Avoiding RFID stalemate how can manufacturers play to win?

Steve Baxter, managing director of Ross Systems UK, looks at the RFID issues affecting the supply chain.

Analysts estimate that around 2.3bn will be spent on RFID technologies by 2008, highlighting just how much investment will be required by all parties in the supply chain if an RFID solution is to work efficiently. The larger retailers are driving the adoption of the technology and, in order to comply with RFID demands, manufacturers will suffer huge costs, tightening margins that are already squeezed to next to nothing.

Retailers need manufacturers to comply with RFID in order for it to work but many smaller manufacturers don't have the resources or technology at this stage to do so. To avoid reaching RFID stalemate and to ensure that they dont miss out on the potential benefits RFID can bring to their own business, manufacturers must consider all the issues surrounding RFID.

Just-in-time to real-time manufacturing

The concept of RFID has taken off in such a big way mainly because of the business benefits that a successful RFID solution can bring. The new technology will give manufacturers increased business allowing for greater control and transparency throughout the business. RFID really will revolutionise the supply chain for all parties involved.

So, with these benefits, what exactly is holding back the widespread adoption of RFID solutions?

Initial outlay

Many manufacturers are faced with the high cost of the RFID solution itself as well as the cost of integrating RFID with existing product systems. Add to this the fact that around half of the test RFID projects that have been carried out so far have been abandoned and you can see why many manufacturers are reticent to invest in RFID just yet.

VHS or Betamax?

Non-existent international tagging standards are deterring retailers, manufacturers and suppliers from using RFID chips. The fear of choosing the wrong standard is preventing many companies from even launching any trial projects. At present, technology is developing at different rates in Europe and the US which has led to rumours of a possible VHS/Betamax situation, resulting in total incompatibility either side of the Atlantic.

However, industry standards group, EPCglobal, which is a joint venture of the standards bodies EAN International and the Uniform Code Council, is currently considering four different protocol proposals. EPCglobal intends to have reached a decision by September. Wise retailers are delaying the widespread implementation of RFID technologies until a uniform standard is agreed. Manufacturers would be well-advised to do the same.

Assume caution

Ultimately, caution should be assumed. Retailers have no choice but to recognise that their suppliers cant all afford the latest RFID technology and by working in a collaborative manner, retailers and manufacturers can ensure that they invest in the most efficient, cost-effective solution on offer. The emerging standards will have an effect on the cost of RFID technologies as vendors vie with each other to offer the most competitive prices to their customers. The all important standards will drive down costs, improve the quality of technology on offer and increase the choice of vendors. The dawn of RFID brings with it its own retail revolution and manufacturers must realise that by working closely with retailers and supply chain partners, they too can be revolutionaries, not just loyal followers of the retailers.

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