By Jo Best, 5 April 2004 17:30
NEWS Major retailers' tactic of laying down the law and demanding all suppliers get RFID may well help speed up adoption of the technology. However, it looks like their strategy might be about to backfire on them.
A report by Forrester Group, RFID at what cost?, shows that just one quarter of Wal-Mart's suppliers who were ordered by the retail giant to be RFID-enabled by 1 January next year will actually be using the technology.
It's not surprising that suppliers may as yet be reluctant to fork out to set up the tagging technology, especially when the estimated set up costs for the average Wal-Mart supplier would run to $9m.
For those opting for item rather than case- and pallet-level tagging, the costs start to spiral even more reaching up to $100m. And that's why the Forrester Research report believes that only a few scanty early adopters will make the jump to the tracking tags at item level, despite the benefits that source-level tagging can bring.
And while Wal-Mart and others may trumpet the savings that installing the technology may bring, Forrester believes that the current pricing of tags means that most suppliers will steer clear for the foreseeable future.
RFID's novelty might be keeping chip prices high but its lack of maturity is also slowing adoption in other ways. Because RFID is still tech's new kid on the block, the amount of RFID specialists remains relatively small meaning that hiring out professionals to help with distribution centre set-up costs a pretty penny and, Forrester believes, will only go up.
Labour costs in general will also follow the skyward trend as vendors have yet to streamline automated tagging, meaning that suppliers will need extra hands to get the chips into packaging.
But for those under the cosh of retail's heavyweights, there are ways to save money. The analyst house recommends that Wal-Mart lead from the front and set up a buyers' consortium to help drive tag prices down.
It's also recommended retailers adopt the technology step-by-step rather than dictating blanket tagging
Christine Overby, senior analyst at Forrester Research, said that suppliers are still at a lost to justify the expense of adding RFID to the supply chain.
"There is no business case for most suppliers in the short term. The technology is not ready and there is lack of deep expertise in the industry to help suppliers implement RFID," she said in a statement.
Comments
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1. anonymous
I agree with your basic position - the RFID community is still in its infancy and the number of real experts is well below the number needed to develop a full roll-out. As well, I think grossly exaggerated expectations were set about the fully automatic end to end supply chain - which will just not happen in the short term.
2. anonymous
I agree as well, there seems to be alot of discussion about how RFID can streamline supply chain managment but very little discussion about the actual supply chain of RFID tags. Converting and sales implementation seems very limited at this time. The more I researched the more I realized I was reading nothing more than the typical propaganda used to spur interest. Full fledged wide use tag roll out today 5-4-2004 seems to be total fiction, however, use of the technology will continue increase just not as quickly as some folks would like to believe.