Consulting » Analysis paralysis

Business IT has been dominated by what industry commentators like to call ‘killer’ technologies. In other words, pieces of kit and software that create ‘business revolution, not evolution’. But since the internet arrived on the business scene in the mid-1990s, there has been precious little else to shout about. Technologies such as WAP have come and gone, and others such as grid computing are not really new technologies, but merely a way to use your existing technology better.

There is hope, though. Over the past year or so resource frequency identification (RFID) has been making headlines in the US, and UK retailers are starting to embrace it too.

On the surface RFID, which is basically a way of tagging goods and tracking them via radio signals wherever they are in the supply chain, doesn’t sound as sexy as mobile telephony or the information super highway. But RFID does have the potential to change the way businesses currently operate.

Being wireless, RFID tags can be read remotely by the palette, lorry or tanker load, without having to scan each item physically. The barcode is dead meat.

RFID is especially important because the latest thinking is that companies no longer compete with other companies: supply chains compete with other supply chains. The argument goes that products are increasingly commoditised and easily copied, but the way you service your customers is not. RFID provides so much information on where, when and how your supply chain is operating that companies can drive efficiencies in their supply chains, create a better customer experience and pass on some of the savings to their customers.

Wal-Mart was one of the first to see the potential for RFID and in 2003 ordered its top 100 suppliers to be RFID-compliant by 2005 if they were to continue to do business. Wal-Mart’s decision alone has meant that an extra one billion RFID tags are now in circulation.

But on such a large scale, the immense amount of data RFID generates may be its biggest weakness. The real competitivenes of RFID is in how good you are at analysing the data, most of which will be irrelevant. The trick is to work out what you are trying to achieve before collecting terabytes of digital soup and then work back from there to identify the really juicy nuggets of information you want to pull out of the databases.

In traditional British fashion, Marks & Spencer is now dipping its toe in the shallow end of RFID a year after the Americans launched themselves from the highest diving board. M&S is extending a trial of RFID from nine to 53 of its stores starting in 2006. Until now it has used the technology to track low-impact items such as men’s suits, but will start using it to track products with availability issues and complex sizing structures, such as bras.

Whether customers will flood back to M&S will depend on the quality, design and price of its clothing rather than its supply chain management, but the retailer says that RFID looks as if it might deliver some competitive edge. “We are using the data to carry out an item-level stock-take on a weekly basis in each RFID-enabled department and store. Accurate stock data drives effective replenishment and helps to improve availability. Trials to date indicate that this has a significant potential to improve business efficiency,” an M&S spokesperson told Financial Director. So M&S will be able to provide more sizes of clothing without ever having inventory problems – if it works.

M&S knows that data management may be an issue so it has designed its system to “only generate data that will create a more accurate stock file”. The handling of this data “is within the capability of our existing network”, it says.

And good on M&S for identifying the problem. When technology goes wrong in business it usually has nothing to do with the kit itself but with the way businesses allocate resources to deal with it. A common mistake is when companies upgrade software without upgrading the hardware to run it on. Another is that 90% of most project budgets are spent trying to get systems to work, leaving little time and money for customisation and staff training.

Companies implementing any technology that creates vast amounts of data should think hard about how they will manage the information they collect, the IT that supports it and the staff that have to sift through it. As the old saying goes: if you put garbage into a system, you get garbage out. And companies that spend too long wading in junk data aren’t likely to come up smelling of roses.