RFID
This is a story I put together from many sources (a lot of cut and paste). It’s a little lengthy, but I believe well worth the reading. This is what the Kelly Co - CDED merger is all about
RFID Technology
A technology that is changing the way almost every retail business in America will operate. This technology, called Radio Frequency Identification, or RFID for short, will change the course of business over the next 20 years.
An RFID chip is a very small radio transmitter. It’s inactive -- like a bar code -- until it receives a radio signal. When it does, it broadcasts one piece of information: its serial number. It sends its serial number back to a master radio, where it is recorded in a database. This isn’t some new, experimental technology, either. It’s already being used in the real world. For example, if you have “keyless” entry to your car, or an Exxon Speedpass to buy gas, you’re using RFID. If you live on the East or West coasts, you may also use FasTrak or EZPass… using a small box in your car, you can pay highway tolls without stopping. Both systems use RFID technology. In fact, many of the biggest companies in the world are using or testing RFID right now:
Ford uses RFID in its forklifts. It’s testing starters activated by RFID at many airports across the United States.
Avis is currently testing RFID in its rental cars in Puerto Rico. These RFID tags also keep track of mileage, fuel and servicing needs.
Boeing is testing RFID to track airplane parts.
Coors Brewing Company is using RFID to keep keg and cask inventory at its U.K. subsidiary.
Target, the US retailer, Metro, the largest German retailer, and Tesco, the largest food retailer in the United Kingdom, have begun to test RFID in their supply chains.
Getting raw materials onto the sales floor is one of the hardest and most expensive aspects of manufacturing, distribution and sales. But using an RFID tag, a supermarket can, for example, know exactly how many jars of peanut butter are on the shelves, in the warehouse, and on the way - instantly. In theory, every RFID-tracked inventory could stay in perfect balance. Before RFID, however, there has not been an effective way to reduce and control inventory costs.
“The buzz around RFID has built steadily over the past two years. Like the Internet, analysts say, RFID will touch every part of a retailer’s business. Using wireless technology inside tiny chips or smart tags RFID can track a product from the factory floor to store checkout. For retailers, the technology promises lower labor costs, more efficient inventory management, and the ability to market to individual shoppers.”-- The Boston Globe, Sept. 20, 2004
“The next big thing in this category is an explosion of wireless sensors, starting with radio-frequency identification (RFID) tags. Used by retailers to track inventory, they could also monitor the movement of pill bottles in smart medicine cabinets -- warning if you reach for the wrong pill.”-- Business Week, July 19, 2004
That’s why RFID technology can potentially reduce inventory costs as much as 90% or more. The benefits of this technology to America's biggest companies, like Wal-Mart, Gillette, and Proctor and Gamble, are enormous. For you, as an investor, it can mean a huge potential payday.
These small, passive RFID tags can track goods from every stage of production--from manufacturing, to shipping, to the store shelf. All you have to do is put a little tag on your product, and you’ll know exactly where it is at all times… in a truck… at a warehouse… in the store, etc. A study by AMR Research in Boston found RFID tracking can cut warehouse labor by 20%… slash inventory by 25%… and most importantly, boost sales by 3-4%, compared to current inventory methods, such as bar-coding.
Three or four percent doesn’t sound like much… until you realize that a company like Wal-Mart does about $250 BILLION in sales each year. A 3% boost for Wal-Mart could mean an extra $7 BILLION. Now you can see what all the excitement is about.
For the next generation of RFID tracking, EPC Global -- the RFID industry association -- will announce the new, official RFID industry standard. When the new standard is accepted, tag-makers, software producers, and retailers all over the world will race to implement it, spending a total of $4.6 billion per year by 2007, according to the Wall Street Journal.
Wal-Mart, for example, has required its top 100 suppliers (it has over 10,000) to deliver cases to Wal-Mart with RFID tags by January 2005. Barron’s reported that 130 of Wal-Mart’s suppliers have already committed to implementing RFID, no matter what it costs.
The U.S. Department of Defense has done the same. According to the Pentagon’s Alan Estevez, Assistant Deputy Secretary for military supply chain integration, “The new policy will cover everything purchased by the U.S. military -- from beans to bullets and from toothpaste to tank parts -- roughly 45 million line items” from over 43,000 suppliers.
In other words, if you want to do business with Wal-Mart or the Pentagon, you must be RFID-compliant next year. To do this, these companies will spend billions of dollars over the next 5 years.
Wal-Mart is leading the charge to roll out RFID. Wal-Mart has billions of items to track. That’s why Yankee Group Consulting expects Wal-Mart to spend between $515 million and $3.8 billion on RFID in 2004 alone. For Wal-Mart, this is key to bigger profits. That’s because they try to avoid overstock and under-stock. In other words, Wal-Mart doesn’t want to be stuck with 85 T-shirts that just went out of style. The same way they try to prevent any stores from running out of Air Conditioners in the middle of July. .
Currently, Wal-Mart has 2,322 stores worldwide. Their revenue is over $200 billion (it would take K-Mart 21 years to earn what Wal-Mart does in one quarter). Wal-Mart’s key to success was using barcodes to streamline their supply-chain. For the first time ever, they could track the shipment, delivery, sale and replenishment of their products. RFID could help Wal-Mart triple their profits over the next ten years… that’s why they’ll invest billions putting RFID in every single store. That’s why they can sell products cheaper than anyone.
And RFID technology helps Wal-Mart and other retailers streamline their supply-chain in ways that make barcodes look about as sophisticated as a typewriter compared to today’s computers. RFID could help Wal-Mart triple their profits over the next ten years… that’s why they’ll invest billions putting RFID in every single store.
A study done by EPC Global showed four ways retail businesses like Wal-Mart will help them make and save more money:
No more misplaced stock. Stores lose 4% of their sales per day because 8-10% of their stock is in the wrong place.
No more shoplifting or lost perishables. This is known as shrinkage. This costs stores over $500 billion per year.
No more counterfeit products. Currently 30% of the $50 billion spent on prescription drugs per year is spent on counterfeits.
20% less warehouse staff. With RFID most inventory tasks would be automated. No more overtime pay on inventory day either.
They’ll also be able to instantly price their stock to match the current demand of the market for each product. And, they can promote products -- by lowering prices - to each and every customer all day, every day, by simply pressing a button.
With over 50,000 suppliers committed to using RFID, the opportunity to make money on this situation is huge. By the time these suppliers are in compliance, billions of dollars will be spent… and RFID technology providers will see earnings and share prices soar. This is why so many companies are trying to get in on this revolutionary technology. Every retail store, warehouse, and manufacturer is hoping to benefit from it.
On June 26, 1974, a jumbo pack of Wrigley’s Spearmint gum made history…The cashier slid the pack of gum in front of the scanner. Instantly, the cash register knew which product it was and how much to charge the customer. The barcode was born. Barcodes use UPC (which stands for Universal Product Code) to identify every single product. It’s the black-and-white striped label that scanners read electronically.
Since 1984 when Wal-Mart mandated that their suppliers use them, barcodes have tripled profitability.
Today, over 10 billion barcodes are scanned every day. They track everything from donated blood, supermarket discounts, dry-cleaning, overnight deliveries, college students, endangered wildlife, DVD rentals, gym memberships, even prescriptions.
While there are moneymaking opportunities in RFID hardware manufacturing, the greatest potential for profit is in software. Just like it was with computers. Even at the best hardware companies, like IBM and HP, software makes more money.
That’s why investing in the right RFID companies could mean significant profits in the next year.
