RFID Gazette

Computer World has a series of recent articles focusing on Wal-Mart's RFID efforts. First and foremost, Wal-Mart has shifted their efforts towards stores .

This shift is due to an acknowledgement that they've missed their own goal of installing RFID in at least 12 of its 137 distribution centers by last year. Second, despite the fact that many small Wal-Mart suppliers have had trouble finding an ROI (return on investment) in implementing RFID in their supply chain, Procter & Gamble has found .

Now, it should be pointed out that not only was P&G one of the first 100 Wal-Mart suppliers to implement RFID, they're also a giant company themselves. Their ROI in RFID can be realized in volume transactions - something small suppliers just cannot accomplish.

While it'd be nice to think/ hope otherwise, the evidence so far, plus statements from some smaller suppliers, suggests that compliance with Wal-Mart's RFID initiative is hurting them. Nevertheless, Wal-Mart is still promoting RFID adoption.

I doubt even a "little" thing such as supplier revolt will divert the steamroller known as Wal-Mart from pushing their RFID program forward. While suppliers probably aren't at the revolt stage yet, it does appear that they're not thrilled but afraid to criticize. And they have yet to find an ROI (return on investment), mainly because Wal-Mart declared last year that suppliers had to not only comply but had to find their own ROI. Wal-Mart wouldn't help.

That's a huge mistake, as far as I'm concerned. Instead of acting like a dictatorial government and holding threats of financial ruin over every supplier's head, they could have taking their integration sessions a bit further and nudged suppliers along with advice. Sure they're in business to make money. So charge for it then and stop being doofuses. I can't see Wal-Mart bartering, but you never know. For financially -strapped suppliers, Wal-Mart could consider product in exchange for some help finding ways to make RFID work for individual suppliers.

Ultimately, helping their suppliers find the ROI is a much wiser course of action that would help RFID take a better toehold in the supply chain. Not doing so suggests that Wal-Mart doesn't really care about anything but their bottom line - which is already the perception people in small towns have, where the retail giant has displaced mom and pop stores.

Imagine you are in a group of tired, chained beasts pulling a wagon and being whipped if you stop. That's what I imagine some suppliers to Wal-Mart, the US DoD (Dept of Defense), and other influential organizations may feel regarding RFID mandates. The latter organizations are seeing (or claiming) a high ROI (return on investment) on RFID implementation, the suppliers they have mandated to join the RFID club have not seen similar returns.

It's easy to say suppliers see no incentive for implementing the technology, but no doubt some of them feel that they might as well go out of business if they don't accomodate retail giants such as Wal-Mart. Wal-Mart has also indicated that, aside from helping prepare their suppliers to be compliant, companies have to find their own ROI in RFID. Which I think might be part of the problem of adoption.

As I haven't seen the balance sheets for any of these companies, I'm hypothesizing. Wal-Mart may have an "economies of scale" advantage over their suppliers in terms of cost of radio frequency technology. Though I'll admit I'm not sure whether Wal-Mart sources RFID technology for their suppliers, but I doubt it. That would mean, then, that suppliers pay higher prices for the same technology and likely cannot have the same type of ROI.

Even if Wal-Mart had a "Sam's Club" for RF tech for their suppliers, the latter are still at a disadvantage because implementing radio frequency technology cuts into heavily into the bottom line of smallest suppliers, who are already supply on slim margins for the bargain atmosphere of Wal-Mart. Where's the ROI in this scenario? Such a cost means bottlenecks in implementation.

Paul Faber of Industry Week gives a very nice explanation of a phenomenon called the network effect, where the value of a good or service increases in direct proportion to the number of people or companies using that good or service. For example, early email systems were only of value to those few researchers who had access. Now, email access is ubiquitous and valuable. Faber discusses how the network effect applies to RFID in retail, EPCglobal's EPC (Electronic Product Code), and container tracking.

The beauty of the EPC, aside from the fact that it's being promoted as a standard, is that it is designed for the sharing of information, collected by RFID readers, between organizations. So anyone in a particular supply chain that uses EPC could benefit from it. So while Wal-Mart's use of it is unfortunately relatively isolated, their mandate to introduce their suppliers to RFID and EPC should increase the value of its use to both them and the suppliers, especially beause Wal-Mart plans to share such data. However, at present, RFID in retail, Faber suggests, is not large enough yet to enjoy the positive side of the network effect, "[d]ue to the incomplete infrastructure of EPC RFID tools." Layoffs in companies such as Checkpoint Systems would bear that out.

With a predicted shortage in skilled workers for the RFID industry, the number of study programs in colleges and universities are growing. There are also companies like OTA Training, who offer both in-person workshops and classes, as well as e-learning programs. Then there's RFID Recruiters, a company that finds and places business and technical professionals with RFID knowledge/ skills.

They list some of the hot areas for career opportunties on their getting started page: supply chain project management, sales management, RFID tag product management/ marketing, tag design management, middleware business development, channel managers, pharmaceutical smart label sales, print-and-apply technicians. In their actual opportunities listings page, there are over 50 (at the time of writing) executive, sales and technical positions listed.

RFID Recruiters also suggests there will be a growing need for scientists and technicians, since there will be a need to design and test all the new RFID tags with sensor abilities - temperature, humidity, shock and vibration, light. And since the tags of the future will be "very small computers that happen to have a built-in wireless networking capability", there's a need for people with computer networking architecture and management skills. (A geeky aside: Star Trek-like "sensor" mesh networks might even be built in the future, with such RFID tags as the core component. And it'll take some incredible neural network programming skills to have them function correctly.)

Essentially, the whole RFID industry is waiting to boom. All it needs are more skilled workers. To those interested, RFID Recruiters suggests studying the Wal-Mart and DoD mandates, their suppliers, and the equipment/ middleware/ software providers to those suppliers - since Wal-Mart and DoD are driving some of the largest RFID projects.

Contradicting even their own reports of their own setbacks and that many vendors are lagging behind in implementing RFID in their supply chains, Wal-Mart has announced [Extreme RFID] that they will be increasing the number of their own stores using RFID to over 1,000, by Jan 2007. As a spokesperson put it, they are moving ahead aggressively. They've had to push suppliers in the past to start implementing RFID technology by announcing mandates and deadlines for compliance. But while I'm not big on their whole project in the first place, I have to give the retail juggernaut credit: they've persisted despite setbacks.

Wal-Mart is being sued for supposedly violating an RFID-based inventory control patent filed in 2002 by a company called RFID World. Also named in the suit are Gillette (now owned by Procter & Gamble), Michelin, Home Depot, Target, and Pfizer). Visit RFID Journal for more details of the suit.

Wal-Mart and Target are probably two of the largest retailers using RFID for inventory control and supply chain management. Conflicting media reports suggest that Wal-Mart has had some difficulties with their RFID rollout and might have scaled back their expectations, but they say they are moving ahead. Some of their suppliers are reluctant to use RFID because they have not perceived a reasonable ROI (return on investment). As a result, some suppliers have lagged behind expected milestones from Wal-Mart, causing the retailer to get heavy-handed and mandate the use of RFID by all suppliers.

While implementing the technology is often perceived as being expensive, one small manufacturer managed their initial RFID trial for around US$6,000, with just one employee. Part of the misperception might come from the confusion betweeen item-level tagging and pallet- and case-level tagging - the latter two of which are generally less costly than item-level tagging. However, with a lawsuit in progress, one which suggests that suppliers will also be in violation RFID World's patent if they comply with Wal-Mart's standard, it's possible that there will be more setbacks in Wal-Mart'sRFID rollout.

CPI To Make Wells Fargo Contactless Payment Cards
CPI Card Group will be making the cards for Wells Fargo Bank's Visa Contactless cards. [via Contactless News]

Swedish Miners Tracked With RFID For Safety
Miners working for Swedish mining company LKAB will be tracked with RFID for their safety. The Wtek wearable active RFID tags being used have a range of up to 100 meters. Scanners will be placed at a number of locations. [Ferret via RFID Blog] Wtek is involved in a number of projects that use RFID for safety. A number of other companies, such as AeroScout, are also exploring mine safety RFID applications.

RFID Volume Pricing Nonexistent?
In many industries, buying a company's product in bulk qualifies you for discount pricing. According to an eWeek article, that doesn't appear to be true for RFID. Quantity pricing of tags seems to be all over the place, depending on several factors including sector use, supplier, and country.

Last week, Wal-Mart's new CIO, Rollin Ford, talked about RFID at the NRFTech (National Retail Federation Tech) conference near San Diego. While less than 10% of their 6600+ worldwide stores are RFID-equipped, they do plan to continue with their RFID rollout. [via Extreme RFID]

This is despite all the little indicators that suggest that maybe their plans aren't going so well, primarily because their suppliers are lagging behind in implementing RFID due to the cost and the lack of incentive, from their point of view. (A Forrester Research report from 2004 says that the start-up cost is about $9M for the typical Wal-Mart supplier.)

Depending on which articles you look at, the RFID market will either booming next year or will be down in revenue. For example, ABI Research dropped its revenue projection for RFID software and services by 15 percent, for a variety of reasons, including less spending by consumers. Still, they expect that next year's RFID market to generate over $3 billion, with the greatest gains in asset management and supply chain management.

Another reason for the reduced forecast from ABI has to do with market consolidations and collaborative solutions. Who would've thunk it, that collaborating might be bad for the bottom line?

Then there's the issue of indefinitely delaying their IPO. At first, I thought that this had more to do with the state of the stock market, especially for tech stocks, than with the RFID industry. However, the rumors from company insiders suggest otherwise. In fact, jobs were supposedly cut.

Whether jobs are cut or increased will likely significantly depend on the RFID programs of large retailers such as Wal-Mart. Despite public claims that they're moving forward with the RFID program, there are some indications they've scaled back, primarily because suppliers have not themselves move forward. Wal-Mart's actual decision will probably have a ripple effect through the RFID industry.

Still, given the positive RFID trials in other countries, it's likely that these are probably short-term situations, and that the .