The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at www.emeraldinsight.com/researchregister www.emeraldinsight.com/0007-070X.htm BFJ 107,6 Radio frequency identiﬁcation and food retailing in the UK Peter Jones, Colin Clarke-Hill and Daphne Comfort 356 University of Gloucestershire, Cheltenham, UK David Hillier University of Glamorgan, Pontypridd, UK, and Peter Shears School of Sociology, Politics and Law, University of Plymouth, Plymouth, UK Abstract Purpose – This paper aims to offer an outline of the characteristics of radio frequency identiﬁcation (RFID) technology and brieﬂy discusses some of its perceived beneﬁts and challenges for food retailers in the UK. Design/methodology/approach – The paper draws material largely from trade and practitioner sources and illustrates general themes with speciﬁc retail examples. Findings – The paper suggests that RFID has the potential to offer food retailers a wide range of beneﬁts throughout the supply chain including tighter management and control of the supply chain, reductions in shrinkage, reduced labour costs and improved customer service while also facilitating compliance with traceability protocols and food safety regulations. At the same time food retailers will need to address a number operational and strategic challenges and consumer privacy concerns before they can fully realise these beneﬁts. Originality/value – This paper provides a brief and accessible outline of the RFID developments in food retailing which will interest non-specialists working in and in association with this sector of the retail marketplace. Keywords Radio waves, Food industry, Retailing, Supply chain management, Control systems, United Kingdom Paper type Research paper Introduction In recent decades the UK’s major food retailers have been very much at the forefront of technological innovation and development within the retail sector of the economy. The introduction of article numbering and scanning from the early 1980 s onwards, for example, which revolutionised buying and supply chain management, brought a range of customer service beneﬁts and provided rapid and detailed evaluation of advertising and marketing campaigns, was led by a number of food retailers (Jones, 1985). In June 2004 an Institute for Grocery Distribution survey of over 130 retailers, wholesalers, manufacturers, packaging suppliers and logistics companies revealed that just over two thirds of the major players in the UK’s food and grocery industry believed that radio frequency identiﬁcation (RFID) would produce a wide range of beneﬁts for them British Food Journal including greater speed and efﬁciency in stock operations, better tracking throughout Vol. 107 No. 6, 2005 pp. 356-360 the chain and enhanced forecasting (IGD, 2004). In a similar vein Deloitte (2003) have q Emerald Group Publishing Limited argued that the beneﬁts of RFID could be truly transformational and they stress that 0007-070X DOI 10.1108/00070700510602156 EU legislation due in force in January 2005 requires both producers and retailers to keep detailed information about all food products as they move through the supply RFID and food chain. This “case note” outlines the characteristics of RFID technology, and discusses retailing in some of its perceived beneﬁts and challenges for food retailers in the UK. the UK The characteristics and origins of RFID RFID is the generic name for technologies that use radio waves to automatically identify and track objects. These objects can be cases, trays, pallets, cages, containers 357 or individual items. There are several methods of identifying items using RFID but most systems consist of a tag, which is made up of a microchip with a coiled antenna, and an interrogator or reader with an antenna. The reader sends out electromagnetic waves that form a magnetic ﬁeld when they “couple” with the antenna on the RFID tag. The tag draws power from the magnetic ﬁeld and uses it to power the microchip’s circuits. The chip then modulates the waves that the tag sends back to the reader, which the reader converts into digital data. The data transmitted by the tag may provide identiﬁcation or location details and/or speciﬁc information about the product such as price, colour and date of purchase. The tags are very ﬂexible in that microchips measuring less than a third of a millimetre wide can now store a wide range of unique product information, they can be read from a distance and through a variety of obstacles. RFID technology can also allow some but not all the data held on a tag to be read and the tags can be updated after the original data has been loaded. The tags also offer security in that they can be made virtually tamper proof. However, RFID does have some limitations. There can be environmental problems in that radio waves can be absorbed by moisture in the product or the environment, they can be hidden, distorted or reﬂected by metal and the noise from electric motors and ﬂuorescent lights can interfere with RFID communications. At the present time the cost of tags is a limitation on the widespread use of RFID and on the speed at which they may be adopted by the retail industry but these costs are declining rapidly and seem likely to decline further as the technology evolves and as adoption rates rise. In 2000 consultants McKinsey and Company reported that the price of tags were at about $1, by early 2004 they had fallen to $0.25-$0.35 and at that time Hewlett-Packard predicted that as more suppliers began to implement RFID the price would fall to around $0.05. RFID technology had its origins in military applications during the Second World War but its commercial applications only began to be realised from the early 1980 s onwards. During the following 20 years RFID was increasingly widely employed, for example in highway and bridge tolls in the USA, Italy, France, Portugal and Norway, in tracing livestock movements, tracking and control of nuclear inventories, in tracking air freight and in motor car manufacturing where managers wish to track individual vehicles through the assembly line. That said, until relatively recently the technology has been too expensive and too limited for widespread mass commercial applications but as the price of tags, tag readers and the associated equipment continues to fall so a growing number of retailers have begun to explore the introduction of RFID and this in turn seems likely to bring the technology into more everyday use. RFID interest among food retailers RFID technology seems to have numerous applications in food supply chains and it can be used to track batches of agricultural products as they move into and through the supply chain and it has begun to seize the imagination of the retail world. In June 2003 BFJ Wal-Mart, the world’s largest retailer, for example, has instructed its top 100 suppliers 107,6 to place RFID tags on all its pallets and cases, though not on individual items, by January 2005, and a year later the company announced that this requirement would be extended to a further 200 suppliers by January 2006. Within the UK a growing number of major food retailers including Sainsbury’s, Marks & Spencer, ASDA and Tesco have been experimenting with RFID technology. Karkkainen (2003), for example, reported 358 on an RFID tagging trial for short-shelf life goods conducted by Sainsbury’s as early as in 1998 and concluded that a supply chain wide RFID initiative could provide a quick payback on capital investment. Marks & Spencer trialled RFID in its food supply chain in 2002 and following the success of these trials the company announced plans to roll out RFID in all its depots during 2004 and to start to deploy RFID enabled systems in store in 2005.By the end of 2004 Tesco, the UK’s largest food retailer, had installed an RFID network that tracks non-food shipments from its central distribution centre to all 98 of its Tesco Extra superstores and the company plans to install RFID throughout its supply chain by 2007. More generally within the food industry the initial focus will be on the introduction of the RFID tagging of pallets, cases and re-usable transit packaging and the ﬁnalisation of the ﬁrst agreed global standards for RFID in June 2004 should help to speed up the adoption process. Perceived beneﬁts A wide range of perceived beneﬁts are being claimed for RFID technology within food retailing including tighter control and management of the supply chain and of inventory management with attendant cost savings; reduced labour costs; improvements in customer service; reductions in shrinkage; and the clearer tracking of customers and the tracking of their purchasing behaviour. Deloitte (2003), for example, argue that deploying RFID will “maximise economic value added” by addressing “all four major levers of value creation”. Thus, it is claimed that RFID will ﬁrst increase on-shelf availability and improve customer service thereby contributing to increased revenue. Second, by eliminating manual physical inventory costs, increasing transport efﬁciency and accuracy, faster picking in the warehouse and improving stock visibility and saleability the employment of RFID will reduce overall operating costs. Third, it is suggested that reductions in inventory levels and warehousing and improved productivity through “just-in-time” delivery and information sharing will optimise the assets employed. Finally, RFID is seen to be able to bring beneﬁts of reduced shrinkage, faster response to product recall, reduced exposure to public safety risks, and better monitoring of international food movements and increased visibility into recycling which will enhance safety, quality control and customer satisfaction. Initially, supply chain applications appear to be the fastest growing area of RFID within food retailing and the technology certainly appears to have the potential to revolutionise the efﬁciency, accuracy and security of the supply chain. RFID tags can be used for example to track the movement of food products from the “stable to the table”. The basic argument is that the more tightly the food retailers can integrate their supply chain the less likelihood of errors. The real time data generated by the tags can provide manufacturers, suppliers, distributors and food retailers with up to the minute information on inventory, logistics and freshness. FRID will facilitate improved use of warehouse and distribution centre space for food retailers in that goods will not need to be stored according to product type for manual location but they can be stored in the RFID and food most efﬁcient manner based on space and size. Where appropriate warehouse and retailing in distribution staff will be able to use hand held devices to locate goods and to improve the efﬁciency of picking goods. Retailers will be able to tell where pallets and cases are, the UK ensure that they are not stolen or missing, identify products that have been recalled, respond quickly to unforeseen changes and problems in the supply chain, check on expiry dates and determine when products will arrive in store. Food retailers often 359 check the delivery of goods into their stores by hand but RFID will allow them to be checked virtually automatically and almost immediately. In addition to the economic beneﬁts outlined above there are also powerful claims that the introduction of RFID technology will facilitate traceability, namely, the ability to trace and follow food, feed, food producing animal or ingredients through all stages of production and distribution, which will, in turn, allow food retailers to comply with increasingly strict national and international regulatory requirements. By January 2005, for example, all companies operating in the food supply chain will have to be able to identify the origin and destination of food products and be able to provide immediate information to national governments as part of the European Health and Consumer Protection Directorate. RFID tags are currently seen as the best way of fulﬁlling this requirement. FoodTrace, the EU funded concerted action group, whose primary objective is to develop a practical framework to identify every item as it passes through the food chain, increasingly seems likely to harness the power of RFID technology. Beneﬁts are also claimed for RFID technology in relation to food safety regulations. While such regulatory frameworks do not specify the use of RFID tags their employment will enable companies to ﬁnd speciﬁc goods in warehouses, distribution centres, retail outlets and in transit and will thus enable rapid responses to government inquiries and public concerns. Challenges While the advent of RFID technology seems to offer a wide range of beneﬁts to major food retailers within the UK its introduction is generating a number of challenges. If RFID technology is to bring about “truly transformational” (Deloitte, 2003) changes within the food supply chain then a number of key challenges must be addressed. First, if food retailers are to maximise the beneﬁts outlined above they will need to undertake a fundamental strategic review of their business processes and of their relationships with suppliers and distributors. A comprehensive review will be vital here and the accent will need to be on the total costs of establishing an RFID infrastructure throughout the retail supply chain and weighing the attendant costs, for example the cost of tags, readers and associated infrastructure and of the application integration that needs to be installed, against the anticipated beneﬁts. Second, food retailers will surely also want to reﬂect on their ability to handle and make effective use of the data captured by RFID systems. These systems will automatically collect a massive and continuous stream of real time data and the storage and transmission of this data will place severe strains on many retailers’ current ITC infrastructure. At the same time retailers will also need to integrate their RFID systems and the data they generate with their other functional databases and applications such as accounts and customer relationship management. Third, the introduction of RFID technology will also generate major training needs for food retailers and their suppliers and distributors, to BFJ allow their employees to use the new systems and master new job functions. Fourth, while retailers’ plans to introduce RFID on individual items within the consumer goods 107,6 sector have provoked a range of privacy concerns from civil liberties groups this is perhaps much less of an issue for food retailers where pallets and cases, rather than individual items themselves, will be tagged. Nevertheless, in what seems very likely to be a rapidly evolving arena food retailers will be well advised to maintain a close 360 watching brief on such consumer privacy concerns and on the introduction of voluntary or statutory regulatory frameworks. Conclusion The advent of RFID technology has been heralded as offering food retailers a range of powerful beneﬁts through all stages of the supply chain while also facilitating compliance with traceabilty protocols and food safety regulation. At the same time food retailers will need to address a number of operational and strategic issues and challenges before they can fully realise these beneﬁts. The speed and extent to which RFID is adopted by food retailers seems likely to be inﬂuenced by a continuing analysis of the costs and beneﬁts and by changing public perceptions and acceptance of what is clearly a powerful technology. Looking to the future the introduction of RFID by food retailers offers a wide range of research opportunities and those companies and organisations involved in all elements of the food supply chain as well as IT practitioners, civil liberties groups and academics from arrange of disciplines will want to keep a watching brief on its progress. References Deloitte (2003), Chips with Everything, Deloitte, London, available at: www.deloitte.com/dtt/cda/ doc/content/Chips%20with%20everything.pdf IGD (2004), RFID Tagging – the Next Big Thing, IGD, Letchmore Heath. Jones, P. (1985), “The spread of article numbering and retail scanning in Europe”, The Service Industries Journal, Vol. 5 No. 3, pp. 529-36. Karkkainen, M. (2003), “Increasing efﬁciency in the supply chain for short life goods using RFID tagging”, International Journal of Retail & Distribution Management, Vol. 31 No. 10, pp. 529-36.