Suppliers' RFID fears must be addressed early

Retailers considering launching radio frequency identification tag initiatives must work on the assumption that their suppliers...

Retailers considering launching radio frequency identification tag initiatives must work on the assumption that their suppliers will be reluctant to embrace the technology, analyst firm GartnerG2 has advised.

They must also address consumer fears about privacy head-on, the analyst said.

Supermarket chain Tesco last month mandated that some products must be RFID-tagged by July 2004, following an announcement earlier last year by US retail giant Wal-Mart that all its suppliers must use RFID from 2005.

The influence and supply-chain capability of the two retailers mean they are well placed to address the degree of infrastructure and process change relating to RFID, GartnerG2 said.

However, less powerful retailers may struggle to shift their suppliers toward RFID compliance, warned Gill Mander, analyst at GartnerG2.

"To make RFID deployment as smooth as possible, retailers must assume considerable reluctance from suppliers," she said. "Tagging will impose large costs on suppliers, including investment in their own infrastructure."

Mander said RFID would only succeed if retailers signed up most of their suppliers. To achieve this, "Retailers must understand what their suppliers need to know and communicate clear roll-out plans, including details of specific technologies," she said.

In April, Tesco will announce which products must be tagged by the July 2004 deadline and which products must be tagged by September 2006. The company has said it will use the EPC (electronic product code) numbering system, class 1 tags and UHF band technology for pallets, cages, trays and cases.

Tesco has also attempted to defuse consumer worries, highlighted by the recent formation of a global alliance of 30 civil liberties groups, aimed at stopping RFID implementation until privacy guidelines are agreed.

Tesco refers to RFID tags in consumer-friendly terms as "radio barcodes" and has used its website to point out the benefits, such as improved stock levels and increased efficiency which, it claims, will lead to lower prices.

"Tesco is making a good start in addressing concerns, but retailers must understand which arguments customers will find most persuasive," said Mander.

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