innovate arkansas

The University of Arkansas and a handful of the state's largest public companies are quickly becoming the leading authorities on radio frequency identification and the promise of revolutionary merchandise accounting practices the technology holds.

Among large retailers, RFID has been the buzz acronym since the 50-plus-year-old technology roared back onto the scene in the last decade and was touted as the key to future retailing, both on the sales floor and behind the scenes.

Much of the initial hype, experts say, put the cart way ahead of the horse, as RFID was slow to provide the kind of return on investment proponents had promised. But the Information Technology Research Institute at the UA at Fayetteville moved ahead of the curve by launching its RFID Research Center program in February 2005 to focus solely on putting the technology to practical use in business settings.

"We are touted by many as the leading RFID research center in the United States, if not the world," said Bill Hardgrave, executive director of the Sam M. Walton College of Business' IT Research Institute and also director of the RFID program, the latter of which is the only accredited academic RFID test center in the world. "It's only a matter of time before RFID is a widespread and mainstream practice, and we're here to help find ways to get RFID to start making more sense in business models."

The UA's RFID Research Institute has 15 students in its lab setting and more than 100 working on various projects, according to Hardgrave, who adds that RFID will be the merchandise accounting technology of the future.

"In terms of accurate accounting for merchandise, there's no question that RFID will revolutionize the way goods are tracked, shipped and stocked," said Hardgrave. "Companies will never lose a single product, and they'll know where it is, where it's been and where it's heading in real-time terms."

Wal-Mart Stores Inc. of Bentonville is credited with RFID's mainstream resurgence after announcing in 2003 that any supplier hoping to do business with the world's largest retailer would have to be RFID-ready by 2005. That lofty goal was later redacted to mean its top 100 suppliers, which was reached and has now increasingly grown to include well more than that. The number of Wal-Mart stores using RFID has grown from 100 in 2004 to more than 1,000 stores in 2007.

Dillard's Inc. of Little Rock, with more than 330 retail stores across the country, has been contemplating RFID since 1992, and in 2006 began the first of many trials using the technology. Dillard's announced in August it would launch a pilot project this year to track one of its denim-clothing suppliers' products from the production plant to the point of purchase in its stores.

Hardgrave said the RFID Research Center at the UA has worked with both companies - along with J.B. Hunt Transport Services Inc. of Lowell, Tyson Foods Inc. of Springdale and several other of the state's and the world's largest companies - to integrate RFID uses into their business models.

The RFID Research Center conducted a six-month study on Wal-Mart's "out-of-stocks" statistics, which generally refer to the number of times an item went out of stock. Hardgrave said the study revealed that RFID tags cut Wal-Mart's out-of-stocks by 30 percent, illustrating that more returns on investments in RFID were possible.

What Exactly Is It?
To answer that question, there's no better source than the RFID Journal, an online industry publication that's existence is proof that there's enough interest in RFID for it to generate relevant daily news.

The publication defines RFID as "a generic term that is used to describe a system that transmits the identity (in the form of a unique serial number) of an object or person wirelessly, using radio waves."

RFID is broadly grouped with other popular auto-ID technologies, like traditional bar-code systems and the budding optical character readers, like retinal scans. But unlike other auto-ID technologies, RFID does not require a person to manually scan a label or tag to capture data and is designed specifically to enable electronic readers to capture data on tags and relay it to a computer system. It's that feature, Hardgrave said, that will propel RFID in the next decade.

"The underlying theme here is better visibility," he said. "It allows us to see products in near real time without human intervention. With a bar code you have to have someone standing there at the receiving door scanning the boxes as they come through if you want to be able to see that product."

How It Works
The beauty of RFID, Hardgrave said, is that individual products and pallets can be identified simply by arriving at their destination.

RFID stickers are about the same size as most bar code labels, only they're encrypted with a microchip that's attached to a tiny radio antenna. The chip will store about two kilobytes of info, which usually includes product information like its manufacture date and its destination, among other relevant details.

"With RFID all you have to have is the reading system sitting next to the door or bay, and the boxes come through, and you can read them without human intervention, and it gives you this unprecedented level of visibility without increasing the level of human interaction," Hardgrave said.

The reading systems have antennae that emit and receive radio signals with the individual tags in its vicinity, which Hardgrave said is typically eight to10 feet. That information is then digitally passed from the reader to a computer system that's set up to suit the specific company, allowing it to reduce inventories and at the same time guarantee that products are in the right place at the right time.

Passing the Test
Dillard's, mired in declining sales and profits, has been watching the development of RFID since 1992 and began its initial testing in August 2006.

It began by tagging 250 different items and digitally following their path. As the keynote speaker at August's RFID Journal/AAFA Apparel & Footwear Summit in New York, Dil-lard's chief information officer, Bill Holder, said the results were positive enough to go ahead with further testing.

"The results were mixed, but good enough to keep us looking at RFID," Holder said at the conference.

Dillard's headquarters did not return several messages last week seeking comment.

In the speech, Holder said the company then worked with Hardgrave's department at the UA testing RFID techniques on conveyor systems, and in March Dillard's began another pilot that read 100 percent of the merchandise it tagged at one of its distribution centers and one of its stores.

That success led to a third pilot Dillard's has already begun, which targets the movement of blue jeans through the supply chain. According to the RFID Journal, the two-phase test will run through January 2008 and will ultimately compare the accuracy of both RFID and bar code data-capture processes.

"We think that there will be a big bang for our buck in source-tagging private-label goods," Holder told RFID Journal, and added that the company has several RFID pilot projects scheduled through 2009.

The Future of RFID
Wal-Mart's interest in RFID wasn't the only reason a new wave of the technology came back around at the turn of the century, as the Massachusetts Institute of Technology overcame the cost barrier in developing cheaper RFID tags around the same time.

The tags' price has dropped dramatically in the last few years, from as much as 40 cents to 8 to 12 cents apiece. Hardgrave said that once tags reach the 5 cents-per-sticker mark, more companies will jump on board.

"It varies with different companies, but the upfront costs of adding the technology along with the continual costs of the tags should obviously cumulatively still save the company a lot of time and money," he said.

Companies also are working to ensure the tags can be recycled and reused.

In the next five to 10 years, companies will be able to share data transmitted from the RFID tags in real time via an integrated network, Hardgrave said.

Take, for example, a pallet of Coca-Cola shipped to Wal-Mart. The pallet is automatically scanned when it leaves the bottler, and software then alerts Wal-Mart that the product has left the bottler. Wal-Mart can then look up data and learn exactly what is coming and when it will arrive, among other details. When the shipment arrives at Wal-Mart, it's again automatically scanned and a message is delivered to Coca-Cola saying the shipment arrived intact.

Hardgrave said the ultimate goal is to flip the supply chain from companies pushing goods into the market hoping they sell to pulling them through the chain based on real-time demand.

"I think in the next three to four years we'll see the use of RFID in pallet and cases progress, and in five years it'll take hold at more of an item level," Hardgrave said. "By the end of another decade, say in eight to 10 years, you'll see RFID tags in use on individual products and everything will be easily trackable."