Radio frequency identification (RFID) is coming. The only question for manufacturers, retailers, health care providers and other businesses is whether or not they want to be early adopters or wait until the technology is perfected and the price drops.
As more businesses decide to plunge into the still unstable and expensive adoption, questions continue to be raised.
Consumer advocates claim their privacy is at stake. Market research experts warn against hasty implementation and money losses. Companies are concerned about affordability and reliability.
RFID technology is marketed mainly in the form of identification tags for manufacturers and for security purposes.
The technology continues to increase in intelligence and decrease in physical size, and it eventually will become vital for those who wish to stay at the forefront of their industries.
More manufacturers are realizing that the benefits of RFID tag implementation greatly outweigh the costs. With RFID technology installed, a warehouse can reduce human error and increase quality and efficiency by passing pallets of products through a reader, instead of taking inventory by hand.
Implementation at this point also puts participating companies at an advantage. Because RFID tags will replace barcodes, companies will have to implement to stay in the game.
"Tags are about facilitating convenience and accuracy," said William DeKruif, vice president of RFTechnologies, Brookfield. "The barcode solved the inventory issues within stores, but there are still issues within warehouses and trucking companies."
When Wal-Mart announced in June 2003 that its top 100 suppliers must utilize RFID tags at the case and pallet level by January 2005, experts like Kara Romanow of AMR Research shook their heads in hesitation.
"Consumer packaged goods (CPG) manufacturers are stuck in a tough position with RFID," Romanow wrote in an October 2003 Alert Highlight. "Even Kevin Ashton of the Auto-ID Center admitted at the recent Consumer Goods Information Technology (CGIT) conference that the technology is ‘quite immature.’"
Romanow warned businesses about tweaking that still needs to be done for RFID to be an aid in efficiency. Romanow listed problems based on results from companies partaking in pilot programs.
Some shortcomings included: motors and nylon conveyer belts generate RF noise; the effective range of the tags has not reached past 4 feet; concrete, steel and previous RF installations interfere with the signal; and the glue on the tags can deteriorate with temperature changes.
Wal-Mart spokeswoman Sarah Clark said a Wal-Mart executive sponsor and an associate product sponsor are assigned to each of the 130 suppliers implementing RFID to ensure operations are running smoothly.
"Since we announced RFID implementation to the top 100 suppliers, 30 additional suppliers have asked to join the trial, and we expect more than 20,000 suppliers will be on board by 2006," Clark said. "We asked all 130 suppliers participating in the trial to give us feedback at the end of February so Wal-Mart could provide a report that represents our plans and how to overcome the barriers. We will be working with suppliers to address those problems."
The results of the report have not yet been released.
Of course, advocates and manufacturers of RFID technology are glad Wal-Mart has taken the initiative in adopting RFID.
Robert Ladd of Miles Data Technologies, Pewaukee, implements both RFID and barcode systems. In a Feb. 20 report in Small Business Times, Ladd said Miles Data sees similarities in the evolution of the barcode and the evolution of the RFID tag. According to Ladd, companies see the value in RFID but are hesitant, either questioning the life expectancy of the technology or just waiting for others to go first.
"Wal-Mart is trying to drive change for increased through-put, security of items and reduced labor costs," said Glenn Jonas, president of RFTechnologies.
AMR Research analyst Scott Lundstrom wrote in a July 2003 Report that RFID will be the future, but the transformation could take as long as 10 years.
Lundstrom said the RFID market will develop in three phases: pilots, supply chain infrastructure and item-level tagging.
The pilot phase, according to Lundstrom, will last until 2005 and will be characterized by testing and prototyping in preparation for widespread adoption.
The supply chain infrastructure phase will last from 2005 to 2009, Lundstrom said, and will involve deployment of the RFID tags on a case and pallet level across the supply chain market.
It will not be until the third phase, according to Lundstrom, when suppliers and customers witness an industry change. Lundstrom said the item-level tagging phase from 2009 to 2013 will bring growth across the board.
"Broad adoption of the technology, coupled with significant increases in the number of deployed tags and readers, should drive 70% to 80% market growth rates for several years," Lundstrom said. "Retail will experience rapid changes as new racks, point of sale (POS) systems and planning replenishment applications move to RFID-based technologies. Growth in storage and analytics will take off to capture the huge volumes of data generated by the tagging of most consumer and industrial goods."
Despite the current imperfections, many manufacturers and distributors have seen the capabilities of RFID and want to join the technology.
Dennis Mullen, chief executive officer of Birdseye Foods, a New York-based frozen foods company, is implementing RFID because of the Wal-Mart mandate. Mullen said he had been aware of RFID before, but Wal-Mart has opened the eyes of the industry to the positive effects of RFID.
"I see RFID as a win-win-win," Mullen told Small Business Times. "The customer is happier because we can now track a product through a system and always have it available. Capital employees are going to be happier with a more efficient warehouse, and I am going to be happier because I will have a similar upside in making sure customers are happier because of efficiencies."
Mullen said he will have a better sense of food security once the RFID program is up and running in his facilities.
"There is no question that in the next 12 months we are going to spend more money than someone 24 to 36 months from now, but I am hoping the investment gives us a competitive advantage over those that delay their initiative," Mullen said. "It is my belief that this will become the equivalent to universal coding. It is complex, but we are already using it every day with airlines and tolls, and through UPS. It is going to happen, and our position will be as a leading, recognizable, reliable packaged goods processor."
April 2, 2004 Small Business Times, Milwaukee
