Ready for the Wal-Mart mandate?

We're getting mixed signals on RFID readiness as Wal-Mart's January 2005 deadline looms. On that date, the retail giant wants its top 100 suppliers to be RFID ready at the pallet and case level. The top 100 has actually expanded to 130 as 30 additional suppliers volunteered to comply. But word on the street is that some suppliers won't be able to make the deadline. "Not all of the suppliers will hit the mandate," says Steve Banker, the lead RFID analyst at ARC Advisory Group. "We're hearing that suppliers are already going to Wal-Mart and explaining they won't be able to meet the deadline."

So far, Wal-Mart has not specified what will happen to vendors that are not ready on deadline date. Since the companies facing compliance mandates are Wal-Mart's top suppliers, it wouldn't make sense for the retailer to batter its best suppliers with costly consequences, especially since the ramp-up to RFID already involves a big investment for these suppliers.

Manufacturers expect short-term return on RFID

A recent Accenture study shows that the majority of North American manufacturing executives anticipate a high return on their RFID investments—at least in the short term. When asked to identify expected benefits from RFID, 58 percent cited improved tracking and tracing capabilities, 51 percent said enhanced recall management, and 47 percent, better shipping and receiving. "Many manufacturers evaluating RFID today are looking for tactical benefits because the path to return on investment (ROI) looks shorter and clearer," says Christopher Boone, program manager for analyst firm IDC, commenting on the Accenture study.

Yet while most of respondents were generally optimistic about the short-term benefits, fewer saw the longer-term supply chain advantages of RFID. For example, only 31 percent believe RFID will help reduce inventory and working capital. Just 28 percent anticipate improved revenue through reduction in out-of-stocks. And only 17 percent believe that they will be able to reduce expediting costs through RFID. Even so, IDC's Boone expects that the longer-term advantages of RFID will materialize, though they may be less tangible. "The long-term, strategic benefits of RFID are harder to attain," he says. "But they will lead to competitive advantage in supply chain operations."

Not all analysts are as optimistic about the RFID payback. "ROI for RFID? Absolutely not," says ARC's Banker. "Wal-Mart says that once RFID becomes pervasive and it becomes end-to-end, there will be ROI for manufacturers. But if you look at passive RFID in isolation, it's not a very interesting supply chain tool from a manufacturer's point of view." The ARC analyst believes that over the long run, RFID can play a role in efficient processes with trading partners when it's blended with bar codes and active RFID. But on its own, he doesn't expect passive RFID to offer much benefit to manufacturers. "In supply chain history, never has so much been written about so little," Banker says.

3M to use HighJump for RFID

3M announced it will implement supply chain execution technology from its subsidiary, HighJump Software, to help meet its customers' RFID tagging requirements. 3M will be required to ship RFID-tagged pallets and cases to major retailers such as Wal-Mart, the Department of Defense (DoD), and others beginning January 2005. 3M says it can use HighJump's software to incorporate RFID tagging into existing fulfillment and distribution processes without disrupting bar-code-based operations.

The company also announced that American Port Services (APS), a Georgia-based third-party logistics provider, has chosen HighJump's RFID technology to help its customers meet retail requirements. APS chose HighJump for its ability to integrate into the HighJump suite that APS already uses at five of its distribution facilities.

RedPrairie and Xterprise partner

RedPrairie Corp. and Xterprise Inc. have jointly developed an off-the-shelf print-and-apply solution for RFID. The application is designed to provide a fully automated inline labeling system using Printronix's printer/application systems to meet the RFID requirements of Wal-Mart, the DoD, and other major retailers.

FCC and China commission agree on standard

The U.S. Federal Communications Commission (FCC) and China's State Radio Regulatory Commission have agreed to support the 434 MHz radio-frequency band. The agreement is considered a milestone in advancing a global standard for active RFID technologies in supply chain management. In a prepared statement, FCC chairman, Michael Powell praised the agreement as a step toward making ports safer and more efficient. "I'm excited by the prospects from improved inventory control, lower costs, and increased homeland security that this technology promises to bring," Powell said.

RFID test centers proliferate

A number of RFID testing centers have sprung up to help companies use RFID technology. Not surprisingly, many of these facilities are in the Dallas area, near Wal-Mart's first RFID-enabled distribution center. Most recently, third-party logistics provider Exel opened an RFID center in Harrisburg, Penn. Exel will use the 110,000-square-foot distribution center to work with retailers, manufacturers, and technology companies to test multiple aspects of RFID implementation, including chip positioning, pallet configuration, materials handling, and distribution-center layout.

Exel joins a number of RFID test facilities such as RedPrairie's RFID lab, which was unveiled last October at company headquarters in Waukesha, Wis. In addition, Xterprise recently opened a 15,000 square-foot test center in Dallas. SIS Technologies has teamed up with Distribution Center (DC) Logistics to test RFID in DC's 150,000 square-foot warehouse in Hutchins, Texas, near Dallas. International Paper has opened a 10,000 square-foot center in Memphis. And RSI ID Technologies has expanded its RFID testing facility to include testing of UHF tags and readers at its headquarters in Chula Vista, Calif.

One of the major Dallas-area test centers is operated by Sun Microsystems. Sun is working with customers such as Goodyear Tire & Rubber at the 17,000-square-foot facility to test RFID in a near real-world setting. Goodyear has embedded RFID tags in its tires to help track inventory. "Goodyear has a vision that RFID will allow it to provide better service to retailers and customers," says Juan Carlos Soto, director of advanced technologies at Sun.

Soto believes RFID will deliver a very direct payback to the suppliers of large retailers such as Wal-Mart. "There is definitely an ROI if they get to keep Wal-Mart as a customer," believes Soto. He adds that RFID-enabled benefits such as continual restocking can deliver a clear ROI for manufacturers. "Gillette has been very public about that fact that if you're out of stock on the shelf, your customer will buy a competitor's product," Soto says.

RFID Downloadable Book

RFID in Manufacturing: A Practical Guide on Extracting Measurable Value

Free download published by Rockwell Automation (www.interwavetech.com).

RFID Web Seminars

You can view past RFID Webinars at no charge at a number of RFID vendors. Here are some recent Webinars archived at vendor sites.

RFID Deployments: Slap & Ship to Total Integration

Zebra Technologies (www.zebra.com)

What You Need to Know about RFID in 2004

Tibco Software (www.tibco.com)

RFID Implementations

Wipro Technologies (www.wipro.com)

RFID: What You Need to Know to Get Started

Manhattan Associates (www.manh.com)

How to Implement RFID Today

Intermec Technologies (www.intermec.com)

Upcoming RFID Conferences

RFID Bootcamp—monthly conferences

Texas Instruments, AIM Global, and other RFID leaders present one-day conferences.

Sept. 13 (Las Vegas)

Oct. 4 (New York)

Nov. 16 (Orlando)

Nov. 29 (Boston)

Produced by Shore Cliff Communications (www.shorecliffcommunications.com)

EPCglobal U.S. Conference

Sept. 28–30 (Baltimore)

Produced by EPCglobal US (www.epcglobalinc.org)

RFID for Retailers

Oct. 5 (London, England)

Produced by Retail Events (retailevents.co.uk)