Retailer reboots its RFID initiative

Towns in the UK have to be small not to have at least one branch of Boots, the retail chain that started

It developed into a string of chemists, manufacturing and selling thousands of over the counter drugs. Then it added make-up and toiletries, then hot-water bottles and other household goods, then music, then photography equipment, baby goods and, eventually, food.

Well, food doesn't mean it's trying to challenge the big supermarkets, but thousands of customers gueue up every day to lunch on the company's lines of sandwiches, crisps and soft drinks. Throw in the fact that it's a top-100 supplier to Wal-Mart (indirectly anyway, a third-party partner supplies a Boots-owned product to Wal-Mart) it all makes for quite a supply chain.

A man that can cast some light on all the complexity is Marvin Couldwell, who glories in the job title of Boots's supply chain transformation manager. "We have 1400 stores and source 40 000 products from thousands of suppliers," he says (talking at a presentation at the NetMarkets Europe RFID Summit in London a few weeks ago).

"That means 12 to 14 million stock keep units going through the supply chain every day. We also have the largest electronic point of sale system in Europe, and we use the data for replenishment."

He says the problem is simple: it's hard to keep track of all this stock. Products don't always arrive in the stores on the right day, so they don't make it out onto the shelves. The system reduces the forecast because it thinks they're there and not selling. It's a vicious circle.

With barcodes, he says staff miss as many containers as they scan. This seems like a bit of an exaggeration, but the point is the existing set-up generates too many errors. That's why RFID now looks interesting to Boots. And not for the first time.

In the early 90s, it did some very early testing of the technology. It proved costly and the error-rate was high. Boots concluded that RFID was "immature" and bowed out. But it's been watching the market since last autumn, and now it thinks it may be time to try again.

"With technology, if you look into the mind of a retailer," Couldwell explains," there are leaders who go for it (new technology) at the bleeding edge. Then, when the technology in question has moved past the high-risk, low-return stage, you get fast followers moving in. You also get sceptics. Well, we're looking to be fast followers in RFID, but we're waiting for suppliers to convince us it's something worth going for."

In other words, Boots believes the time is right for a step change, but the question is how to cost-justify the change.

The price of tags and readers has not come down "as quickly as expected" so Couldwell says he no longer assumes that it will. He also complains that he's heard about lots of ideas, but about very few "real solutions on the ground."

He has questions about the technology, the applications and the business case, but he says suppliers seem reluctant to engage with him on them.

For example, he's worried about the disparity between Europe and North America on frequency, because Boots supplies to both markets. Also, his company is investing in radio frequency-enabled tills and Couldwell would like some assurances that these will work with any RFID system his company may buy in the future. Is that too much to ask? Alas, yes.

He has to win the interest of a CEO who prefers - in the face of disappointing recent financial results - to invest in stores rather than in up-stream activities. Most retailer managers, don't forget, can still feel an ember glow in the fingers they burned during the dot-com bubble.

"Nevertheless," Couldwell concludes," there are still some suppliers who seem to have no interest in helping us compile a business case. And we won't proceed without one."