Companies Adopting RFID Despite Challenges

InformationWeek

Many companies across a variety of industries are either deploying radio frequency identification systems or plan to adopt the product-tracking technology.

Many companies across a variety of industries are either deploying radio frequency identification systems or plan to adopt the product-tracking technology, despite concerns over the high cost and lack of good integration tools and standards, a survey released Wednesday showed.

The survey of 135 attendees at last week’s Frontline Conference and Expo confirms the findings of analyst firms, which say RFID mandates from the federal government and major retailers are driving suppliers to the technology sooner than many would like.

The survey conducted by Wavelink Corp., a supplier of wireless application development software, found 79 percent of the respondents had launched a pilot of the technology or were planning such a project. A breakdown for that group showed 22 percent had implemented an RFID pilot program, 42 percent were planning one in the next 12 months and 21 percent within 12 to 24 months.

Nevertheless, the company execs, which worked in retail, manufacturing, transportation and the government sector, expressed serious concerns about RFID technology. Nearly 60 percent currently piloting the technology or planning to in the next two years said cost was a primary concern. Forty-two percent cited a lack of standards as a concern, and 36 percent listed an early, untested market. Thirty percent were troubled by the lack of sophisticated software to integrate RFID with business applications, such as supply chain management and enterprise resource planning systems.

Despite the worries, retail suppliers are diving into the technology to meet 2005 mandates from Wal-Mart Stores Inc., the world’s largest retailer; Target Corp., Albertsons Inc. and others. A similar mandate has been imposed by the U.S. Department of Defense.

“A lot of companies are working in deadline mode,” Warren Wilson, analyst for research firm Summit Strategies, said. “Their chief concern is to comply with the mandates and to remain eligible as a supplier to these big outfits.”

Many companies have adopted a “slap-and-ship” approach to RFID, in order to meet the mandates at minimal cost, Wilson said. The term applies to companies that stick an RFID electronic tag on a case or pallet before shipping it to the retailer, but do not use the technology themselves to track goods.

Companies across industries are expected to gradually adopt RFID as the technology matures, because of its ability to cut costs through more efficient handling of shipments and inventory.

“There’s widespread belief that as the technology takes hold and tracks goods from manufacturers to consumers, there will be major benefits through efficiency,” Wilson said.

Nevertheless, companies should wait to reap the cost-cutting benefits of small projects, before expanding them into more warehouses and other facilities within a supply chain, Wilson said.