RFID Adoption Moves Ahead of Schedule
Emerging RFID (radio frequency identification) technology is progressing above expectations, but industry- wide adoption is expected to be a lengthy and arduous process, said manufacturing and retail executives speaking at an Oct. 18 conference at the EPCGlobal trade show held Oct. 17–19 at the Los Angeles Convention Center.
While Wal-Mart Stores and representatives of consumer goods manufacturers like Procter & Gamble continue to lobby for and mandate RFID programs, privacy, legislative and cost issues remain a major barrier to adoption.
RFID employs a wireless technology using bar codes, microchips and scanners to read inventory and other data for inbound and outbound warehouse shipments, as well as other applications such as highway and credit card FastPass systems, and military and library-book tracking. The technology can store much more information than current bar codes, which is why Wal-Mart, Target, Best Buy and other retail chains are requiring that their suppliers be equipped with RFID hardware.
RFID technology can also track personal information from consumers, which has alarmed a number of privacy advocates.
On Sept. 30, Gov. Arnold Schwarzenegger vetoed a bill that would have placed privacy safeguards on RFID chips in state-issued driver’s licenses and library cards. In a statement, Schwarzenegger said the bill would roadblock the potential of RFID in applications that could “enhance and streamline operations, reduce expenses and improve customer service to the public and may unnecessarily restrict state agencies.”
Reik Read, senior research analyst for Milwaukee, Wisc.–based Robert W. Baird & Co., said the privacy issues are a “real threat.”
Cost issues are also a concern for suppliers, but Read said inroads are being made, citing data that show that the average tags cost 75 cents each in 2003. Now they are down to 10 cents to 13 cents each.
“The suppliers are no longer saying that they don’t want to do this. They know it’s coming. The question now is how to find a return on investment,” Read said.
Two years ago, Wal-Mart mandated its top 100 suppliers be RFID compliant. By the end of the year, the mass merchant is expanding that number to 600. It is also doubling the number of stores participating in its RFID initiative to 1,000, said Carolyn Walton, Wal-Mart’s vice president, who spoke at EPCGlobal.
“Our focus is to keep product on the shelves for the benefit of our customers,” she said.
Walton explained that Wal-Mart is looking at expanded uses of RFID by using new remote communications technology at the warehouse level.
“On an average day at one of our Supercenters, we will have seven tractor-trailers unload 7,000 boxes, which are usually brown and all look alike. We are experimenting with wearable technology to instruct workers exactly where to take those boxes. It could be right to the selling floor if it’s an item with an extremely good sell-through,” she said.
Wal-Mart is currently in the prototype stage of implementing the technology on a system-wide level.
Chris Adcock, president of EPCGlobal, the main agency responsible for adopting RFID standards, noted that more apparel companies have joined the EPC (electronic product code) community, which has helped the overall schedule for adoption.
“The initial projection was for 80 companies to be onboard by 2006. In actuality, it’s reached 1,000 companies representing more than 40 countries,” he said. “It’s expanded from consumer goods to apparel and pharmaceuticals and other industries.”
The panelists said that education remains a big challenge.
“It’s more about tags and readers. It’s about retrofitting your entire line,” said Dick Cantwell, vice president of Procter & Gamble.
Added Walton of Wal-Mart: “We’re looking at this whole process as a journey, not just a single event or project. You can’t go at it alone, however, because you will fail.”
