Frankly Speaking: Don’t Pay Attention to Computerworld

An article published on the media company's Web site badly misinforms people about radio frequency identification and Wal-Mart's RFID efforts.
Published: June 5, 2008

The radio frequency identification industry has not done a good job of explaining the Electronic Product Code (EPC) standards being adopted by some companies, such as Wal-Mart in the United States and Metro Group in Germany. But that doesn’t really excuse the terrible misinformation put out today by Computerworld.

An article by Frank Hayes, entitled “Frankly Speaking: Why Wal-Mart’s RFID push is failing,” argues that most Sam’s Club suppliers will pay the $2 per-pallet charge for non-compliance rather than adopt RFID because “RFID tags may be standardized, but that’s not true of the software that supports using them for warehousing and inventory management. That software may nominally meet formal standards, but it won’t interoperate with any competitor’s software.”

Hayes goes on to write: “So when a big customer like Wal-Mart goes with Vendor X’s system, all of Wal-Mart’s suppliers have to buy software from Vendor X too. They can’t buy from another vendor or roll their own, because it must be certified by Vendor X before it can talk to Wal-Mart’s software. The suppliers are a captive market. And when Target goes with Vendor Y, and Sears goes with Vendor Z, the number of RFID systems required for captive suppliers just keeps going up—at monopoly prices. No wonder $2 a pallet sounds like a bargain.”

I’m going to ignore the erroneous assumption about Wal-Mart’s efforts failing and get to the meat of his argument, which is completely wrong. If a retailer opts to become an EPCglobal subscriber and use EPC standards, then data is shared in a standardized XML format. If the supplier sets up an EPC Information Service (EPCIS) database, all EPC information related to that supplier’s products sent back by Wal-Mart can go into the EPCIS and be used by promotions management, replenishment, electronic proof of delivery and other software applications from companies such as OATSystems and Retail Solutions.

Moreover, it’s not that difficult to integrate EPCIS data into existing enterprise applications from SAP, Oracle and other major software companies because the data is in XML, which is already widely used. And middleware from such companies as Microsoft and GlobeRanger enables companies to take that XML data and distribute it to existing applications or new applications. SAP also has a middleware product called Auto ID Infrastructure (AII), that will distribute data to SAP enterprise applications.

In fact, the biggest argument in favor of using EPC technology is not the standardization of the tags, but rather the standardization of the data. Today, retailers share point-of-sale (POS) data with suppliers in proprietary formats and over a variety of networks (EDI, AS2 and so forth). So suppliers getting POS data back from partners have a difficult time analyzing the information across all of their customers, and most don’t bother because it’s too much work.

EPC enables retailers to share far more than just POS data—Wal-Mart already shares information with partners regarding where tagged goods are in its supply chain—and promises to provide it in a standardized format for all retailers that adopt EPC standards. That means a supplier to Wal-Mart, Target, Albertson’s and Sears can put all of the information into one EPCIS database or linked databases, analyze it and produce what’s needed based on a holistic view of demand across all their retail customers.

Data standardization will make adoption of EPC technologies attractive to suppliers if more retailers jump on board. It’s also worth pointing out that Sam’s Club is charging $2 per pallet, but is quickly moving to case-level adoption. The company has not yet indicated how much it might charge if companies don’t tag cases, but even if it’s 25 cents, that would make it highly uneconomical to resist tagging.