Best Buy Initiative Will Include Item-Level RFID

iRiver, a manufacturer of portable digital devices, is using OATSystems' framework in a pilot program with the retail giant.

One of the earliest participants in Best Buys RFID initiative, iRiver America, is currently doing pre-pilot testing of OATSystems Inc.s RFID framework, with plans to launch a full-fledged pilot two weeks from now, and to move from there to item-level tagging of its $200-and-up portable music devices in February.

The consumer electronics product manufacturer and distributor also expects to join in on Wal-Mart Stores Inc.s RFID initiative, although probably not until 2006, according to Deepak Govil, senior manager of sales operations for iRiver.

"We havent been mandated by Wal-Mart yet. But weve been hand-picked by Best Buy as one of the first to comply with the [Best Buy] mandate," Govil said in an interview.

Over the past few weeks, iRiver has used OATSystems OATxpress to produce its first batch of RFID tags, designed for use at the master carton level.

When the system goes live in February, the portable device maker will add OATaxiom, another product in OATs RFID framework, for supply chain analytics, Govil said.

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Also during the February time frame, Govil anticipates the introduction of item-level tagging to its new RFID system. "Our products come in packages worth $200 to $300," he quipped.

Ultimately, iRiver will also participate in Best Buys plans to use the OAT framework for building an RFID portal architecture, according to the senior sales operations manager.

Govil acknowledged that complying with Best Buys mandate is the biggest driver behind iRivers RFID adoption.

Beyond that, though, Govil envisions a number of other benefits, including supply chain optimization and better protection of its portable tune-producers against loss and theft.

"I would place supply chain [optimization] way, way ahead of theft," Govil said. "RFID will give us the ability to track our products all the way to the customer distribution center. Well also be able to respond to changes in demand."

Industry analysts point to several recent trends reflected in iRivers RFID deployment. "Supply chain optimization is where a lot of people feel theyll get the best benefit. Analytic tools such as OATaxiom will give people better insight into things like demand and [the need for] product replenishment," said Dennis Gaughan, an analyst with AMR Research.

Although privacy concerns remain a barrier to item-level tagging, prices are coming down, somewhat alleviating costs as a barrier, Gaughan said.

"Privacy remains an area of concern, as it should. Companies need to be open and clear with customers about their use of RFID. But for the most part, RFID is really designed as a supply chain improvement tool, not as a way to reach out [for customer information]," according to the analyst.

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As for costs, Gaughan cited a flurry of recent announcements around lower pricing for tags and other products complying both with the original epcGlobal specification and the newer epcGlobal 2.

Moreover, he said, tagging costs arent nearly as critical to manufacturers bottom lines in the consumer electronics arena as they are for lower-priced CPG (consumer packaged goods) items with "razor-thin margins."

Best Buys RFID initiative is the first to revolve around OATs emerging portal architecture, which is geared to out-of-the-box implementation, said Erik Michielsen, an analyst for ABI Research, in another interview.

"As data volumes intensify and broaden, there will be a need for a common portal architecture between retailer and suppliers," according to Michielsen.

Wal-Mart, for instance, is instead using a custom architecture dubbed Retail Link for communications with its suppliers, the ABI analyst said.

Right now, iRivers RFID deployment is being run on a hosted remote server operated by Rackspace Managed Hosting. "We requested remote hosting, and OAT found Rackspace for us. Well be able to easily troubleshoot the system from our offices in southern California," Govil said.

OATSystems is performing all RFID systems integration work for iRiver. ADT Tyco is participating as an RFID hardware supplier.

Pre-pilot implementation has gone smoothly, with the exception of one minor glitch, according to Govil. "We were skeptical [about how long deployment might take]. But OAT got everything up and running in 24 hours," he said.

"At first, we were getting some error [messages] coming out of the system when we tried to do tagging. But OAT quickly figured out that some of our attributes werent set correctly, and fixed that for us," according to the iRiver executive.

Govil also said that iRiver considered several other RFID vendors and systems integrators before deciding on OAT.

Although Best Buys use of OATs software was a major factor in the selection process, OAT was also chosen based on iRivers perceptions of OATs deep background in RFID.

"We have strong ties with Best Buy, [and] OAT gives us a neat little comfort zone. OAT seems to know everything that anybody could know about RFID," according to iRivers Govil.

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