Woolworths, for example, is rolling out its Mercury program, which demands of all its suppliers that each pallet supplied from January 2005 must bear two human-readable barcode labels that conform to the EAN-128 standard. The labels must contain information including the serial shipping container code, the traded unit number describing the product on the pallet, the number of boxes or crates on the pallet and the pack date. Additional information is optional.
The trick for suppliers will be to comply with current requirements of retailers, while ensuring they will be able to handle the demands of RFID when that becomes mandated. According to Con Colovos, two main challenges are thrown up once a company decides to become RFID-ready. First it needs middleware that can handle data flowing into its ERP from the RFID readers, and second it needs to know what information to collect on the tags and how to store and access it.
In the Moraitis trial, which will be with a tomato supplier in Tatura, Victoria, trays of tomatoes will be RFID-tagged. Each of those tags can store up to 32KB of data. Tutura ships three million trays of tomatoes a year. In theory Moraitis could have to deal with a flood of information from the use of RFID - 9.6 gigabytes a year about tomatoes alone, each year.
"That's what no one understands," says Colovos.
The challenge will be to manage the information flow effectively, trawling it for value, and discarding the chaff - otherwise the system will quickly be swamped.
Getting to the right information is critical, according to Nick Drasic, group general manager of Moraitis, who believes that RFID will be a logical extension of the ERP system now being rolled out through the business, and provide improved information flows to management. "The big thing is to trade more effectively with your partners - be it a supplier or an independent greengrocer," says Drasic. He believes that the data integrity predicted as a by-product of RFID will facilitate effective trade, and probably also deliver labour efficiencies and reduce waste.
However, with a keen eye on the bottom line, he notes that the tags remain very expensive. "My position is that while we are innovators, and we want to be one of the first, I'm mindful of keeping a rein on costs." Drasic, who went to Europe with Colovos to look at fresh produce companies that are also using the Navision ERP system to underpin their operations, believes that the Europeans are not as far along the RFID curve as Australians. "I think the penny has just dropped for them."
A penny that has dropped for Drasic is that you cannot throw technology at a business and hope it will improve. Until Colovos came along as its first CIO, Moraitis had a patchy relationship with technology; investing in the TIMS information system that did not deliver the information that had been expected or the benefits anticipated. What Drasic learned was that before applying technology the underlying processes have to be right.
With the old, largely-manual processes, a lot of the business process was driven by the need to have people in certain places at certain times in order to move paper around, he admits. Now the information systems serve the people, and "with the ERP we will get quality information at a better rate, and that will also progress the streamlining".
For Drasic the benefits of faster, cleaner information are clear. "If I can make better decisions quicker than my competitor then sooner or later I will win." And his horizon is well defined. "In three to four years I want to be able to trade B2B with major customers. Coles and Woolworths spend substantial amounts on IT. We can't match the money they spend, but we've got to be able to talk to them and trade with them."
According to Colovos the expected demands of these large customers are why the RFID pilot is now under way. "At Moraitis we realize that we will be required to go down the RFID path," he says, pointing to US retailers such as Wal-Mart, which are already mandating RFID use.
Although there are economic barriers given that tags still cost around 60 cents each, Colovos says there is a likely return on investment as soon as the tags drop to five to 10 cents each, which he expects will happen within 10 months. "Then my payback time is two to three years." In the interim, Colovos and Moraitis have applied ingenuity: they are reusing the tags. The tags are slipped in - and out of - small plastic sleeves.
After running the pilot and ironing out any wrinkles in process and technology ahead of time, Colovos says he will be ready when Australian retailers mandate RFID. He is planning to document the program in a Moraitis white paper looking at RFID in fast-moving consumer goods markets. The issue of information management is top of mind. "What are we going to do with this multitude of information about all the different product categories?" he wonders.
In Moraitis's pilot the granularity of the information is such that it will be possible to identify the percentage of waste or spoiled product, then link that spoilage back to the patch of dirt where those spoiled tomatoes grew. It should be possible to identify the type and source of seedlings, and other factors such as the amount of water the tomatoes received, the moisture content of the soil and so on. Using that information it should be possible to, if not eliminate, at least reduce spoilage.
It is a seductive information trail. But the challenge for business will be to limit that seduction to only the information that is valuable, or risk being swamped as storage costs balloon and extraction of meaningful data becomes harder.
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