RFID: No such thing as low risk

- Last updated on GMT

Related tags: Rfid, Wal-mart

A research analyst claims that no RFID service provider can be
considered low risk' due to the general lack of experience in this
early stage of development of the technology - plant operators
beware.

The analysis from AMR Research also cautions that consumer product companies will incur greater risk if they view RFID implementations as short-term compliance issues and not long-term strategies.

The findings are part of AMR Research's newly launched Risk Assessment Profile (RAP), an analytical tool that compiles quantitative and qualitative information to interpret risk associated with purchasing RFID technology.

The market research firm said that RAP is the first comprehensive analysis of the RFID implementation service providers for consumer product manufacturers. The report examines the top thirteen service providers' expertise in RFID projects and assigns each company a risk score.

"As consumer goods companies enter the final hour to comply with retailer-issued RFID mandates, there will be an all-out scramble to find the best partner,"​ said Kara Romanow, research director at AMR Research. "Although some service providers have more hands-on deployment experience, others have deeper, more complex project skills.

"Companies evaluating RFID partners will have to weigh their priorities - a quick compliance fix versus a long-term strategic approach - and choose accordingly."

AMR​ says that consumer product manufacturers, including food and drink producers, will spend $500 million in 2004 on implementation projects, and this spending is forecasted to grow fivefold to $2.6 billion by 2008. Service providers stand to profit greatly from this adoption of RFID technology by consumer products manufacturers, with top firms claiming over 90 per cent of these implementation projects.

Each of the service providers was evaluated based on four service attributes: domain expertise, delivery expertise, referenceability, and internationalisation of offering, as well as four company attributes: business strategy, financial strength, customer practices, and company-wide international capabilities. AMR said that leaders like IBM and Accenture demonstrated capabilities that scale because both staked claims in RFID early on and became involved with more complex projects with larger consumer products companies.

Major retailers, a key driver in the proliferation of the technology, have claimed to be satisfied so far with RFID implementation. Wal-Mart, which has just begun its initial roll-out of electronic product codes (EPCs) in select distribution warehouses and stores, believes that the concept will be a long-term success.

"To date, no glitches - only positive glimpses of what's to come,"​ said Linda Dillman, executive vice president and CIO for Wal-Mart Stores. "During this test phase, we're experimenting with various tag types and tag placements to see how they impact readability on various products in a non-laboratory environment.

"We want to make this information available to our suppliers early on so that they can incorporate it into their efforts to meet the readability goals we've established."

Wal-Mart is hoping to achieve 100 per cent readability of pallets at dock doors and 100 per cent readability of cases at its distribution centre conveyor systems. The initial implementation, launched 30 April, saw cases and pallets of 21 products from eight suppliers being shipped to Wal-Mart's distribution centres and then onward to seven local Supercentres with radio frequency identification, or RFID, tags attached.

Wal-Mart initially announced its EPC initiative in June 2003. At the time, the company stated that the first phase of implementation would involve its top 100 suppliers tagging cases and pallets of products headed to three Dallas/Fort Worth area distribution centres by January 2005. Since then, an additional 37 suppliers have voluntarily asked to meet that same milestone.

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