RFID: benefits and challenges abound.

Position::AWA Conference

The enormous push that Wal-Mart gave to the future of radio frequency identification (RFID) in the summer of 2003 has begun a process that will radically change the way products are manufactured, stored, shipped, sold and consumed. Wal-Mart announced that by 2005 its top 100 retailers will be required to implement RFID at the pallet and case level for all of their products, thus streamlining the management of the supply chain. The declaration has sent many industries into a spin, and has given rise to several conferences aimed at exploring and explaining this complex subject. In November, AWA Alexander Watson Associates, a Netherlands-based research company, produced a two-day program to explore RFID as well as other methods of product authentication and brand security.

The conference, which was attended by about 50 people, was held in the Hilton Washington Dulles Airport Hotel, in Herndon, VA. No label converters attended.

The high point of the conference was a presentation by K.C. Kendall, Procter & Gamble's director of global snacks and beverages purchases. P&G, one of the suppliers that will be affected by Wal-Mart's decision, has been active in exploring the future use of RFID.

Costs and benefits

"Who will ultimately pay for RFID?" he asked. "Not the retailer. The supplier? Hardly. The consumer? Probably, unless they rebel. And they also might get their privacy invaded." Right now, P&G is conducting tests of the EPC--the electronic product, code--the smart tag that will be affixed to pallets and cases in the near future, and to individual products beyond that. "EPC must 'pay its own way'," he said. "Who gets the benefits, versus who pays the costs? It is not clear whether the costs and the benefits occur at the same place, nor whether the benefits come more to the retailer and the costs to the supplier. We have to see EPC testing done to the same degree of rigor that we put our products through. So we are testing EPC."

The cost of one EPC tag is a factor that enters into every discussion of RFID. Industry experts look forward to the eventual arrival of the five-cent tag (Right now the lowest is 10 cents.). Kendall says companies such as his are hoping for an "ultimate cost of less than one cent each."

There's more to the cost of RFID than the tags. All companies involved in the supply chain of any product will require tag readers and the hardware and software to support the electronic management of goods in transit. "Who knows how much...

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