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Commentary: Three challenges for RFID

Retailers' mandates for adoption of radio frequency identification technology mean that suppliers have their work cut out for them.

Commentary: Three challenges for RFID
By Forrester Research
Special to CNET
March 10, 2004, 8:30 AM PT

By Christine Spivey Overby, senior analyst

Without new technologies that reduce the complexity and costs of compliance, manufacturers of consumer packaged goods can't meet the radio frequency identification mandates major retailers are rolling out.

Target's strategy for using radio frequency identification (RFID) technology, announced last month, calls for a broad application of case and pallet tagging over the next few years--echoing the mandates from Wal-Mart Stores, the U.S. Department of Defense, Tesco and Metro Group. Forrester believes that collectively, the mandates are necessary for spurring industry adoption. They prod RFID vendors to develop standardized technologies and force consumer goods suppliers to lay out an RFID road map.

But without significant technology innovation, suppliers can't meet schedules or capital investment requirements. In the end, the mandates are unattainable, unless RFID vendors solve three of the largest technology problems. Vendors must:

• Define rules for where to tag a case. Consumer goods suppliers like Clorox and Black & Decker need guidelines for tag orientation by product category--such as "place tag in upper-right corner of the case when it contains liquid products in round bottles." Industry rules will cut testing time and consulting costs.

Today, each supplier spends up to two days per product category to figure out how tags behave with specific products. RFID consultants--from the big players like Electronic Data Systems and IBM Global Services to boutiques like Traxus Technologies and Integrated Product Intelligence--must share what they learn early on with EPCglobal, which plans to release these rules by midyear.

• Deliver source-tagging infrastructure. Suppliers like Dow Chemical and Eastman Kodak need RFID infrastructure that works in high-speed production environments. The reason: Suppliers will only recoup compliance investments if they push RFID into manufacturing facilities--which would allow them to realize benefits like better inventory management across the distribution network.

For limited deployments, this will require integrated bar code/RFID printers and automated label applicators from vendors like Zebra Technologies

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and Checkpoint Systems. But ultimately, packaging vendors like Smurfit-Stone Container and International Paper must offer RFID tags embedded in case-packaging material.

• Provide better interfaces between readers and applications. Right now, suppliers need an additional layer of RFID middleware--from vendors like OATSystems, Savi Technology and ConnecTerra--to get the right data from readers and into applications like warehouse management. The drawback: added expense and integration overhead for overtaxed RFID compliance teams.

To buffer companies from this complexity, middleware vendors must first provide simple interfaces to allow administrators to program readers and then accelerate plans to bundle their software with back-end applications or integration products from companies like Tibco Software and WebMethods.

© 2004, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.