Wal-Mart has a reputation for shaking up business. So it’s no surprise the world’s largest company will require its top suppliers, including Kraft, Procter & Gamble and Pfizer, to put radio-frequency identification tags on all incoming shipments starting in January 2005.
Radio what? If you’re unfamiliar with the technology, it’s time to evaluate the threats and opportunities. Wal-Mart’s move could herald an age in which all businesses use RFID — the wireless equivalent of a bar code on steroids — to track the location, numbers and age of products from factories to store shelves.
RFID tags are essentially microchips equipped with radio transmitters. The chip can store information, from product color to when it expires, which is transmitted to stationary or portable receivers plugged into computer systems. With RFID creating a complete picture of all its stock, a company could streamline inventory and distribution. A recent Forrester Research report says that U.K.-based Scottish & Newcastle brewery is saving $25 million a year by tagging its beer kegs and predicts that more than five billion consumer packaged goods will carry RFID tags in 2005.
However, only big firms with significant supply-chain issues currently stand to reap major benefits. At present, RFID tags cost 40ÃÃ¢ each, compared to 1ÃÃ¢ for a bar-code label. Moreover, mid-sized firms can expect to spend about $100,000 on RFID software and hardware. “It will eventually change the landscape of business, but only with lots of work,” says Jeff Woods, a senior analyst in the Chicago office of Gartner Inc. “No one realizes how difficult it will be to implement.”
Still, the ball is rolling. While smaller firms are wise to sit on the sidelines today, they’ll eventually get the call to play. And if your coach is a giant like Wal-Mart, your helmet better be nearby.
© 2003 Erik Heinrich