Wednesday, July 07, 2004

Pentagon: Rough RFID Ride Ahead?

WASHINGTON, D.C. - It's always a little nerve-wracking when big businesses or government bureaucracies wager on a new technology, especially when the technology in question involves the fate of thousands of suppliers and billions in inventory. So Wal-Mart Stores and the U.S. Department of Defense have no doubt rattled some with their embrace of radio frequency identification, or RFID, as the next big thing for managing their supply chains. Both outfits have deadlines this coming January for significant RFID rollouts.

But between the two RFID efforts, which will likely prove more challenging for the organization and its suppliers? That's an easy one: the Pentagon's. "Their needs are probably the most robust and exhaustive of anyone, way more than whatever Wal-Mart is thinking," says Ann Grackin, chief executive at ChainLink Research, a Cambridge, Mass.-based logistics consultant that advises both the U.S. military and its contractors.

Some background on RFID: The technology, around since the 1940s, is the same used for automated highway toll collection and key chain devices to open car doors. For years, RFID has been touted as the successor to bar codes as the best way to keep track of merchandise. Tagged with RFID chips, boxes and cases of merchandise will automatically transmit information from embedded RFID chips to "readers" throughout the distribution process. The promise: less work and better-stocked shelves--or better-equipped soldiers.

In mid-2003, Wal-Mart upped the RFID ante by asking its top 100 suppliers to put tags on cases destined for Wal-Mart and Sam's Club stores in the Dallas/Fort Worth area by January 2005. By 2006, Wal-Mart expects all its suppliers to be on board with RFID.

The Pentagon, which had already had success with RFID in certain war zones, announced in October 2003 that its suppliers, save those in "bulk commodities," would have to have RFID tags on cases by January 2005. About 40,000 vendors do regular business with the military.

So what makes the Defense Department's RFID initiative tougher? Beyond the security difficulties inherent in dealing with combat operations, Grackin points out some unevenness in the military's facilities; it has some of the best warehouses and depots in the world but also some of the worst. That's not the case with Wal-Mart.

Full story at Forbes.com