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Polarized Response to RFID Mandates

Evidence of an increasingly polarized approach to RFID is apparent as some manufacturers pursue competitive advantage through strategic use of EPC data while others remain motivated solely by compliance.
Aug 29, 2005This article was originally published by RFID Update.

August 29, 2005—The first round of retail suppliers required to tag cases and pallets for Wal-Mart are now, for the most part, two-thirds of the way through their first year of this "experience." Even within this short time frame, evidence of an increasingly polarized approach to RFID is apparent as some manufacturers pursue competitive advantage through strategic use of EPC data while others remain motivated solely by compliance. Current and planned integration of both inbound and outbound case data is a primary determinant of which manufacturers fall into which category, as is continued wrangling with physical layer issues versus pursuit of the higher-order benefits associated with supply chain data integration. At the same time, a significant amount of case tag data is accumulating in off-line data warehouses as suppliers in both categories continue to grapple with process, technology, architecture, personnel, suppliers, and other strategies in the early light of the EPC landscape.

Comparison of retail supplier sentiments expressed in ARC's early 2005 interviews and those conducted just recently confirm the soft investment environment experienced by most EPC hardware and software suppliers. Manufacturer investment in EPC RFID infrastructure is being delayed by the ongoing effort to apply or integrate existing investments. Many are similarly reticent to invest in existing technology given that Gen 2-compatible tags and infrastructure are in their future. The majority appear to be forgoing major hardware infrastructure purchases and will continue in largely pilot mode for the near-term.

A number of manufacturers are already on to their second or third suppliers of tags, readers, and/or printers due to a variety of problems with the initial products they purchased. These early difficulties are understandable given that many of the first products were selected by default. A sampling of early infrastructure supplier selection criteria includes: because Wal-Mart was using it; it was offered by the tag or existing Auto ID vendor; and/or was recommended by an outside system integrator. Many also report recent resolution of a variety of print-and-apply issues. These ranged from coordination issues between inlay, label, and printer providers to labels not feeding properly or lack of compatibility with middleware.

Some retail suppliers report continued debate about the optimal tagging process and associated hardware and software architecture. For example, ubiquitous, truly passive RFID strategies inherently involve use of dock door and similar infrastructure portals. A number of suppliers are reconsidering this strategy and focusing instead on centralized read stations in load staging areas, at stretch wrappers, etc. If we assume a reader portal costs $10,000, this centralized approach can represent a significant cost savings because only 1 or 2 portals are needed at a central station versus 20 or more to outfit all of the dock doors.

Then there is the issue of how case tag data is being treated by manufacturers. ARC's most recent survey found that a significant amount of the data from product tagged this year is sitting in data warehouses and, so far, not being analyzed or compared to data fed back from the trade. Manufacturer complaints about lack of ROI from EPC investments often relate to the limited value of outbound case tag data, particularly in this age of sophisticated barcode and Auto ID tracking systems. In order to drive truly demand-driven manufacturing, this outbound case tag data must be integrated with the inbound data coming back from the retailer. This is the holy grail of EPC-driven supply chain integration, one that many manufacturers appreciate and to which some potentially aspire. It also represents a higher level of EPC-driven supply chain actualization that will increasingly distance the leaders in the retail supply base from the rest of the pack.
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