Much has been made of the looming 1 January 2005 deadline for RFID implementation by Wal-Mart's top 100 suppliers, with the common conclusion being that the majority of them simply won't get there in time.
But according to ABI Research's director of RFID and ubiquitous technologies Erik Michielsen, the fact that only around 30 per cent of the Wal-Mart's top 100 suppliers will have done full-scale RFID implementations by 1 January is not the issue.
What's really important, he believes, is what the lagging 70 per cent - who have just been testing the waters with shallow "slap-and-ship" efforts - will do over the course of the coming year, and why they have been so half-hearted in their compliance efforts so far.
"Wal-Mart didn't expect this battle to be won by January first, 2005," said Michielsen. "What it did was create an incentive structure that pushed its partners in the market to better understand the technology while standards were being developed and innovation was taking place. Wal-Mart's goal is to get companies to integrate this technology into their changing business processes."
Some of these companies have said that they can't afford the cost of integration. Companies struggling to meet the so-called Wal-Mart mandate, which requires the retailer's top 100 suppliers to enable tracking using RFID tags by the end of the year, plan to spend around $2 million each, according to ABI research carried out earlier this year.
And Research group Forrester, which earlier this year interviewed supply chain executives at $1 billion-plus companies, found that many firms do not expect RFID mandates to enhance supply chain visibility.
"RFID is forcing us to take our eyes off major efforts to minimise shocks to our supply chain," said one manufacturer interviewed by Forrester. "My perspective is that we need to focus on events that exaggerate supply/demand shocks. Then the extra RFID data can be helpful."
However, Michielsen refutes these arguments. "The truth is that there haven't been reputable integrators in the market. Only now are we seeing Sun Microsystems, HP, IBM, Oracle, SAP and Microsoft getting involved at the product and personnel level."
Apart from meeting retail mandates, RFID compliance can benefit suppliers in other ways. Advantages include improved information on inventory status, better tracking and management of assets, improved responsiveness and customer service and improved tracking of shipping containers.
In addition, RFID can lead to reduced labour costs, improved inventory availability and reduced inventory stock outs. But reduction in labour is only likely if manufacturers move beyond the compliance approach that most are contemplating now.
ABI Research's study, "RFID Integration Services Markets," is designed to help suppliers and manufacturers realise these benefits. It includes models for RFID verticals and applications, with focus on RFID reader integration services, RFID middleware integration services, and RFID systems integration services.
RFID tags are tiny computer chips connected to miniature antennae that can be affixed to physical objects. The most commonly application of RFID contains an Electronic Product Code (EPC) with sufficient capacity to provide unique identifiers for all items produced worldwide.
When an RFID reader emits a radio signal, tags in the vicinity respond by transmitting their stored data to the reader. Passive (battery-less) RFID tags, read-range can vary from less than an inch to 20-30 feet, while active (self-powered) tags can have a much longer read range. The data is then sent to a distributed computing system involved in supply chain management or inventory control.