January 12, 2004 9:30 AM PST
Techs line up to track retail goods
A cadre of tech companies, including Intel, Microsoft and Sun Microsystems, used this week's National Retail Federation trade show in New York to announced new developments in inventory management for retailers.
Chipmaker Intel is working with a consortium, including the Carrefour Group, Metro Group and Tesco.com, to create a forum called the Electronic Product Code Retail User's Group of Europe. The forum, launched Monday, aims to speed the deployment of technologies such as RFID (radio frequency identification) and EPC (Electronic Product Code), which the group believes are superior for managing inventory in distribution centers, in warehouses and on stores' sales floors.
Some companies are likely to use the two technologies together. RFID tags let a distributor mark an object such as a pallet with an electronic tag that stores information about what's inside. That data can be read via a wireless connection, using a number of devices. EPC provides a system that uses chips to replace bar codes. Whether employed together or separately, some retailers believe that the two technologies can make it easier to track inventories and therefore reduce their operating costs over time, the group said.
"Carrefour is participating in this initiative in order to ensure that this exciting new technology is implemented globally in an efficient way for suppliers and retailers so that consumers can get better availability of products with better value," Jeremy Hollows, director of business to business for Carrefour, said in a statement.
Together, Carrefour--the largest retailer in Europe, with 10,400 stores--Tesco and Metro Group represent a major portion of Europe's retail industry. While they may reduce costs, tech companies could come out ahead by selling the retailers products that cut inventory management costs. For example, Intel, which has been working to improve its position in vertical markets like retail, could sell more chips for products, such as RFID tag readers. Other companies, such as Sun Microsystems and Microsoft, could sell more computer hardware, software and services, as the new inventory-tracking technologies are put to use.
The EPC Retail Users Group of Europe plans to write white papers and other documents describing technologies, their deployments and usage models. The group said it will share that information with the retail industry.
Meanwhile, other companies are getting more directly involved in inventory management technology.
Sun Microsystems on Monday said it will pair its RFID software with tracking software from partner Aldata Solutions to help companies track inventories. Sun also said it will soon open an RFID test center, comprised of a 17,000-square-foot warehouse, in Dallas. The company has a similar facility in Scotland.
Also on Monday, Microsoft unveiled its own project for setting up retailers with technology such as RFID.
Use of RFID tags is expected to expand on a worldwide basis in coming years, as large retail chains like Wal-Mart Stores begin adopting the technology. Last year, Wal-Mart asked its top 100 suppliers to begin attaching RFID tags to the millions of cases and containers they ship to the company, by Jan. 1, 2005.
IBM on Monday said it is assisting Metro with a similar project, the Future Store Initiative, scheduled to begin in November. To get started, 100 Metro suppliers will use RFID tags to identify pallets and transport crates delivered to 10 of Metro's central warehouses and 250 of its stores, IBM said.
Although it promises to save money over the long haul, the move won't come without costs. Market research firm IDC predicted last week that RFID spending at U.S. retailers will grow from $91.5 million in 2003 to nearly $1.3 billion in 2008.
IDC expects RFID tags to be used first on pallets or cases, rather than individual product packages.
"RFID will be deployed in fits and bursts, as manufacturers and retailers move along the learning curve, and as tag and reader costs come down over the next several years," Christopher Boone, IDC program manager for U.S. vertical-industry research, said in a statement. "Although many suppliers and distributors are currently unfamiliar with RFID technology, they will soon need to comply at some level with customer demands for RFID tagging of cases and pallets."
Hardware purchases of gear such as RFID tag readers will dominate RFID spending through 2007, reaching $875 million in that year, IDC said. But manufacturers and distributors will bear much of that burden, instead of retailers absorbing it, IDC said.
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