Consumer goods companies' top tech projects have often served as harbingers of the next wave of must-have technologies. Enterprise-resource-planning and customer-relationship-management software, demand-planning, other supply-chain apps, and collaborative Web tools that link suppliers with buyers have been adopted first by this industry.

Consumer-goods companies this year once again embrace an innovative technology, though for now their time and attention are focused on the mechanics of implementation rather than the higher art of finessing it. Sixty percent of the consumer-goods companies on this year's InformationWeek 500 list are developing or testing radio-frequency identification tags. The technology's promise has caught the imagination of large companies such as Wal-Mart Stores Inc., which is requiring its top 100 suppliers to affix RFID tags on all the cases and pallets of goods they ship to the retailer by January. Target Corp., the U.S. Department of Defense, and others have similar mandates, hoping that RFID will help them track products as they move through the supply chain, providing up-to-the minute inventory details, triggering automatic replenishment, and ultimately generating more sales.

Imperial Sugar Co., with sales of $1.1 billion in 2003, already has begun the arduous task of planning to use RFID in its distribution centers so that it can meet customers' requirements. But the company's aggressive stance has more to do with VP and CIO George Muller's belief that RFID offers a way to outsmart competitors. "With RFID, the people that get there first will have a competitive advantage," Muller says. "And they'll be able to take costs out of their supply chains sooner."

The company, which is in the second tier of Wal-Mart suppliers that has until January 2006 to comply with the retailer's RFID mandate, has formed a team of about a half-dozen employees from all aspects of the business to evaluate a third-party provider to help with its initiative. Imperial Sugar spent two days in June in Bentonville, Ark., Wal-Mart's home, to learn more about the retailer's mandate and to meet with 65 vendors showcasing their RFID technologies. By March, Imperial Sugar, which also has to meet the RFID requirements of Target and Albertsons Inc., has to present a detailed RFID plan to Wal-Mart.

Muller has bigger designs that would take advantage of the fact that IT is a core competency of Imperial Sugar. He'd someday like to co-develop and co-market an RFID system with a third-party service provider that could hook into any back-office ERP system and provide visibility into any company's flow of inventory. "This is late-breaking news that I haven't really discussed with management," Muller says. "We can generate a nice revenue stream with some very attractive margins." Extra revenue would be welcome in the sugar industry, where, Muller says, margins are only about 3% to 3.5%. Plus, "this would give our IT employees an opportunity to expand their horizons," he says. "That could be a lot of fun."

The biggest challenge regarding RFID is to comply with business partners' requirements without breaking the bank, says Jeryl Wolfe, CIO and VP of global business solutions for McCormick & Co. Inc., which makes spices and sauces. "The technology isn't mature, not even close," he says. Whereas cost-effective use of RFID is predicated on the 5-cent tag, decent tags aren't available today for less than 20 cents. "The costs get scary as they scale," he says. McCormick also is a second-tier Wal-Mart supplier with a January 2006 RFID deadline.

RFID implementation cost estimates vary wildly, and much of it depends on how many tags will be required and whether the use of scanners and other associated tools will extend beyond the point that goods are loaded on trucks and moved to retailers. In a Forrester Research study earlier this year, which included interviews with 10 of Wal-Mart's top 100 suppliers as well as 25 tag and reader manufacturers, the research firm estimated that Wal-Mart's mandate could cost a supplier $9.1 million in startup and maintenance fees for one year. In some cases, the costs for consumer-goods companies won't pay off in the near term. To lower inventory, improve product tracking, and reduce theft, companies will need to tag much earlier in the process, Forrester says. That requires RFID throughout the supply chain, which could cost a company more than $100 million in capital outlay, the research firm says.

VF Corp., the world's largest apparel manufacturer with brands that include Lee and Wrangler Jeans and Vanity Fair lingerie, will spend several million dollars on RFID, an expense the $5.2 billion-a-year company can absorb more easily than a smaller manufacturer. So far, VF's initiative is coming in on budget. "We went into it with an expectation of what it would cost, and we've stuck to that," deputy CIO Joe Plaster says. VF is well on its way to hitting Wal-Mart's January deadline. The company already has selected its technology providers, among them Alien Technology Corp., a top supplier of RFID readers and tags. VF is kicking off pilots this month and plans to roll out RFID to its seven distribution centers by early December.

VF would like to see RFID costs come down, particularly so it could use tags on individual garments to make tracking inventory up and down its global supply chain easier, Plaster says. But current initiatives are giving RFID the shot in the arm it needs. "This is a first step to try and build on and leverage the technology," he says. "We're very excited about working with our partners, and we do see further opportunities down the road."

Black & Decker Corp., a global manufacturer of power tools, hardware, and other home-improvement products with sales last year of $4.5 billion, also is readying an RFID initiative. The company supplies to both Wal-Mart and Target, and Black & Decker "is very committed to meeting their requirements," VP of IT Jeffrey Coomer says. For now, though, the manufacturer is taking a minimalist's approach. "We're doing what people call slap and ship--we're putting RFID tags on at the point of distribution in our warehouses, and we'll have a fairly consolidated network shipping the tagged pallets to Wal-Mart from one or two of our distribution centers," Coomer says. RFID's promise is great, "but we're a ways from getting the full benefits on either side--the customer or supplier side," he says.