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Home » the case of the missing mandates
rfidwatch

the case of the missing mandates

July 1, 2005
John R. Johnson
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Where have all the mandates gone? Last August, when retailer Best Buy issued an RFID mandate to its suppliers, the word on the street was that the floodgates were about to open. Everybody expected a rush among both electronics industry players and other retailers to issue mandates of their own (high-value products like electronics are considered to be a sweet spot for the tracking and identification technology).

Yet 11 months after Best Buy's announcement (which carries a January 2006 deadline), it's been all quiet on the RFID front. Not a single mandate has been issued. Home Depot and Lowe's, both long rumored to be on the brink of issuing aggressive RFID fiats to their suppliers, have remained silent as have big retailers in the grocery, pharmaceutical and electronics industries, where RFID holds major promise.

As for what's behind the slowdown, some speculate that the retailers are waiting for the bugs to be worked out. Retailer JCPenney, for example, is on record as saying it'll let Wal-Mart and Target do the dirty work, then pounce on RFID technology when it matures. "When the time is right, we'll be there," says Michelle Livingstone, vice president of transportation for JCPenney Logistics.

In fact, that seems to be the tack many companies are taking as they await the arrival of Gen 2 RFID tags later this year. "The whole market is in a lull right now as people wait for production quantities of Gen 2 products," says Chantal Polsonetti, vice president of manufacturing advisory services at ARC Advisory Group. "Many of the infrastructure pieces for Gen 2 are available, but the silicon isn't."

Until that situation turns around most likely in three to six months Polsonetti and other experts say it just doesn't make sense for retailers to pursue RFID mandates. One problem is that the technology has yet to achieve critical mass. Another is that tag prices remain too high, in the range of 20 cents or more per tag. Plus sporadic tag shortages continue to plague suppliers, a situation that's unlikely to be resolved this year.

"The startup is definitely taking a little longer than people had expected," says Ed Matthews, information systems director at Pacific Cycle, which supplies bikes to Wal-Mart and Target. "I think everybody is still waiting for Gen 2 products to become available before they start pushing this thing forward. And the tags are still in short supply. We have some good relationships with vendors and we're still just barely [able to get] enough tags."

Polsonetti expects that most retailers and suppliers will continue to take a wait-and-see approach over the summer months. Though retailers like Home Depot and Lowe's are investigating it, she says, they're holding back "because they want to see that it works first [so they can] benefit from the lessons learned by others."

on the slow boat from China?

Though many of Wal-Mart's top suppliers found complying with the megaretailer's initial RFID mandate to be a struggle, Pacific Cycle wasn't one of them. Pacific Cycle appeared to coast through the process, shipping four RFID-tagged pallets of bikes to Wal-Mart's Dallas DC in September 2004, well ahead of the deadline. And it's continued to stay ahead of the curve. Pacific recently began sending RFID-tagged shipments to Target as well. In addition, the bike maker was set to install RFID equipment at its second North American distribution center in California last month.

Though the company reports good results with its domestic initiatives, it expects the big RFID payoff to come when it's able to tag its products at the point of manufacture in China. So far, that effort has been hindered by a lack of RFID standards in that country. But Pacific Cycle is undeterred. As a way to jumpstart the process, the company recently shipped several hundred pre-written tags to China so that they can be applied to bikes before they leave the manufacturing plant.

"While we wait for China to settle on standards, we're just sending them tags to get them used to it," says Ed Matthews, Pacific Cycle's information systems director. Matthews says he's curious to see how accurate read rates will be after the bikes are shipped across the ocean. He may not have long to wait at press time, the company already had several shipments on the water.

Transportation Maritime & Ocean Automatic Data Capture RFID
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John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.

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