What to do while waiting for RFID to pay off

The moment a technology transforms from a novelty item into a common, everyday tool usually arrives without notice.

Take the mobile phone. Not only are people talking on them everywhere you go, but a sizeable portion of the world's population now uses mobile phones in lieu of laptop computers, wristwatches, alarm clocks, cameras, and pocket change.

The people who make RFID tags must be envious. For much of the past decade, RFID has been touted as the eventual replacement for bar codes. Yet despite its ability to store more information than bar codes, RFID still struggles to gain mainstream status. It appeared well on its way several years ago when Wal-Mart issued its famous mandate, requiring its largest suppliers to place RFID tags on items delivered to certain Wal-Mart distribution centers. But if you believe what you read in the newspapers—specifically The Wall Street Journal—even Wal-Mart's enthusiasm for RFID may be waning.

Wal-Mart's original schedule called for 12 of its 120 distribution centers to be receiving RFID-tagged products by January 2006. So far, according to the Journal, only five of the retailer's warehouses have been outfitted with RFID equipment.

Wal-Mart declined to speak with the Journal about the pace of its RFID program. A spokesman did say, via email, that placing tags on product cases has made store managers more efficient at replenishing inventories. He also said Wal-Mart expects its expanded use of RFID to “build on those results.”

Meanwhile, several Wal-Mart suppliers complained to the Journal about spending $200,000 or more per year to support RFID infrastructures that were showing no return on the investment. None of this should surprise regular readers of Manufacturing Business Technology. We reported more than two years ago that manufacturers would have to be inventive to find ways of benefiting from RFID. A manufacturing executive we spoke with in the fall of 2004 was one of the few to speak positively about RFID in general—and Wal-Mart's program specifically—to the Journal.

Howard Stockdale is CIO of Beaver Street Fisheries, a Jacksonville, Fla.-based distributor of frozen seafood that volunteered to be among the first Wal-Mart suppliers to put RFID tags on its products. In our 2004 interview, Stockdale said Beaver Street became an early adopter to get a head start on figuring out how RFID could pay dividends beyond making one of its largest customers happy.

“We aren't even trying to convince ourselves that we can get immediate ROI,” Stockdale said at the time. “The ROI will come from being in position to take advantage of the technology when it comes into widespread use.”

While that still hasn't happened, we were able to report last month that some manufacturers are indeed discovering valuable internal uses for the technology. Industry analysts believe technology vendors—particularly software suppliers—should be doing more to help manufacturers wring value from RFID.

Manufacturers have little choice but to continue exploring the use of RFID because large retailers like Wal-Mart are not going to abandon the technology, regardless of what you may read in various media outlets.

So if you haven't done so already, you might want to start talking with your enterprise software suppliers about their plans for accommodating RFID. It may not pay immediate dividends, but it could prevent you from being hopelessly behind when RFID finally becomes a mainstream technology.