Users resist RFID hype

Despite speakers at the EPCglobal US conference talking up the benefits of radio frequency identification, many US companies are...

Despite speakers at the EPCglobal US conference talking up the benefits of radio frequency identification, many US companies are still waiting to see a clear reason to adopt RFID technology.

EPCglobal focuses on industry-driven standards for the electronic product code (EPC) to support RFID and conference speakers waxed lyrical on how RFID tagging could help companies track products, cut down on theft and reduce supply chain costs.

Scott McNealy, chairman and chief executive officer of Sun, turned up on video link to say that the concept of an EPCglobal network that securely connected products to manufacturers and retailers throughout the supply chain had graduated from futuristic concept to reality.

"We are able to go into the supply chain and do some very interesting things," McNealy said, as attendees got a demo of a web-based product-tracking system allowing manufacturers to ensure enough of their products were on retail shelves.

Steve David, chief information officer at Procter & Gamble, said the company was using RFID to distinguish genuine from counterfeit products and to identify and recall outdated products.

A trio of analysts told the EPCglobal crowd that many users were adopting RFID because they had to. Wal-Mart requires major suppliers of stores in Texas to use RFID chips on pallets and cases by January 2005. And the US Department of Defense plans to make suppliers use RFID tags by early 2005.

However, Reik Read, an analyst with Robert W Baird, said many companies trying to comply with such requirements were taking a "slap-and-ship" attitude to RFID by making minimal investments to meet the requirements.

And Bear Stearns analyst Philip Alling predicted few major RFID implementations in 2005 even though IBM and Hewlett-Packard have both announced multimillion-dollar investments in RFID.

Goldman Sachs analyst Sarah Friar added that although interest from chief information officers in RFID remained high, RFID hype at public companies seemed to be waning. "Talking about RFID is the easiest way to get on a CIO's agenda these days," she said. "This is something they think they should know about. We're at an interesting point in the hype cycle."

Friar said companies needed to make a good business case for switching to RFID from other tracking methods such as bar codes. "It's important if we want to find more return on investment," she said, "and not just because Wal-Mart says so."

Read said many companies saw cheaper bar-coding as an acceptable way to track products. "You can make the case that RFID is a better technology, but bar-coding is out there, it's proven, it's cheaper."

Mike Meranda, president of EPCglobal US, said RFID was already pervasive in some sectors, including the car industry, where many cars and most tyres had RFID chips, and the retail and pharmaceutical industries.

But conference organisers agreed that major RFID growth was still in the future.

"It's very difficult to build a strong business case when it's just for compliance," said Capgemini's Mal Postings. "RFID is in its infancy at the moment."

Grant Gross writes for IDG News Service

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