The adoption of radio-frequency identification (RFID) technology got a big boost last month when the giant of the retail industry announced a major commitment to the technology. Bentonville, Ark .-based Wal-Mart said it would require its top 100 suppliers to begin using RFID tags for tracking cartons and pallets by January 2005. Wal-Mart made the announcement during the Retail Systems/VICS Collaborative Commerce Conference and Show in Chicago. According to news reports, Pam Kohn, the retailer's vice president of global supply chain operations, said the company expected RFID to improve its inventory management and supply chain visibility.
RFID technology is not new; it's already in wide use in the automotive industry and in military applications. But adoption rates in supply chain applications have been relatively low, in part because of the tags' cost and in part because of the lack of universally accepted standards. Wal-Mart's mandate, with widespread repercussions not only for suppliers but also for retail and consumer goods supply chains,is likely to change all that. "With Wal-Mart making this request, hundreds of vendors are saying, 'What can we do? How can we fit in,'" says Pam Cory, vice president of data capture systems for Intermec Technologies Corp. "Wal-Mart has made the statement and you know that other retailers are looking at it."
Although Wal-Mart's push—which will eventually require billions of RFID tags to be placed on pallets and cases—could swamp tag manufacturers with demand, adopting RFID shouldn't be especially difficult for most of the suppliers, says Cory. "These are standard products used in other applications today," she says. Intermec has already developed a kit based on some of those products that allows new users to essentially plug and play, she reports. Cory adds that most suppliers will find that using RFID to mark cases and pallets provides a quick return on investment.
With Wal-Mart leading and others sure to follow, the development of standards seems likely to come sooner rather than later. "Standards are forthcoming in a short time frame," Cory believes. "A lot of the arguments are going to disappear."
In fact,the Auto-ID Center at the Massachusetts Institute of Technology has been working with the Uniform Code Council for months to develop an Electronic Product Code (EPC) for RFID tags. Members of the Auto-ID Center include a number of retail and consumer-goods giants, including Wal-Mart, Gillette and Procter & Gamble. The center has scheduled what it calls the inaugural EPC Symposium for Chicago in September. (Information on the conference can be found on the Auto-ID Center's Web site at www.autoidcenter.org.)
And it appears that more help is forthcoming. During the Retail Systems conference, the software giant Microsoft announced that it would join the Uniform Code Council in commercializing the RFID technology. Microsoft Corp. said it would join AutoID Inc., a joint venture of the Uniform Code Council Inc. and EAN International, to develop and oversee commercial and technical standards for the EPC.
In the meantime, Cory offers reassurances to vendors that may be feeling overwhelmed by the mandate. "This is a proven technology," she asserts. "The vendors will need to set up pilots, but [they'll find that this] is complementary to what they're doing today. All the suppliers at this level have bar-code based tracking systems. RFID is complementary to that."
Getting into the game requires a relatively small investment. For example, Intermec's pilot kit is available for less than $15,000. Its Intellitag Ready-To-Go Retail RFID package includes hardware, software, and professional services aimed at retail suppliers that want to conduct pilot applications.
Wal-Mart, which has been involved in trials at the Auto-ID Center, will likely begin pilot tests of its own before the end of the year.