Albertsons Launches RFID Initiative

Food and drug retailer Albertsons Inc. on Friday said it has launched an initiative to use electronic tags for tracking goods through its supply chain, and expects its top 100 suppliers to join the program by April 2005.

The $36 billion company is currently testing radio frequency identification technology in its own warehouses. The program is focusing on using RFID tags to track cases and pallets.

"We are confident that RFID technology will further enhance our service to customers by improving consumer demand chain management," Bob Dunst, executive vice president and chief technology officer, said in a statement.

A spokeswoman declined to give further details, saying only that Albertsons was conducting its tests in one product category within the grocery business, and planned to expand to other categories throughout the rest of the year.

In making the announcement, Albertsons joins retailers Wal-Mart Stores Inc. and Target Corp. in launching initiatives to use RFID technology to track pallets and cases of goods as they move through warehouses and head to stores. Wal-Mart and Target also have 2005 mandates for suppliers.The U.S. Department of Defense has also launched a similar initiative.

RFID is data-collection technology that uses electronic tags to store identification data, and a wireless transmitter gun to capture it and send it to a warehouse management system. Retailers believe the technology can cut costs through better alignment between the inventory on hand and actual demand. Companies often pay more for storing inventory that doesn't sell well, or lose money by not having enough of fast-selling goods.

The technology, however, is far from perfect. Experts say standards for storing product data in RFID tags are still under development, and readers used to capture data do not yet reach acceptable levels of accuracy.

Nevertheless, the technology's potential has sparked strategic initiatives from some retail giants and top suppliers, such as Procter & Gamble Co., Unilever and Kimberly-Clark Corp. The next question, however, is how far suppliers below the top 15 will take the technology.

"Based on conversations we're having, the next 60 or so suppliers are doing whatever it takes to comply with retailers as cheaply and easily as possible," Erik Michielsen, analyst for ABI Research, said. "The largest companies are an important piece, but how far the smaller companies are willing to deploy it will determine how pervasive RFID becomes in the industry."Driven by retail adoption, sales of RFID technology could reach $3.1 billion in 2008 from $1.15 billion in 2002, according to ABI.

Albertsons, based in Boise, Idaho, operates about 2,300 retail stores in 31 U.S. states. The chains includes Albertsons, Acme, Sav-on Drugs, Osco Drug and Super Saver.