Are You Ready for RFID? - Page 2
Throwing Down the Gauntlet
Which company is responsible for the RFID rush? The answer may surprise you. It's not based in the world's technology capital, California, Washington, or even New York.
It's in Arkansas, the headquarters of retail giant Wal-Mart. While the front of the store is filled with grinning, blue-vested Wal-Mart employees greeting shoppers, out back in the storerooms and loading docks, the world's largest retailer is now using automated inventory with RFID — and is insisting that suppliers and IT vendors follow.
The company could spend up to $3 billion over the next few years in converting its internal tracking systems to RFID. But some analysts already feel it's worth it, figuring Wal-Mart could save up to $8 billion a year from the investment.
Wal-Mart recently told its top 100 suppliers they would have to feature RFID on all cases and pallets of goods delivered to Wal-Mart by 2005, with smaller suppliers getting an extra year to comply. Faced with banishment from thousands of stores, suppliers are scrambling to honor the mandate.
"Three or four months ago if you asked me if RFID was ready, I would have been very cautious," says Jamshed Dubash, who leads a 20-person RFID team at razor giant Gillette. "But this gauntlet that Wal-Mart has thrown down has made it very apparent that they're moving forward with this, and we have to [as well, in order] to share in the benefits."
Dubash reports Gillette will make Wal-Mart's deadline with its deployment. The company is currently piloting an RFID system in its 400,000-square-foot Northeast distribution center in Devens, Mass.
Gillette believes RFID will avert problems such as incomplete orders, misplaced products, and theft, which industry-wide costs up to an estimated $40 billion a year. And once the tracking reaches individual products, the information will help suppliers make better decisions about displays and inventory levels.
Proctor & Gamble has toured Gillette's warehouse to learn about RFID, an "unheard of" event for the two rivals. But like the Internet, the more suppliers and retailers that adopt RFID, the lower the implementation costs.
For example, the cost of tags has fallen from a few dollars per tag to about 10 cents per tag. Still, industry-watchers say the tags need to be around a penny each to make economic sense. Several companies are currently working on the transmitters, including Philips Semiconductor, Intermec, and a division of Tyco.
Outside the retail world, the federal government also sees RFID as a way of saving money. It is telling its suppliers to ready RFID systems as well.