RFID Warning For Wal-Mart Suppliers

Wal-Mart suppliers racing to meet the retailer's mandate for using radio-frequency technology to track goods starting in 2005 were warned Friday that not all vendors of the technology will be ready to meet Wal-Mart's requirements.

Among the hurdles faced by vendors of radio-frequency identification (RFID) technology will be ramping up production of tags used to track cases and pallets by up to five times current levels, market research firm Allied Business Intelligence Inc. said. At the same time, the tags will need an accuracy rate of 99.9% or better.

Wal-Mart's plans to adopt the technology within its supply chain, along with similar plans by the U.S. Department of Defense and United Kingdom-based retailer Tesco, will help drive revenue from RFID technology to $3.1 billion in 2008 from $1.15 billion in 2002, ABI said in a recent report.

Such a prize has spurred dozens of companies to market readers, tags and software capable of helping suppliers meet Wal-Mart's mandate.

"However, it's important to look at how their past can translate into future success for meeting Wal-Mart's standards," ABI analyst Ed Rerisi said. "There's a lot of companies out there that believe that their histories uniquely position them for success with Wal-Mart, but the reality is their past success has nothing to do with Wal-Mart. They'll never be able to ride that gravy train, even though they're trying to."

Among the factors suppliers need to look for in evaluating vendors is the success of their customer installations in retail, the number of RFID tags they have deployed and for what applications, the number of patents they have for RFID technology, and the quality of their production facilities and whether they can meet expected demand.

No single vendor is expected to meet all of a supplier's needs, so a company should be prepared to work with multiple tech vendors. For example, companies such as Intermec, Texas Instruments, Tagsys and Em Micro have tens of millions of RFID tags deployed, and therefore, are worth looking at as established implementers.

However, other companies, such as Alien Technologies and Matrics, are ahead in innovation, so some of their technology may complement other products, Rerisi said.

"You're going to see a lot of Wal-Mart's suppliers look to various RFID vendors for solutions during the next 12 to 24 months, testing different versions of the technology, exploring with different readers and different tags to see what works best," Rerisi said.