Ready or not, RFID’s coming: Wal-Mart and DoD are throwing their two cents in, but their trading partners are going to have pay a lot more to make the transition

Ready or not, RFID’s coming: Wal-Mart and DoD are throwing their two cents in, but their trading partners are going to have pay a lot more to make the transition – Mandates 2005

Brian Albright

Analysts, vendors, customers and journalists have been wondering for years: When will radio frequency identification (RFID) technology take off and be widely adopted? Now that Wal-Mart, the Department of Defense (DoD), Gillette, Procter & Gamble and possibly even the Food and Drug Administration have declared their intentions to start tagging everything from cargo containers to razor blades with RFID, everyone has a new question to ponder: What happens next?

In June, Wal-Mart announced it wanted its top 100 suppliers to use RFID tags on pallets and cases by 2005, and the retail giant plans to expand that mandate to all suppliers by 2006. This fall, the DoD outlined an even broader program, proposing to have all of its suppliers using RFID at the lowest possible packaging level, starting in 2005. The FDA, meanwhile, indicated in a report that RFID could be one possible solution to preventing drug counterfeiting.

Wal-Mart and DoD have both embraced the Electronic Product Code (EPC) model for RFID tracking, first developed by the Auto-ID Center at MIT, and now being ushered into commercial applications by EPCglobal Inc. (a joint venture of the Uniform Code Council and EAN International).

The problem for suppliers is that some parts of the EPC network–which will link RFID tags via the Internet to manufacturers’ product databases–remains theoretical. Wal-Mart planned to release its final technical specifications to suppliers in November, giving them barely a year to complete what most estimate to be a two-year implementation and testing process. And the DoD only just began holding its planning meetings at press time.

“It’s a lot to ask by 2005, isn’t it?” says Mike Liard, senior AIDC/RFID analyst at Venture Development Corp., Natick, Mass. “Most companies are just getting their feet wet with RFID. They have yet to wrap their arms and minds around this concept.”

Suppliers have been left with little direction, wondering how to implement a technology that has not yet been clearly defined to them. Complicating matters, few systems integrators or consultants have much RFID experience, and the EPC model has yet to be rationalized with ISO standards relating to RFID.

“The EPC standards are not finalized,” says Matt Ream, senior manager of RFID systems at printer manufacturer Zebra Technologies Corp. “But you don’t need to wait on those standards. From an application perspective, the technical challenges won’t change, and the radio frequencies involved aren’t going to change.”

What will suppliers see in 2005?

Unlike other initiatives, RFID poses a number of challenges for suppliers. The biggest seems to be physics–water, wood, metal, nylon conveyor belts, concrete and other materials can interfere with the radio signal from these tags. According to a report from AMR Research, read rates in some of the handful of EPC pilots are as low as 80%.

Information systems also have to accommodate the EPC number and the potential influx of data caused by reading pallet and case moves in real time.

A number of software companies have come up with quick-fixes to help manufacturers get in line with Wal-Mart’s demands. Manhattan Associates, Provia Software and SAP are probably furthest along in providing RFID support in their products, but RedPrairie, V3Systems, Oracle, Manugistics and others are rapidly developing and offering products.

“These suppliers have their hands up in the air, saying ‘Crap! What do I do now?'” Liard says. “These companies need a plan of action.”

Benefits for manufacturers remain unclear, as well, but the same manufacturers will bear much of the cost of implementation.

“The savvy suppliers are looking at how to leverage RFID for internal process improvements, and ultimately Wal-Mart wants to see the suppliers achieve operational benefits from this,” says Ream. “After all, someone has to pay for it.”

Odds are, Wal-Mart will roll out RFID on a limited number of SKUs in a particular region. DoD is planning a phased approach, as well, according to Assistant Under Secretary of Defense, Supply Chain Integration, Alan Estevez. “I’m realistic,” Estevez says. “We’re going to phase this in. The idea is just to get it out there and get started.”

“The ultimate benefit of RFID is not in doubt, just the timing,” says Kara Romanow, analyst at AMR. “With the many issues, immature technology, and enormous costs without much immediate benefit, manufacturers can’t tag every pallet, case and carton sent to Wal-Mart and DoD by January 2005.”

COPYRIGHT 2003 Advanstar Communications, Inc.

COPYRIGHT 2004 Gale Group