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RFID promises to improve on-shelf availability and reduce inventory levels for retailers by allowing goods to be electronically tracked as they progress along the supply chain.
For manufacturers, the high level of investment required and the absence of immediate returns are disincentives to RFID spending, said Paul Roberts, business technology manager at Nestlé UK. "The benefits are more easily realisable by the retailers than by ourselves, as we have good barcode systems in place that satisfy our requirements," he said.
Earlier this year European retail chains Tesco and Metro Group joined US giant Wal-Mart in mandating that all cases being delivered into their stores would have to be RFID tagged by the end of 2004 or 2005.
"Given the adoption requirements, the level of cost [for manufacturers] could be quite large," said Roberts. "If we are going to spend that money, we want to see what benefits we can get out of it, but we do not know what these are yet."
Roberts said Tesco's announcement "caught everyone on the hop", although he admitted that it was inevitable that a European retailer would make some commitment to RFID following Wal-Mart's mandate in 2003.
Collaboration between retailers and suppliers is essential, said Rob Garf, research analyst at AMR, but he warned manufacturers not to expect quick returns on RFID investments."The success of RFID is predicated on the willingness of manufacturers to tag products," he said. "However, the return on investment is not being seen today - it is a future issue."
One key forum for co-operation between retailers and their suppliers is EPC Global, the main RFID standards body, which is driving towards a single, worldwide standard for RFID technology.