Subject: [NEXTEL-1] The watershed moment for RFID

From: [email-masked]
Date: Mon, 08 Sep 2003 04:15:02 -0400

The watershed moment for RFID

By Eric Peters 
September 7, 2003

Earlier this summer, Wal-Mart announced that by January 1, 2005, radio frequency
identification technology would become a requirement for doing business with the
world's largest retailer. A line was drawn in the sand: RFID was going to happen. 

More recently, Wal-Mart said it would not put RFID technology in retail stores,
and a flurry of "not ready for prime time" RFID responses followed. But Wal-Mart's
retreat from shelf RFID tags neither suggests a retreat on its earlier commitment
to RFID nor a signal for the halt of adoption. 

Product level RFID tagging may be years away, but a technology inflection point
has been reached. Many companies are now extremely interested in the technology,
and the potential is just too attractive to ignore. Globally, RFID will not sell
more razors or bars of soap. What it can do, however, is redistribute the market
share of the different companies that sell razors and bars of soap. 

The costs of not making your supply chain RFID-compliant far outweigh the costs
and obstacles of implementation. As with other high-impact technologies, the early
adopters will get a disproportionate share of the wealth, and the laggards will be
the companies who suffer lost market share. 

Wal-Mart's pragmatic decision to start with RFID tags in the
warehouse at the pallet and case level is quite prudent. Instead of rushing into
things, Wal-Mart's more measured approach toward RFID offers a good model.
Businesses can give suppliers the capability to produce RFID pallet or case labels
with minimal technology--a browser session and a remote label printer. 

Then, as cases are unloaded from the truck through an RFID receiving portal, all
the information associated with the tags gets captured and updated in real time
for better inventory visibility. This allows businesses to experience some of the
most critical benefits of RFID, including increased inventory accuracy and
decreased labor costs within their facility. 

As trading partners begin adopting RFID, the focus of labeling at the pallet or
case level can then be extended to labeling at the unit level and so on. As with
any new or emerging technology, there is incremental value with each step of an
RFID implementation. 

With Wal-Mart's supplier mandate, the "sixth month rule" is the statement I most
often hear from retail executives regarding RFID: "Don't let me get more than six
months behind Wal-Mart in RFID adoption." In reality, if you waited to hear
Wal-Mart's position on RFID, you are already more than six months behind. 

The reality is that if you were waiting to hear Wal-Mart's position on RFID, you
are already more than six months behind.  
The real date for becoming RFID-compliant is August 2004, but realistically, no
consumer goods company will internally pilot RFID between September and December
of 2004. The technology has to be tested before going into the holiday season.
This creates a window of approximately one year to design, pilot, test and
implement RFID. 

The cost of RFID will be distributed across the supply chain and will drive the
cost of RFID tags down across the board. Retail compliance means simply that
retailers will expect their vendors to comply with their shipping requirements. 

If you waited to hear Wal-Mart's position on RFID, you are already more than six
months behind.  
Each link in the supply chain will look for cost savings to help offset the cost
of the technology; by the time the carton or pallet gets to the retailer, each
supply chain participant will have partially absorbed the RFID cost. Whatever cost
cannot be absorbed in the supply chain will then be absorbed through lower margins
but will not be passed on as a higher cost to the consumer. 

Finally, businesses should understand that there is no "second" 100. Though
Wal-Mart's announcement covered its top 100 vendors, every vendor I know that
supplies products to Wal-Mart wants to show that it is a good and deserving
trading partner. Each one will work hard to support RFID; they don't want their
competition to get there first, and they don't want to have to be asked to comply. 

biography
Eric Peters is senior vice president of products and strategy at Manhattan
Associates  which develops supply chain software. 

http://www.manh.com/
http://news.com.com/2010-1071_3-5072343.html?type=pt&part=inv&tag=feed&subj=news

http://news.com.com/2100-1022-1013767.html?tag=nl

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