US retailer Target has confirmed that it will expect its top "supplier partners" to apply radio frequency identification tags to all pallets and cases they ship to unspecified "select" regional distribution centres beginning next spring.
All suppliers will be expected to comply by spring 2007, a company spokesperson said.
Industry analysts said they expected more retailers to issue RFID mandates in the coming months.
Wal-Mart Stores started the trend last year, asking its top 100 suppliers to begin tagging pallets and cases by the start of 2005 so it can better track goods through its supply chain. Tesco and Germany-based Metro Group followed suit, as did the US Department of Defence.
Kara Romanow, an analyst at AMR Research, said she expected most retailers to adopt the technology within six to 12 months of Wal-Mart in hopes that they will not fall too far behind.
But for suppliers, the mandates can be costly, with very little near-term benefit, said Christine Overby, an analyst at Forrester Research.
Forrester studied a number of the proposed benefits, such as shrinkage reduction, automated receipt of goods, truck yard management and more accurate shipping. But the reality of today's technology makes it unlikely that suppliers will gain many of those benefits over the next 12 to 24 months, she said.
"Every mandate broadens the implementation plans for suppliers, and those plans, even as they're currently defined, are nearly improbable today," Overby said.
Jeff Woods, an analyst at Gartner, said an RFID printer and the software to drive it may cost $100,000 to $200,000, but tags and labour costs can run into the millions. And so far, suppliers are finding no business case other than to satisfy Wal-Mart.
"They are pessimistic and very upset at this point," Woods said. "They just see it as a huge cost. So the effort is really just to minimise the cost."
Carol Sliwa writes for Computerworld