Defense Dept. orders its suppliers to use RFID tags by 2005

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October 08, 2003 (Computerworld) -- The U.S. Department of Defense will require all of its suppliers to use passive radio frequency identification tags (RFID) on all cases and pallets by January 2005, a mandate whose impact will likely dwarf a similar policy that Wal-Mart Stores Inc. imposed on its top 100 suppliers in June (see story).
Analysts said the Defense Department and Wal-Mart projects would impose "massive" infrastructure costs on supply chains over the next two years, with little return for suppliers.
The new policy will cover practically everything purchased by the U.S. military -- from beans to bullets and from toothpaste to tank parts -- or roughly 45 million line items, according to Alan Estevez, assistant deputy undersecretary for supply chain integration.
Estevez couldn't estimate the number of suppliers affected by the policy document, signed last week by Michael Wynne, the acting undersecretary of Defense for logistics. But the Defense Logistics Agency -- which bought an estimated $24 billion worth of goods last year -- has 23,642 suppliers, according to DLA spokeswoman Dawn Dearden.
Estevez said he believes the Pentagon's policy mandate will help jump-start the RFID industry, which had already gotten a boost from the Wal-Mart decision this summer. He also said that while the 18-month timetable is ambitious, the department believes it's doable. It plans to use the Electronic Product Code (EPC) that Wal-Mart will deploy, Estevez said.
EPC is under development by the Uniform Code Council, a standards body, and EPCglobal, a new organization that the UCC will formally launch in November.
The department wants the "lowest possible price" for the tags its suppliers will use, Estevez said. Wal-Mart has a goal of 5 cents per tag, and Enu Waktola, a Texas Instruments Inc. marketing manager, said the economies of scale the Defense Department brings to the RFID market will drive down prices.
Besides requiring suppliers to use passive RFID tags on cases and pallets, the department has also instituted a formal policy to use active RFID tags to track all of the 20- and 40-foot shipping containers it uses, Estevez said. Savi Technology Inc. is already supplying active RFID tags and container tracking systems to the department under a series of contracts valued at $280 million.

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