Lack Of Cheap Tags No Reason To Ignore RFID

While much of the clamor around RFID has centered around a cry for the chip-equipped tags to come down in price to five cents each, that's short-sighted, a research firm said Wednesday.

“Five cent tags are a component to the overall success of RFID but they're not one of the top five most important elements,” said Erik Michielsen, a senior analyst with ABI Research who covers the RFID market.

“Without proper commitment, planning, and partnering, cheap RFID hardware is not sufficient to make a sustainable long-term difference with consumer packaged goods suppliers looking to benefit from RFID,” he added.

RFID (Radio Frequency IDentification) has been a hot topic in business circles mostly because of Wal-Mart's demand that its top 100 suppliers meet a Jan. 1, 2005 deadline to implement the technology on all products shipped to the mega-retailer.

But Michielsen sees the problem with RFID as a more complex, complicated one than just meeting Wal-Mart's deadline.

“Non-RFID compliance with Wal-Mart's Jan. 1, 2005 deadline is not a win-lose scenario,” he said. “RFID is not Y2K.”

Instead, companies need to look beyond the deadline, and beyond the brouhaha over cheap tags. “It's so much more complex than just five-cent tags,” Michielsen said. “Even if tags were just five cents apiece, companies couldn't order billions of them, nor are they ready with an infrastructure to support RFID.”

The RFID picture may be confusing -- “even companies like IBM are perplexed,” said Michielsen -- but if enterprises look at the big picture, and stay on top of the technology, they'll have a better chance of getting a return on their investment and keeping up with the corporate Joneses.

Businesses are still trying to figure out such mundane, but necessary, details as where to apply the RFID-equipped labels on pallets and products, said Michielsen, and haven't even built the industrial backbones -- conveyor belts in warehouses and distribution centers, for instance -- that are required to move products through the process.

“Companies have to take a dual approach,” he recommended. “They need to trial the technology, and then and scale up the trials.”

And they need to take a long-term approach to RFID to really see the benefit of this sea-change in supply chain technology. “Tags are now in the 35- to 40-cent range, so if I do a back of the book calculation, tag costs might be prohibitive. At that price they're not going to generate payback and a solid ROI. But companies need to take one of the team on this one. As the industry scales up, then tag costs will come down.”

Don't make excuses for not implementing RFID, Michielsen recommended, or you may reap what you've sown. “This technology is going to be around for a long time, and when all the pieces click together -- and they'll do that soon -- it will explode. You don't want to be left behind.”

Let the major consumer product suppliers -- the Krafts and Nabiscos of the world -- lead, just don't let them get too far ahead, he urged. At the same time, companies need to be cautious in how they approach this new form of distributed computing, where intelligence is out at the very edge of the corporate network.

“To ignore RFID is bad, to wait to implement RFID is bad. But to rush in isn't good, either.”

Confused? So is Michielsen. “This is confusing and complex,” he said. But he knows one thing. “To make it as simple as five-cent tags is missing the point.”