Radio Frequency Identification (RFID) technology is certainly a technology whose time has come. However, it means the consumer goods industry may face one of it biggest challenges to date.

Because of the richness of the technology, RFID has the potential to create more data than any retailer or consumer packaged goods (CPG) company has ever tracked before. Some analysts estimate that when RFID systems become fully operational they will generate upwards of five terabytes of data per day. At that rate, Wal-Marts industry-leading 200-terabyte database would be eclipsed in less than two months.

Now consider the plight of the average clothing manufacturer, which produces five to 10 styles of clothing in anywhere from four to 12 sizes in dozens of colours. Because RFID tags are designed to track all these attributes plus the products name, description, identification number, and price, the data storage demands on a mid-sized fashion retailer is unthinkable - unless, of course, such a firm were to limit the scope of what it tracks. The alternative is nothing less than drowning in the details.

It used to be this wasnt a problem, because the systems we worked with 20 years ago were incapable of crunching much more than a few numbers. Tracking and eliminating out-of-stocks wasnt even possible then. Understanding profit margins by product was about all that was doable, but that was enough.

With too much information to analyse, choosing what not to do becomes critical. For most, this will include tracking the precise movement, in time and space, of an item through the supply chain, for doing so is bound to improve internal processes. From there, the choices are myriad. Certainly it will be tempting to test the limits of imagination with RFID technology. After all, there will be so much RFID-driven data that could be used for streamlining warehousing and distribution alone. But imagination doesnt guide business success. Good processes do. And good processes are increasingly being driven by business intelligence systems.

Indeed, CPG firms and retailers should look to BI as a guide for how and where to implement RFID. Take, for example, our clothing manufacturer from above. Perhaps in tracking inventory through a business intelligence dashboard the clothing manufacturer finds frequent out-of-stocks for medium white T-shirts. In configuring an RFID infrastructure the firm may want to establish an alerting system that has pallets of the T-shirts moved straight from manufacturing to the loading dock without any time in the warehouse.

This is no fantasy. Market researcher Forrester has seen the connection between business intelligence and RFID with senior managers in a variety of industries. For example, retailers and wholesalers planning to implement RFID tell Forrester they are 1.5 times more likely to increase their usage of business intelligence. Why? Because business intelligence is a blueprint for RFID. Its a lifejacket in a rolling sea of data, and it may just save your business.

Russ Hill is Director Retail, Consumer Products, Distribution, Worldwide Industry Marketing, Business Objects, the worlds largest supplier of business intelligence.

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