March 31, 2003, 12:00 AM

They`re small, techie and revolutionizing pick-and-pack and warehouse operations

Radio frequency i.d. tags are helping optimize warehouse space and speed the flow of goods through the supply chain.

Most direct merchants prefer nice orderly warehouses-a place for everything and everything in its place. But not The U.K.-based, fashion-driven retailer of intimate apparel prefers a jumbled system that randomly stores products in whatever bins are available.

“Our warehouse is dynamic,” says Daniel Nabarro, chairman and founder of the fast-growing FigLeaves. “There’s no point in having a warehouse with empty space, so our whole warehouse is always optimized to new stock. We never have to worry about creating space for different categories, because we just stick products in any old bin.”

While it sounds like a sure way to mess up orders, Nabarro reports exceeds 99.9% accuracy in order filling. Its key to success: It uses radio frequency identification, or RFID, along with bar codes to quickly find and sort products to fill orders efficiently and accurately, Nabarro says. The intentionally unorganized system maximizes use of the company’s single, small warehouse, where managers avoid dedicating space to any one product or category because of constantly changing demand for its many varieties of intimate apparel.

New urgency

While the challenge of moving and organizing products fast enough to get the right ones in front of consumers at the right time is as old as retailing itself, it has taken on new urgency in the world of web-based retailing where fast, accurate order fulfillment is crucial to success as well as in store-based retailing where the fast pace of product introduction and changing consumer tastes has mandated quicker movement to stores.

The retail industry has made great strides with supply chain and warehouse management systems that give retailers more control over the way products flow from production to warehouses and into store and online displays. But merchandise often still moves too slowly and remains too far out of sight, such as when a pallet of containers must be unloaded to scan dozens of difficult-to-reach bar codes. But now, RFID tags on products and shipping materials, under a system called electronic product code, or ePC, and strategically placed RFID readers report the movement of products to a dock worker’s or back-office manager’s computer. Those workers then get a real-time look at a product’s key data, such as SKU and serial numbers as well as current location and intended destination.

Although it’s still at an early stage of use in the retail industry, RFID is already supporting several retailers’ efforts to increase visibility and efficiency in the way they move goods, both at the distribution center level and at the b2c fulfillment level. RFID has been an integral part of manufacturing for years to track the flow of products in high-priced assembly operations, such as automobiles. But the cost per tag has only recently declined to where it can be economical enough to track a general range of goods in retail supply chains. And with further declines, it’s just a matter of time before more retailers like FigLeaves use RFID on every product, analysts say.

The web goal

Although projections of the retail industry’s investment in RFID are sketchy, it’s easy to see how fast the technology will grow, says Peter Abell, a supply chain analyst for AMR Research Inc. Wal-Mart Stores Inc. has said it plans to have all containers and pallets it receives RFID-tagged by early 2005. “That’s tens of billions of tags, and that’s just Wal-Mart,” Abell says. And with other large retailers, such as The Home Depot Inc. and Target Corp., signed up as members of the Auto-ID Center, an industry group committed to RFID’s development, the use of RFID systems will mushroom over the next several years, he adds.

Right now, most RFID projects operate over private networks. For example, a pallet of RFID-tagged containers passes by a reader when it arrives in a store. The reader identifies and records the products’ SKUs and serial numbers on a screen. It also forwards that information over a private network to update a corporate database, such as in a merchandising management system, or to pull more information from a database to further describe the products in the containers.

But RFID proponents foresee a more ambitious use that would send such information over the Internet for a broader range of connections. That capability would allow information on delivered goods to be exchanged with databases outside a corporate network, such as in a supplier’s back-end system. So if a retailer needs more information on what’s inside RFID-tagged containers, for example, the RFID reader will identify the SKU and serial numbers and read any other information on the tag, then pull additional information that’s still needed through an Internet connection with the supplier’s databases.

“The vision of the Auto-ID Center is that objects will communicate through the Internet,” says Greg Gilbert, director of RFID strategies for Manhattan Associates Inc., a provider of supply chain software and a member of the Auto-ID Center. “So when you read an RFID tag, you can communicate through Internet protocols with a database that has the information you need.”

Connecting with suppliers’ databases, however, will require a level of cooperation from suppliers that may not be easily obtained. Many vendors may be disinclined to invest in the equipment needed to place RFID tags on their product containers. To make it easier for suppliers to participate with RFID, Manhattan Associates has released a test version of a web-based application, Infolink, in which a retailer provides the RFID infrastructure.

Retailer’s initiative

It works like this: the retailer provides its suppliers with blank RFID tags and a printer/encoder from Zebra Technologies Corp. The supplier accesses the retailer’s web-based Infolink application to access the retailer’s order information, such as the number of products to be shipped and their identifying SKU numbers. The supplier then clicks on the printer/encoder to encode the information on the RFID tag’s silicon chip as well as print out human-readable information on a paper label. The RFID tag is generally attached to the back of the label.

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