Wal-Mart Stores is working with its top 100 suppliers to
deploy radio frequency identification (RFID) tags for tracking
crates and pallets in its supply chain beginning January
2005.
RFID uses low-powered radio transmitters to read data stored in
tags, at distances ranging from 1in to 100ft.
The tags are used instead of bar codes and can contain a lot
more data, allowing manufacturers, suppliers and retailers to track
and manage assets more efficiently.
Wal-Mart's decision to ask its suppliers to support RFID tags
could lead to a faster adoption of the technology and a common
standard around it, according to Kevin Ashton, executive director
of MIT's Auto-ID Centre.
The Auto-ID Centre is working with the Uniform Code Council to
develop a standard electronic product code (EPC) for carrying
information on RFID tags. The centre's sponsors include companies
such as Wal-Mart, Gillette and Procter & Gamble.
"Everybody is looking for clarity on this technology and its
future," Ashton said.
"The fact that the largest retail company in the world is
publicly adopting EPC open standards should give companies
confidence that the day of a single, interoperable RFID system is
close at hand."
By asking its top 100 suppliers to support RFID technology,
Wal-Mart hopes to improve inventory management and gain better
visibility into the supply chain, said Pam Kohn, vice-president of
the company's global supply chain operations.
Although RFID tags can be used to gather and track a variety of
product-related data, Wal-Mart's initial effort will be narrow,
focusing mainly on better inventory management.
Deploying RFID tags at the pallet and crate level with its top
100 suppliers will involve about one billion tags, Kohn said.
Scaling up to meet Wal-Mart's RFID requirements will prove a
"major challenge" for the RFID industry, according to Bill Allen,
marketing communications director for the RFID division of Texas
Instruments.
Texas Instruments has alreadly shipped 200 million RFID tags to
date.
Meeting Wal-Mart's price of five cents per tag could be another
hurdle, Allen said, since they now sell in the range of 30 cents to
50 cents. Allen said only economies of scale could drive the price
down further, and Wal-Mart's plans certainly meet the volume
requirements.
But neither Texas Instruments nor the Philips semiconductor
division of Philips Electronics, the other large RFID chip
manufacturer, has the capacity to meet Wal-Mart's requirements
right now.
The lack of capacity could mean Texas Instruments would have to
build new semiconductor fabrication facility which could cost more
than $1bn (£600m) to build.
Gary Robertson, executive director of global infrastructure at
Delphi, a vehicle electronics manufacturer which uses RFID
technology in its manufacturing operations, said Wal-Mart's
decision to use RFID in its supply chain "will legitimise [the
technology] and push it into the mainstream."
Wal-Mart's move to adopt RFID comes at a time when a growing
number of companies are considering the technology.
Marks & Spencer has just completed a rollout of RFID
technology in its food supply chain. The project involved the
deployment of 13.5-MHz RFID tags on 3.5 million plastic trays used
for shipping food.
The company started testing RFID in its supply chain in 2002 and
has subjected the tags to a variety of temperature, moisture and
read-distance tests before deploying them. Eventually, they will
help improve accurate item tracking, visibility and availability in
the supply chain.
Kraft Foods North America is also looking at the possibility of
using RFID in its supply chain.
Jaikumar Vijayan and Bob Brewin write for
Computerworld