Most Wal-Mart suppliers can't yet tag products at manufacturing facilities there
Ed Matthews, director of information systems at bicycle maker Pacific Cycle LLC, had hoped Wal-Mart Stores Inc. executives would discuss using radio-frequency identification technology at manufacturing sites in China at the retailers' RFID summit last week. It didn't happen. Wal-Mart instead said that it will have RFID deployments live at about a dozen more distribution centers and as many as 600 Wal-Mart and Sam's Club stores by October 2005.
Between 50% and 70% of nonfood products shipped to Wal-Mart are made in China, analysts say. As the retailer deploys passive RFID technology in more distribution centers and stores, some of its suppliers are increasingly eager to take advantage of efficiencies and lower costs that could come from tagging pallets and cases at offshore plants. Pacific Cycle, whose iconic brands are Schwinn, GT, and Mongoose, has invested about $50,000 in RFID to date and has budgeted $1 million for 2005, not including tags. "If we're going to spend all this money to help Wal-Mart, we want to figure out how in the heck to use RFID to improve our supply chain at Pacific Cycle," he says. "One way is to put the RFID tag on the boxes at the manufacturing facility, and ship more product to customers from the manufacturer's site in China." Tagging cartons once they arrive in the United States adds about an hour and a half to preparing each truckload shipment, Matthews says.
Adding RFID tags at the manufacturing sites in China would improve Pacific Cycle's supply chain, IS director Matthews says.
Photo by Al Gartzke/Getty Images
The problem is China lacks RFID standards and open frequencies to transmit signals from tags to RFID readers. A working group set up earlier this year by the Chinese government will define RFID protocols for the country. China's State Regulatory Radio Commission plans in August to open UHF 868 for passive RFID transmissions, but that may not happen till year's end.
What's needed now is a tag that will transmit a signal across a range of frequencies to conform to local regulations, says Fraser Jennings, VP of standards and regulatory activities at RFID tag maker Savi Technology Inc.EPCglobal, which is leading the development of industry standards for the Electronic Product Code Network to support the use of RFID, is reviewing proposals for the UHF Gen 2 passive RFID standard to operate in the band between 860 MHz and 960 MHz. The Gen 2 specification is scheduled for publication later this year. Significant changes, however, could make the Gen 2 standards incompatible with EPC Class 0 and Class 1 tags used in the United States, though those backing the proposals are assuring backward compatibility. At least one company, ThingMagic LLC, says its Mercury 4 RFID reader will be able to support any tag and multiple frequencies.
Meanwhile, approval by the Chinese government to test RFID is being granted on a case-by-case basis. Hewlett-Packard, which makes many consumer products in China, is applying to the Chinese government for a temporary license to use RFID at its manufacturing facilities there. It expects by year's end to tag cases and pallets of notebooks, printers, and scanners, some of which ship to Wal-Mart's RFID-enabled Texas distribution center, says Ian Robertson, director of HP's RFID program.
"There are large orders that go direct from HP's manufacturing facility in China to Wal-Mart's distribution centers," Robertson says. "Unless you're going to interrupt the flow of goods, tagging at the manufacturing facility is the only place to do it."
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