Tuesday, February 26, 2013

JC Penny and Nano-Based RFID Tags

The fact that Nano-Based RFID tags are capable of replacing bar codes is exciting. This technology accommodates easier and faster retail checkouts as well as immediately adjusting inventory. The article, “Nano-Based RFID Tags Could Replace Bar Codes,” by graduate students at Rice University, notes that the tags are already in numerous common items, including passports and library books. In addition to reducing labor costs since the tags increase customer service efficacy, they decrease printing costs because they are silicon-based. But if the tags are so great, then why do retailers hesitate to institute them?

In January 2012, Ron Johnson, CEO of JC Penny, announced an aggressive campaign to  restructure all of the chains to accommodate in-aisle checkout via RFID tags. Johnson proposed to make all inventory, (online and in-store), RFID enabled and designed a floor plan with self-checkout stations for customers. This cost saving initiative would remarkably change the stores and hopefully pave the way for others to use RFID tags.

Unfortunately, the long-term costs of implementing the RFID tags were trumped by the short-term costs of remodeling every store to accommodate the technology and the costs of attaching the tags to every item. While self-check out is still slated to go into effect in months to come, the RFID initiative has been cut. All tags were removed from the items and Johnson wrote to suppliers with RFID tagged items that he would expect tag free items at a lower cost as opposed to those with the technology.

What exactly were the reasons for the failed project? JC Penny officials state that it was cost related and not due to errors or implementation issues. I believe the initiative was too grand, and that Johnson should have tested a few stores to begin with. Is restructuring part of the supply chain process a good idea? Implementing the RFID tagged items in only a few stores would complicate their system, but would enable them to maintain their remodeling budget.


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