RFID (radio frequency identification) has long been touted as one of the hottest technologies in automatic identification, with the potential to push bar codes into obsolescence and to track products through every stage in the supply chain. Now, the technology can finally start living up to its promise.

With Wal-Mart and the U.S. Department of Defense (DoD) throwing their weight behind its implementation, RFID is finally speeding toward widespread adoption. Both organizations are setting 2005 deadlines for the deployment of RFID. While Wal-Mart says it wants its top 100 suppliers to affix the "smart tags" on pallets and cases by next year, the DoD is requiring ALL suppliers to start using RFID at the lowest possible packaging level by that time. Wal-Mart will then broaden its edict to all suppliers by 2006.

What's more, Gillette, Procter & Gamble and perhaps even the Food and Drug Administration (FDA) are embracing the technology as well. The FDA suggested in a report that wireless RFID chips—which can contain large amounts of data that can be changed, updated and read in bulk by radio waves—could be a viable preventative measure against drug counterfeiting.

Because of the deadlines set by Wal-Mart and the DoD, manufacturers and distributors are now rushing to implement the technology, propelling RFID spending. In fact, research firm IDC expects RFID spending for the U.S. retail supply chain to surge from $91.5 million last year to almost $1.3 billion in 2008. Most of the money will go to hardware, including RFID tags, infrastructure and systems integration. While that figure will hit $875 million in 2007, spending on RFID-related services will reach roughly $270 million in 2007 before flattening, says IDC. The research firm also expects software spending to start increasing in 2006, when more companies will begin to seek RFID middleware.

But RFID's move into the mainstream is not expected to be smooth. For one thing, some say the technology remains untested and is too costly—with manufacturers and distributors expected to shoulder most of the expense. Moreover, the Electronic Product Code (EPC) network—which both Wal-Mart and the DoD plan to use—has yet to be completed. This network is supposed to connect RFID tags via the Internet to manufacturers' product databases. But for now, the EPC model for RFID tracking still lacks ISO standards.

Indeed, suppliers are still scratching their heads about how to deploy—in some cases, even define—the technology. And few systems integrators or consultants can help them out as they too lack experience in RFID implementation. "It's a lot to ask by 2005, isn't it?" says Mike Liard, senior AIDC/RFID analyst at Massachusetts-based Venture Development Corp. "Most companies are just getting their feet wet with RFID. They have yet to wrap their arms and minds around this concept."

Suppliers are faced with a number of problems. One major one is the fact that many things—including water, wood, metal, nylon conveyor belts and concrete—can impede the radio signal from RFID chips. In fact, an AMR Research report shows that some of the EPC pilots have read rates of only 80%. Moreover, information systems have to be set up to handle the EPC number and the likely flood of data caused by the real-time tracking of pallets and cases.

"The ultimate benefit of RFID is not in doubt, just the timing," says Kara Romanow, AMR analyst. "With the many issues, immature technology and enormous costs without much immediate benefit, manufacturers can't tag every pallet, case and carton sent to Wal-Mart and DoD by January 2005." But despite the questionable feasibility of the 2005 deadline, one thing's for sure—the edicts from the two huge organizations have put RFID on the fast lane toward a once-elusive destination: widespread adoption.

Sources:

Ready or Not, RFID's Coming
Frontline Solutions, December 1, 2003
www.frontlinetoday.com/frontline/article/articleDetail.jsp?id=77424

IDC to RFID: Tags, You're It
Matthew Broersma
The New York Times, January 7, 2004
www.nytimes.com/cnet/CNET_2100-1008_3-5136650.html