Wal-Mart may be assuring its suppliers that RFID will mean big savings in the long run. But in the near term, at least, it's more likely to mean big costs. How big? About $9 million, according to a highly critical report released last month by Forrester Research. That's what it will cost the typical supplier to comply with Wal-Mart's RFID mandate when startup and first-year maintenance expenses are totaled up, Forrester says.
"There is no business case for most suppliers in the short term," says Forrester Senior Analyst Christine Spivey Overby, author of RFID at What Cost? "The technology's not ready, and there is a lack of deep expertise to support implementation." For many suppliers, tag costs alone have far exceeded projections.More than 80 cents of every dollar spent on implementation will go for RFID tags, Overby claims. "Based on today's tag production processes and projected volumes, suppliers should not build a near-term business case on any price lower than $0.40 per tag." That's a far cry from those much-hyped 1-cent tags.
The bad news doesn't end there. Forrester projects that the costs of professional services to support RFID implementation will run to the high end for the simple reason that there's a shortage of experienced RFID implementers. But won't RFID at least cut labor costs? Don't bet on it. According to Forrester, suppliers may actually have to add staff—at least in the beginning—because "vendors have yet to perfect solutions for automating tagging and embedding RFID in packaging material."