RFID is touted as the next big technology that will revolutionize retail supply chains by tracking pallet and individual goods throughout the supply chain using embedded chip reading devices – also commonly referred to as smart-tags. The technology promises to squeeze more costs from the chain through the minimization of inventory losses and reduction in labor costs.

Many expect RFID tags to replace traditional barcode technology in the next ten years.

Metro is at the forefront of RFID trials in Europe, having already tested RFID in its so-called Future Store for about a year now.

The German retailer’s 1,300 square meter RFID center is located in Neuss, (near Dusseldorf) Germany and will help suppliers to prepare for Metro’s initial roll out of smart-tag technology across its German stores this November. According to Metro officials, the center will showcase RFID applications for logistics and retail shop floor management.

Around 20 suppliers will be involved in the first phase of the roll-out, which will focus on pallet level tagging of packaged goods. A second phase will add 80 more suppliers, eight centralized warehouses and around 270 stores.

The center will also provide a conduit for discussion between Metro’s main IT partners and its suppliers. Metro recently signed up IBM Corp and Intermec Technologies Inc to supply it with smart-tag RFID technology. IBM brings to the table its WebSphere-based RFID and data management system and Intermec its RFID inventory tracking system.

Metro is also working with SAP AG and Intel Corp to supply technology for its system.

Metro operates over 2,300 stores mainly in Germany and the rest of Europe. It plans to extend its RFID rollouts to these stores in the future barring concerns over consumer privacy issues and the cost of RFID tags that threaten to stunt the technology’s uptake.

As a result, most RFID initiatives today remain focused on pallet-level (warehouses and store backrooms) rather than item-level (consumer) level tagging.

Metro is by no means the only company driving forward RFID. In the US, Walmart Stores Inc and the US Department of Defense have laid down a January 2005 deadline for all its major suppliers to adopt RFID standards if they want to continue doing business with them.