An efficient supply chain is more important than ever in the automotive sector, where some manufacturers are struggling just to stay in business. Yet it'll be at least several years before one of the most promising supply chain technologies--radio frequency identification--makes a big dent in this multitrillion-dollar extended industry.

There have been baby steps. Nissan, for example, last week said it will use active RFID tags from WhereNet in a Mississippi plant that makes Altima sedans, Infiniti SUVs, and Quest minivans. As vehicles come off the assembly line, they'll get tags that store information about testing, repairs, inspections, and destination. The tags will be removed before the cars are shipped to dealers.

The tags are "active" in that they're battery-powered and don't require a close-range reader; they can be read by antennas hundreds of feet away. Trailers carrying components and equipment will have tags containing information such as contents and arrival time when they enter Nissan's yard. This data will be transmitted wirelessly to a management application that automatically generates instructions, such as notifying a worker to transport materials from a trailer to a specific dock area. Among WhereNet's other customers are BMW, Ford, General Motors, and Toyota.

Still, at $30 a tag, active RFID isn't ubiquitous in the auto industry, where it's used mainly to track high-value objects or reusable containers. In Nissan's Mississippi plant, those are cars and equipment trailers.

By comparison, retailers are years ahead of the automakers, as they use mostly passive tags for collaborative supply chain functions such as inventory management. One reason is Wal-Mart: a very large, influential customer that requires suppliers to get on board with the technology. While the auto industry has plenty of big players, none has set an RFID mandate.

The auto industry's concerns aren't surprising: cost, return on investment, and lack of standards, according to a study by AMR Research and the Automotive Industry Action Group. While 75% of survey respondents report problems with supply chain processes and tracking capabilities, 41% have no plans to deploy RFID.

	Tags on vehicles rolling off the line will store testing, repair, inspection, and destination data Photo by Rogello V. Solis/AP

Yet as the industry evolves from mass to custom vehicle production and focuses even more on just-in-time assembly and quality control, it will need the type of information RFID can provide, says AMR analyst Kevin Reale.

General Motors is using active RFID to store job information--the data on what needs to go into a vehicle in production--and is using passive RFID to marry a vehicle identification number and body style to a pallet. But wider industry use of RFID "is not a good fit right now," says Kirk Gutmann, process information officer for manufacturing and quality at GM. The bar-code technology now used is about a tenth the cost of passive RFID tags, Gutmann notes.

Cost isn't the only issue. Pallets of electronic parts can create interference, making it difficult for a reader to gather accurate information, he says. Metals and chemicals used in auto manufacturing also disrupt signal transmissions and equipment placement.

Still, Gutmann says there's a lot of potential for passive RFID. That includes tagging parts that go deep inside a car, so that information about them could later be easily picked up with a reader, or tagging parts with information that an auto dealer's service desk could then use to find replacements. "Costs will come down, and readability rates will get better," he says.

AMR Research pegs 2010 as the year when RFID starts to take off in the auto supply chain. Thirty years ago, analyst Reale says, "the bar code went through this same phase of precautionary optimism." For at least three more years, expect the same for auto RFID.