Wal-Mart's Rocky RFID Road
By Carlo Longino, Wed Jul 07 22:15:00 GMT 2004

The world's biggest retailer attracted a lot of attention when it announced plans to force its suppliers to start using RFID tags, but things don't seem to be running too smoothly.

eWeek's got a report from the Dallas-Fort Worth area, where Wal-Mart is testing 21 tagged products from eight suppliers at a distribution center and area stores. The company says the trials are a success, but analysts question how they're being judged.

The company won't disclose read rates, the percentage of tags accurately being read, but tests by Sun Microsystems, which is working with two suppliers, aren't encouraging: an early test on a pallet of trash bags showed a 53% chance of every tag being read, and the lab only got to 100% on Goodyear tires after weeks of trial and error.

Different products need different tags and different size antennas, as certain materials can block and interfere with radio waves. The tires contain both oil and steel, which can block signals, and tag location or even the plastic wrap around pallets can hurt too. The tires only got 100 percent by securing tags to the outside of the tires with blue masking tape, then running them through two separate sets of readers. Suppliers are already having to spend a lot of time to devise solutions; if applying the tag becomes a labor-intensive task, it could eat up any potential savings an RFID system might create.

Wal-Mart's plans may turn out to be overly ambitious. The company's top 100 suppliers are supposed to have their products tagged, along with 37 other volunteering companies, by January. But Wal-Mart's RFID manager now says not every product will be tagged, making this little more than a distributed-cost pilot that might slowly prod the consumer-goods industry along.

Wal-Mart is notorious for squeezing every last penny out of its suppliers, and its sheer size forces most companies to go along. But for many suppliers, the cost of adding RFID tags to their goods and RFID equipment into their processes may be too much to bear. After all, Wal-Mart specializes in low-cost, low-margin, high-volume goods, and prides itself on trimming fat from costs -- so why would it add costs with little apparent gain?

Logistics vanguards FedEx and UPS are moving into RFID much more slowly. A FedEx exec said in April the company was sticking with its barcodes for tracking packages, though it does use RFID to track equipment and for keyless entry. "We haven't yet found that magical, postive thing that will have us jump in," FedEx VP Sherry Aaholm told InformationWeek. UPS is also tinkering with the technology, testing it to track some equipment and delivery trucks at one location, but doesn't appear to be close to replacing barcodes with RFID.

Does Wal-Mart know something about RFID that these two leaders don't?