Wal-Mart Backs RFID Technology

Will require suppliers to use 'smart' tags by 2005

Chicago—Wal-Mart Stores Inc. last week said it plans to require its top 100 suppliers to put radio-frequency identification tags on shipping crates and pallets by January 2005, a move that's likely to spur broader adoption of the technology because of Wal-Mart's market clout.

However, at the Retail Systems 2003/VICS Collaborative Commerce conference here, IT managers and technology vendors alike said that RFID devices still need to overcome major manufacturing, pricing and standardization hurdles before widespread usage can begin.

Wal-Mart's move is expected to result in the deployment of nearly 1 billion RFID tags with embedded electronic product codes (EPC) for tracking and identifying items at the individual crate and pallet level, said Pam Kohn, vice president of the Bentonville, Ark.-based retailer's global supply chain operations.

But even Wal-Mart's initial RFID effort will be narrowly focused. Although RFID tags can gather and track a variety of data related to products, materials and more, Kohn said Wal-Mart will concentrate at first on using the technology to improve inventory management in its supply chain.

"We're still determining all the benefits," Kohn said. "We don't want to overburden ourselves." She added, though, that even if Wal-Mart were to collect no new data with the RFID tags, the efficiency and accuracy with which items can be tracked would be huge benefits in and of themselves.

RFID uses low-powered radio transmitters to read data stored in tags that are embedded with tiny chips and antennas. Proponents of the technology say such "smart" tags can store more detailed information than conventional bar codes, enabling retailers and manufacturers to track items at the unit level.

RFID tags have been available for several years, but adoption has been slow because the tags are more expensive than bar coding and because standards are lacking to ensure interoperability between tags and data readers.

Gary Robertson, executive director of global infrastructure at Delphi Corp., a Troy, Mich.-based maker of automotive electronics systems that uses RFID devices in its manufacturing operations, said Wal-Mart's decision to deploy the technology "will legitimize it and push it into the mainstream."

"The fact that the largest company in the world is publicly adopting EPC open standards should give companies confidence that the day of a single, interoperable RFID system is close at hand," said Kevin Ashton, executive director of MIT's Auto-ID Center in Cambridge, Mass.

The Auto-ID Center is working with Uniform Code Council Inc. (UCC) in Lawrenceville, N.J., and EAN International in Brussels to develop a standardized EPC format for storing data on RFID tags. That effort got another boost last week when Microsoft Corp. said it will join AutoID Inc., a not-for-profit joint venture set up by UCC and EAN to oversee the still-evolving standards.

Cost Possibly $50M

Wal-Mart didn't say how much the effort would cost it or its suppliers or whether new systems will be needed to support the technology. But even at the 5-cents-per-tag price that Wal-Mart said it plans to seek from vendors, the cost of the tags alone would total $50 million.

According to the Auto-ID Center's Web site, RFID tags typically cost at least 50 cents each, and RFID readers sell for $1,000 or more. Big companies could require thousands of readers for all their factories, warehouses and stores, the site says.

Wal-Mart isn't the only retailer putting its faith in RFID. London-based Marks & Spencer PLC, one of the U.K.'s largest retailers, is rolling out RFID technology in its food supply chain operations. The project involves putting 13.56-MHz RFID tags on 3.5 million new plastic trays used to ship products, according to Keith Mahoney, the company's food logistics controller.

Marks & Spencer has subjected the tags to a variety of temperature, moisture and distance tests before deploying them, Mahoney said during a presentation at the conference. Although the lack of common RFID protocols and standards remains an issue, "we could not allow the lack of them to hang up the project," he added.

RFID can yield "a huge benefit" for some companies, said David Hutchins, senior director of enterprise systems at Kraft Foods North America Inc. in Northfield, Ill., and a member of the AutoID board. However, Kraft is still evaluating the technology's potential value in its own supply chain. "The first thing is figuring out the business case," Hutchins said.


RFID's Challenges

Production Capacity:

Wal-Mart says it will need 1 billion RFID tags in 2005 to support its planned use of the technology.

But IBM claims that the rate of the decline in Informix revenue has slowed since it bought the databases.


Wal-Mart officials are insisting that the RFID tags cost no more than 5 cents each.

The devices currently sell for as much as 10 times that amount, according to MIT and Texas Instruments Inc.

Copyright © 2003 IDG Communications, Inc.

7 inconvenient truths about the hybrid work trend
Shop Tech Products at Amazon