Recently, I had the fortunate opportunity to engage in an informal dialogue with one of the foremost experts and outstanding minds in the field of RFID for Retail, Dr. William Hardgrave. As founder and past director of the RFID Research Center at the University of Arkansas, “Bill” is a long-time business associate, as well as a friend.
We first met at a Motorola party in NYC and within 15 minutes of meeting, Bill and I—together with David Cromhout—walked into the American Apparel around the corner from the party where I showed them how I was planning to implement RFID to improve inventory management. After seeing the very congested stockroom, Bill and David gave some sound advice about shadowing and issues with metal and cross reads.
Bill was my first point of contact once I was hired to manage the American Apparel RFID project. My excitement about the opportunity for directing the RFID installation for American Apparel and their devotion to the technology brought the three of us together. Since then, Bill and I have spoken on panels together. I was a speaker at the VICS conference Bill hosted at the University of Arkansas, and we have worked as a team advising early adopters.
TC: How did you first become interested in, and involved, with RFID technologies?
Dr. Hardgrave: I have always been interested in technologies that improve business processes. In this particular case, I was working with Walmart on a couple of other projects and they asked me to join an internal team they were assembling to look at how to use RFID in their supply chain (this was in 2004).
TC: How did your involvement and early research impact the direction of RFID technology? How do you see that impact being evidenced today?
Dr. Hardgrave: From the start, our research was always about “the business value of RFID.” Lots of great universities and companies were working on the technology, but no one was really exploring how it should be used to extract business value. The first major business-case research we conducted was a study of the impact of RFID on out of stocks at Walmart. RFID was used at the pallet and case level at that time and we found, even at the case level, RFID improved inventory management such that out of stocks were reduced by more than 20%. Even more importantly, this effort led to the realization that many of the issues faced by retailers were at the store, not the supply chain; thus, a movement away from pallet and case RFID to item-level RFID. A few short years later, we conducted the first item-level RFID study with Dillard’s, followed quickly by studies at JC Penney and Macy’s. In all cases, inventory accuracy improved significantly. This improvement in inventory accuracy has proven to be a silver bullet for retail adoption.
TC: Overall, has the development/growth of the RFID industry met your expectations, or vision? Did you anticipate that implementation and acceptance of RFID would be more—or less—widespread than it is today?
Dr. Hardgrave: Honestly, when all of this started in retail, I thought it was a supply chain tool but not a ‘retail’ tool (i.e., for the store). In 2004/05, I recall saying that it would be many years before RFID would be used at the item level. Of course, this prediction was wrong. Our own research became the catalyst for moving away from supply chain (pallet and case) to store-level (item-level ) RFID. Overall, we moved to item-level much faster than I, and many others, predicted. If you look at the adoption history, RFID really began to flounder after the first few years and much of it, I believe, was due to its ‘misapplication’ at the pallet and case level. After the first few item-level pilots and related research, adoption really took off. I have been amazed at the adoption the past few years.
TC: Knowing what you do now, what are your expectations for the next stages of RFID
Dr. Hardgrave: In retail, adoption should start with retailers addressing four fundamental use cases: inventory accuracy, out of stocks, loss prevention, and locating product. A retailer must solve these issues before trying to utilize RFID otherwise. I think we will continue to see rapid adoption by RFID, especially in apparel, in the next few years as retailers are realizing they must solve the four use cases to continue to be competitive. After a few years, “just having” RFID will not provide a competitive advantage – having RFID will be table stakes for being a retailer. Instead, competitive advantage will be had by those that figure out how best to use the data to improve the customer experience. After all, RFID is not about the technology, it is about the data it carries – the power, and the magic, of RFID is in the data is carries and produces. Those that figure out how to harness this data will win.
Beyond apparel, retailers have started deploying RFID in other categories, such as shoes, electronics, and cosmetics. I think this trend will continue, especially among the major department stores.
And, beyond retail, I am bullish in two areas in particular: healthcare and food safety / food quality. Both are huge areas and can benefit greatly from RFID.
TC: What do you see as the role of niche players, like Truecount, in the market today? Does having a dedicated focus (retail, healthcare) better serve the client/end-user? If so, how; if not, why not?
Dr. Hardgrave: RFID is not a ‘plug-n-play’ nor a ‘one size fits all’ technology. Rather, each deployment is, at least slightly, unique. In fact, one of the things that slowed down adoption a few years ago was that the technology was driving the deployment rather than the business problem. What I mean by that is simple: the business problem should dictate what technology we choose and how we deploy it rather than choosing a technology and then trying to figure out how we solve our problem with this technology. Sounds logical and simple, but many got it wrong.
In new application areas, such as RFID, innovation is driven largely by many, smaller, startups. These startups will address a niche. Eventually, the niche will grow to sustain a startup (or startups) or it will be absorbed as part of a larger area. Companies like Truecount are absolutely essential to the growth and adoption of RFID – without the specific applications from these companies, the value of the technology would not be realized. As I indicated earlier, RFID is ultimately about the data, not the technology.
TC: Do you see other technologies, such as NFC, as threatening or as adding strength to RFID?
Dr. Hardgrave: The best solution for most complex problems involves a confluence of technologies, rather than a single technology. Eventually, retail will be defined by the use of a portfolio of technologies – NFC, RFID, barcode, etc. Retail is complex and requires a complex solution; the best solutions will involve multiple technologies.
TC: Now that RFID is being adopted more widely, are retailers finding the technology to be difficult to work with? Intrusive? Too expensive? What feedback have you received? Why do you think many retailers are still hesitant to implement RFID?
Dr. Hardgrave: I think the industry made some mistakes early that caused adoption to slow down. First, when RFID was introduced, it was a solution in search of a problem. And, frankly, the technology just wasn’t that good. So, some of the early efforts were not successful because we forced the technology onto a problem and it didn’t perform that well. Second, RFID was applied too narrowly. RFID is a technology that can be used across the entire supply chain – from source to shelf. We made the mistake in some of the early pilots by focusing on only one use case. This limited focus will necessarily limit the payback. RFID is a multi-use technology – is should be treated as such. Third, RFID was treated incrementally. In many cases, it was viewed as a ‘barcode on steroids’ and was used to augment a process that was based on barcodes. Again, this will limit the improvement one can have with RFID. The best ROI is when RFID is used as a process enabling, multi-faceted, complete supply chain technology allowing one to do things heretofore not possible.
The good news is: the industry has learned from these early mistakes. As a result, adoption has accelerated.
I think a couple of issues are plaguing current adoption: (1) patent trolls have caused some retailers to delay and others to be very quiet about their deployment (thus, the illusion that adoption is slowing); and (2) deployment issues – RFID deployments are unique; every store and DC are slightly different, even within a single retail chain. Thus, every deployment is at least slightly unique. For retailers, this means they have to either ramp up internal knowledge for deployment or, most likely, rely on vendor partners who have the domain knowledge (i.e., retail) and the technology skills to successfully implement.
TC: What will it take to overcome the retailer’s objections, or hesitancy? What key message can RFID solution providers communicate that will move them to view RFID as an essential—-and strategic—technology tool to add to their tool box?
Dr. Hardgrave: The message is really quite simple: in a few short years, RFID will be ‘table stakes’ to playing. That is, to stay in the game, a retailer must have RFID and they must solve the four fundamental use cases mentioned earlier (inventory accuracy, out of stocks, loss prevention, and locating product). Retailers who do not adopt RFID will not be competitive. And, I believe the future of retailing is Omni-channel – i.e., any place, any time, any product. Retailers must be able to provide a seamless experience to their customers — wherever, whenever, whoever. You can’t do Omni-channel retail without RFID; it just isn’t possible.