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When asked where they would go for help in launching an RFID program, 30% of retail suppliers said “I don’t know,” says analyst Tom Ryan, author of a new Aberdeen Group report.
When asked where they would go for help in launching an RFID program, 30% of retail suppliers said “I don’t know,” says analyst Tom Ryan, author of a new Aberdeen Group report, “RFID in the Consumer Industries Benchmark Report.”
“One of the more surprising aspects of this study was that many suppliers were clueless about who to partner with for RFID,” Ryan tells Internet Retailer. In addition, he adds, many suppliers are adopting a strategy of holding back on investing in RFID, or radio frequency identification, until the technology is further proven in the retail industry through pilots conducted by Wal-Mart Stores Inc. and others. In its pilot programs, for instance, Wal-Mart is learning about the limitations of using RFID tags with containers of metal and liquid shipments, since radio frequencies do not travel well through metal and liquids.
But holding off on investing in RFID raises the risk of falling too far behind with a technology designed to make its users more efficient in delivering goods throughout the supply chain, Ryan says. “In most situations, holding back on a new technology is not a bad call,” he says. “But in this situation, it is a bad call. There’s not enough time to wait for others to solve the technology’s problems, so waiting is eating up their time to comply.”
Wal-Mart and the Department of Defense are running large-scale pilots of RFID, which uses a network of radio frequency tags and readers to track shipments. Tracking information will be made accessible to suppliers as well as retailers over the Internet, allowing them to better respond to any disruptions in the flow of goods.
Ryan says that Wal-Mart should have no trouble getting compliance with its January, 2005, deadline for all of its top 100 suppliers to begin shipping RFID-tagged containers and pallets. Indeed, Wal-Mart says that more than 130 suppliers--its 100 largest plus 30 others--expect to meet that deadline.
The problem, Ryan adds, will come a year later, when Wal-Mart expects more of its some 25,000 suppliers to also ship RFID-tagged pallets and containers. “That’s the other piece of the story, and these other suppliers don’t have time to spend waiting to learn about RFID,” he says. Wal-Mart says it has not yet determined how many of its suppliers will need to comply by January 2006.
The void in RFID knowledge among suppliers is opening up a broad market opportunity for third-party logistics providers to offer RFID implementation services along with shipping services, since they’re in a position to offer turnkey programs, Ryan says.