hot topic, lukewarm reception

You don't need to be a regular reader of specialized trade journals these days to know that one of the hottest topics in business is radio-frequency identification (RFID) technology. Thanks to mandates delivered to suppliers recently by Wal-Mart and the Pentagon, even general interest news magazines and daily papers are now covering the race among suppliers to meet the Jan. 1, 2005, deadline.

Yet surprisingly, many of those you might expect to find on the front lines say they have yet to feel the pressure to implement RFID technology. Nearly three-quarters of the distribution managers and executives who responded to an e-mail survey sent to 5,000 readers of DC VELOCITY late last year said they remained unaffected. Nonetheless, most have placed themselves on standby alert. Now that Wal-Mart has pushed ahead, they say, they know their time will come.

For now, at least, few have done much more than sit back and watch the show. A majority of those surveyed have not yet begun implementing RFID. Some are still thinking it over—41 percent report that they're still analyzing what steps to take. Others (19 percent) say they've taken no action whatsoever.

And for most, there's no particular hurry. Wal-Mart's mandate to apply RFID tags at the carton and pallet level by next January affects only the retailer's 100 largest suppliers. So it's not surprising that 72 percent of those surveyed say they're not affected by that company's mandate. Yet they're also well aware that industry tends to take its cues from Wal-Mart (and in this case, the Defense Department). A full 60 percent predict that other customers will require some form of RFID tagging within the next two years. "My account is with Proctor & Gamble and it has not affected us yet, but everything is subject to change in this marriage," wrote one respondent.

Mixed signals
Once RFID adoption gets under way, how quickly will the conversion happen? The survey responses suggest it will vary widely by industry. For instance, one respondent pointed out that even bar-code compliance is still spotty in some segments of the food-service industry, indicating that RFID adoption could still be years away. But another respondent, who works for an automotive industry business, was more upbeat. He said he expected to see RFID take hold relatively rapidly, adding that the technology "could be very positive for the industry."

Just how positive? A full 84 percent of the respondents believe RFID technology has the potential to improve their logistics operations in at least one area. Most cited inventory tracking as a likely beneficiary (see Exhibit 1).

But not everyone felt the gains would offset the hefty investment required. In fact, while 60 percent thought the investment would be worthwhile, 40 percent contended it would not. Wrote one respondent, "RFID technology … still tends to be cost prohibitive for most inventory tracking applications. As chip prices go down, you will continue to see growth in the application of RFID. However, as in the case of 2D bar codes, many warehouse and shop floor applications simply don't require this added functionality. The low-cost 1D bar code will likely continue to be the technology of choice for many inventory tracking applications."

It appears that the bar code will be around for years to come. Although some predict RFID will replace the bar code as the primary means of capturing data, a full two-thirds of our survey respondents don't think that will happen anytime soon. "It will happen eventually," wrote one, "but it will take something like 10 years to get to that stage."

Given the investment involved, it's no surprise that a lot of people will have a hand in the decision to go live with RFID.When asked who would be involved in the decisionmaking process, 66 percent of the respondents say that their companies' CEO or presidents will play a role (see Exhibit 2). But they clearly won't be going it alone. Nearly all of the respondents reported that the decision would involve more than one department, with 76 percent saying that logistics would have a voice in the decision.