RFID technology is helping to transform logistics by providing a means of tracking and tracing individual products throughout the supply chain.
Regulations on traceability and mandates from such giant retailers as Wal-Mart and Metro are slowing forcing processors to make investments in the technology.
In Europe, Metro is leading the charge.
The group said earlier this month that in late October it had completed a major step in the operational deployment of RFID in Germany during the second phase rollout.
The world's fourth largest retailer labelled the move as the largest RFID project in the European retail sector.
The 180 locations are operated by the sales brands Metro Cash & Carry and Real as well as the central warehouses of MGL Metro Group Logistics.
The remaining locations are scheduled for conversion next year, Metro stated.
Also at the international level, Metro plans to extend the deployment of RFID to suppliers in China and Vietnam.
Starting from late 2007, about 100 suppliers from China and Vietnam will participate in the RFID pilot project "Tag it Easy".
They will tag their export packages with RFID transponders.
"This way, distinct efficiency gains can also be achieved in the supply chain between Asia and Europe," Metro stated.
Metro first tested RFID with 30 Chinese suppliers in May.
Metro is using RFID as a means of recording deliveries automatically.
RFID tags are required on each shipping pallet delivered to the company.
RFID readers at the goods-in gates automatically recognise and identify incoming pallets.
Using software, the system checks whether the deliveries match the order prior to registering them in the inventory management system.
The company also monitors deliveries from its warehouses to Metro's branded stores.
The improved processes help prevent incorrect deliveries and increase the accuracy of the inventory information, Metro stated in announcing the completion of the process earlier this month.
"RFID also benefits the suppliers, for example in the goods issuing control," Metro stated.
"Furthermore, the exchange of data with the vendor is facilitated."
About 180 suppliers are already participating in the project and Metro is in discussions with all other suppliers, the company stated.
The company offers three tailor-made "starter kits" to help suppliers move to RFID.
Metro Group also encourages its suppliers to make the shift through its Future Store programme.
At the pilot store IBM supplies the software for the RFID rollout.
IBM and Checkoint take on the system integration of the portals with readers from Intermec Technologies or Sirit.
Suppliers to Germany-based Metro Group will pay a financial penalty if they decide not to ship pallets that are tagged with radio frequency identification (RFID) technology.
The decision indicates the seriousness of the giant retailer in making its supply chain more efficient, and the pressure on processors to implement the technology.
RFID has long been touted as the future of logistics for all companies by allowing retailers and suppliers to track goods throughout the supply chain.
However high prices for tags and systems has held enthusiasm at bay.
Privacy concerns have also limited its use at the consumer level.
Mandates from such giant retailers as Wal-Mart and Metro are slowly forcing processors to make investments in the system.
Martin Bruening, a Metro spokesman said as the retailer asks more suppliers to become part of the company's RFID roll-out, it expects to achieve more supply chain efficiency.
"We will extend the accruing benefits to compliant suppliers by giving them preferred treatment at our facilities," he told FoodProductionDaily.com.
"Those suppliers who don't use RFID will be charged with the higher process costs."
Currently, Metro's RFID roll out involves about 180 locations in Germany, including the stores and distribution centers that service them.
The stores belong to Metro Group's Cash & Carry wholesale chain and its Real hypermarket sales brand.
In addition the company runs an RFID-enabled supply chain system between suppliers in China and Germany.
Currently about 70 suppliers are already participating with RFID-enabled pallets to Metro's stores in Germany.
Among them are big corporations like Procter & Gamble and medium-sized ones like Papstar, Bruening said.
"By the end of 2007 several other suppliers will have entered in agreements after completing the discussions that are already well under way," he said.
The group has produced guidelines for suppliers, which explain the necessary steps for implementating RFID.
The company also has a special members section for suppliers at its website, which serves as information platforms.
The company started international tests in 2006 through pilot projects concentrating on the supply chain between Hong Kong and Germany.
Earlier this year Metro said RFID tests at one of its distribution centres in Germany had achieved read rates of close to 99 per cent.
Earlier this year Metro told FoodProductionDaily.com that suppliers who do not use RFID will be penalised.
Martin Bruening, a Metro spokesman said as the retailer asks more suppliers to become part of the company's RFID roll-out, it expects to achieve more supply chain efficiency.
"We will extend the accruing benefits to compliant suppliers by giving them preferred treatment at our facilities," he said.
"Those suppliers who don't use RFID will be charged with the higher process costs."
Earlier this year Metro said RFID tests at one of its distribution centres in Germany has achieved read rates of close to 99 per cent.
RFID uses a wireless system that helps enterprises track products, parts, expensive items and temperature-and time-sensitive goods.
Transponders, or RFID tags, are attached to objects.
The tag will identify itself when it detects a signal from a reader that emits a radio frequency transmission.
Each RFID tag carries information on it such as a serial number, model number, colour, place of assembly or other types of data.
When these tags pass through a field generated by a compatiblereader, they transmit this information back to the reader, thereby identifying the object.
According to Venture Development Corporation the worldwide market for RFID systems was $2.3bn in 2006, with hardware accounting for nearly 59 per cent of sales.
Metro Group has sales of about €60bn in 2006.
The company has 270,000 employees and operates about 2,400 outlets in 31 countries.