Radio Frequency Identification (RFID) is a hot topic today due to the announcement made in June by Wal-Mart that they would require their top 100 suppliers to provide RFID tags on pallets and cases by January 1, 2005, and extend this requirement to all suppliers by 2006. That has sent many CPG executives scurrying for information on what RFID is all about and what it might mean for their organizations. Other industries are showing great interest as well.
Unfortunately, much of the hype in the marketplace about the transformational effects and huge potential benefits of RFID technology has been put out there by those with something to sell. The reality is that the technology is still very immature and costly for most applications, with a lack of generally accepted standards. The ROI for RFID deployment has not been proven yet, making the large investments required even more risky. Widespread usage and the attendant benefits are still years away.
However, there is little doubt that RFID will have a major impact on supply chain operations over the next few years. Research firm Gartner, Inc. states: "The use of RFID to capitalize on data flow in global supply chains could be one of the most-significant developments since enterprises first explicitly recognized the importance of information flow in the supply chain." Likewise, AMR Research predicts that RFID will be a $20 billion market by 2013.
So how should companies reconcile Wal-Mart's demands and the long-term benefits of RFID with the current risks and limitations of the technology? This paper will address these issues and provide a phased implementation roadmap that is more consistent with current requirements and technology. It will examine briefly the history of RFID technology, discuss the potential benefits as well as the significant challenges for its adoption, review the various types of tag and reader technologies and their uses, and then provide recommendations on implementation strategies that make sense today.
While there is no question that RFID will transform supply chain management over the next ten years, the impact, costs and results will vary considerably between industries and companies. Despite the current hype and retail pressures, therefore, RedPrairie believes that RFID should be viewed as a long term investment that must be closely examined to determine the appropriate technology, processes, and timelines best suited for each company based on their expected requirements, benefits and ROI. However, it is also clear that companies must start investing today if they are to remain competitive as the supply chain industry transforms.