GENEVA (ILO Online) - Sounds good: consumers will be able to trace the origin of the food they buy thanks to radio frequency identification (RFID) tags, computer chips equipped with miniature antennae.
The technology enables non-line-of-sight transmission via a radio frequency of greater product information than what is currently possible with existing bar code-based equipment such as price, manufacturer, expiration date and weight. The compelling reason underlying RFID supply chain introduction is to help retailers deliver what the customer wants and thus increase productivity and competitiveness.
Other benefits include better food safety management through enhanced ability to track and trace livestock, to access product information, to fight product counterfeiting, to speed up point-of-sale payments, to thwart pilferage and shoplifting, to facilitate merchandise returns and product recall processing, to improve stock control, and a host of other functions.
Many retail experts believe, given all these incentives, the tags will replace barcodes as the workhorse of retailing over the next decade.
"We will see RFID increasingly replace bar codes for certain products but the technology won't be used to identify all products for a good 15 years or more", said Gerd Wolfram, Managing Director of MGI Metro Group Information Technology, at a news conference in March 2006 in Hanover, Germany, ahead of the Cebit trade show.
Metro Group, the world's fourth biggest retailer by sales, already sees clear benefits from its adoption of RFID. In pilot tests warehousing costs were reduced by 11 per cent, and out-of-stock situations decreased by 14 per cent, while merchandise losses were down nearly to 18 per cent. The Metro Group which now utilizes RFID technology at 22 locations, and has more than 40 partners in the consumer goods industry attaching RFID transponders to pallets destined for its stores, is among the technology's pioneers in the retailing industry.
John Clarke, Metro Group's Technology Director for the UK's Tesco Stores Limited agrees with predictions of the significant gains "radio bar codes" could bring, underlining the huge benefits to consumers in terms of better availability and faster movement of products, which will eventually reduce costs and bring lower prices.
All across the world, other retailers have either already taken up the technology or are experimenting with its use in different operations.
In Japan for example, such retailers as Hankyu, Lawson and Izumiya are moving from experimentation in the context of the Japanese Future Store Project completed in January this year, to full RFID store floor roll out. Similarly in China, the country's largest retailer, the Shanghai-based Bailian Group is in the second phase of an RFID tryout programme to track goods within its distribution centre, as well as shipments from some of its suppliers.
"Given the high cost of RFID implementation, it is quite clear that only the very largest retailers with the necessary financial resources will be able to deploy the technology. The estimated set-up costs for a major retailer would range from US$340 to 380 million for a business with approximately eight distribution centres and a thousand or more stores", explains John Sendanyoye, ILO expert for the commerce sector.
While the costs of RFID are prohibitive for all but the largest retailers, the potential cost savings are immense. The projected annual cost savings estimated from the technology for the world's leading retailer Wal-Mart would be up to US$8.35 billion annually with RFID - more than the total revenue of half the companies in the Fortune 500. Wal-Mart is investing approximately US$3 billion over several years in the new technology.
Fear of job losses
Because of their ability to reduce demand for labour, the introduction of new technologies like RFID is invariably accompanied by fear of job losses. The German retailer Metro Group has acknowledged that the deployment of RFID across the company's operations will "render thousands of jobs superfluous". The company stressed, however, that the displaced workers could be shifted to customer service positions, benefiting both them and the company.
The company emphasizes its efforts to prepare its workforce for RFID implementation, involving individual employees and Works Council members from affected stores, outlets and warehouses. All employees from the retail brands and cross-divisional companies concerned with the technology's implementation had undergone comprehensive training, and personnel were kept abreast of RFID developments via the company Intranet and the staff newspaper.
In addition to informing its Works Councils prior to RFID implementation, the company maintains an ongoing dialogue with German trade unions on the issue, giving them guided tours of the future store or making presentations on changes in workplace conditions.
"Because RFID introduction alters demands on employees, with the elimination of routine warehousing tasks, staff resources can be shifted to higher value added tasks, including customer advisory services. Staff support measures for the transition include training and career development", explains Sendanyoye.
A number of trade unions have been critical about some aspects of RFID workplace applications, particularly the potential for misuse of their capacity for tracking personnel movements and worker surveillance. According to the report, there is little regulation in this respect so far, given that the technology is still nascent. For RFID advocates, however, public concern with the technology is reminiscent of the short-lived anxiety when bar codes were first introduced.
The report recommends to initiate an extensive dialogue between workers and employers on worker privacy concerns, employment effects of the new technology, and skills and training for employability. According to the ILO report, with extensive social dialogue and appropriate training, workers and employers can achieve win-win outcomes with improved productivity, increased customer satisfaction and enhanced working conditions. Besides a discussion of the report, the ILO tripartite meeting will also adopt a set of conclusions on ways to reconcile the interests of all stakeholders in the face of a changing employment landscape and propose a programme of follow-up activities to implement those conclusions.
"As the full replacement of the bar code with the newer RFID technology will not be completed for at least 15 more years, public authorities and the social partners will have sufficient time to examine all ramifications of the technology and to agree and design measures to ensure that its benefits far outweigh any possible negative impacts. The ILO meeting, the first of its kind at the international level is an important step in this respect", concludes Sendanyoye.
Note 1 - Social and labour implications of the increased use of advanced retail technologies, Report for discussion at the Tripartite Meeting on the Social and Labour Implications of the Increased Use of Advanced Retail Technologies, International Labour Office, ISBN 978-92-2-118652-6, Geneva, 2006. To order a copy, please visit: www.ilo.org/publns.
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