Wal-Mart's RFID plan too aggressive for suppliers

Wal-Mart's intention to use RFID tags on products from its top 100 suppliers by 2005 is too aggressive and will lead to major...

Wal-Mart's intention to use RFID tags on products from its top 100 suppliers by 2005 is too aggressive and will lead to major problems for supply chain partners, analyst firm Meta Group said last week.

Although Meta said the electronic tagging technology offers "potentially significant advantages" in supply chain management, it warned of a number of obstacles that must be overcome before it will work smoothly.

"Wal-Mart's time-frame in attempting to get such a system up and running in less than two years is very aggressive," said Jack Gold, analyst for infrastructure strategies at Meta.

"Wal-Mart is shifting the implementation burden to its product suppliers and we believe that many suppliers do not have the necessary expertise to pull this off without major problems."

For example, Gold said, many packaging issues remain. "While pallet-level RFID presents minimal problems in most cases, tags on certain packages will be nearly impossible to read reliably."

The lack of available RFID tags and the eventual disposal of tagged goods could also prove problematic, Gold said.

"For Wal-Mart to meet its need, we estimate it to require one billion RFID chips every year, and many times that if other large retailers require RFID," he said.

"Furthermore, the additional assembly required - flexible circuits with built-in aerials - must also be manufactured. This causes problems, such as disposing of copper in landfill sites or recycling."

Wal-Mart and its suppliers will also have to consider the integration of RFID with supply chain systems, such as ERP and purchasing, as well as the complex process of implementing RFID reading equipment, Gold said.

"Suppliers of equipment will produce a variety of doorway and shelf-installed equipment, requiring a significant amount of installation at every site," he said.

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