RFID held back by sceptics

According to US retail giant Wal-Mart and other leading retailers, the replacement of barcodes with radio-sensitive identity tags is being thwarted by a general scepticism amongst suppliers. RFID allows retailers to track products from production all the way through to the sale, yet companies which have been forced to ship products containing the RFID tags are holding back, hampering the development of the system.

Wal-Mart has said that it is having problems convincing its suppliers to use RFID. The retailer was the first to use the tags. Wal-Mart's chief information officer, Linda Dillman, told the FT that approximately half of the suppliers still regarded the use of RFID labels in shipment as a matter of "compliance" rather than a benefit to their own business operations.

The fact that suppliers are concerned about the cost of the RFID technology was brought to light at an industry conference in New York last week, where they vocalized their worries. "There are a lot of people who are dragging their feet and there are a lot of people who think they are wasting money," says chief technology officer Gary Cooper of Tyson Foods, which is the world's largest butcher. "I have not found anyone yet who has managed to make a return at the current tag costs."

Experts say that this is a common concern in the early stages. The prices of the tags are high, but people are not looking far enough into the future to realize that the efficiency of the system will curb costs in the long run.

According to Linda Dillman, one of the challenges facing Wal-Mart is the application of the RFID tags on cases. This challenge requires the full cooperation of suppliers. A big challenge for suppliers is the fact that the transmission of data by the tags can be affected by the proximity of water or metal, which means shippers need to place the tags with great caution. These are some of the major concerns facing suppliers.