has the possibility of having a huge impact on the supply chains of many companies. The following lists just a few of RFID’s expected benefits (Byrne, 2004):

• Significant reductions in the cost of goods sold, resulting from increased labor productivity and reduced product shrinkage;

• Large declines in working and fixed capital-the result of reduced inventory levels and improved asset utilization;

• Improved inventory visibility for wholesalers/distributors, creating an environment conducive to better planning;

• The opportunity for manufacturers to be able to more accurately ascertain product and pricing information;

• Less need for all of the parties in the supply chain to (re)check, (re)audit, and (re)verify their order accuracy;

• Lower personnel expenses, since less labor and time are needed to complete tasks; and

• Improved in-stock positions for replenishments and refills.

These benefits will impact all segments of industry but right now they have the biggest effect on companies that ship medium to high-value items such as the pharmaceutical industry. The full implementation of RFID depends on several factors, such as the value of the item to be tracked and the ease of use and availability of the tracking software. This last item will improve as more companies start using the RFID systems. In order to determine if RFID is going to be used, the company must first has determine the value of the product and its needs,