Making RFID Real

Advocates of that technology must prove in 2004 that it's more than a flash in the pan.

Having propelled supply chain-based RFID into the vortex of enterprise hype in 2003, advocates of that technology must prove in 2004 that its more than a flash in the pan.

Strong interest in the technology continues, following Wal-Mart Stores pronouncement in November that its 100 largest suppliers have until next January to track their products using radio-frequency identification tags that can be scanned by radio waves at any time. Recently, there has been a groundswell of RFID-related products and services from IT providers. At the National Retail Federation conference this month, heavy hitters such as Microsoft, Intel, IBM and Sun Microsystems all sought to show their RFID savvy. They join vendors such as Texas Instruments, Symbol Technologies, NCR, Accenture and BearingPoint in advocating the technology hailed as the solution for optimizing supply chain operations.

There is no question the technology will reduce labor and improve accuracy in inventory tracking—if it works as advertised. If Wal-Mart can know the contents of a pallet without opening it, the company will speed up merchandise routing and loading and, most important, cut costs.

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Before we regard RFID as a panacea, questions must be answered. What data should be stored? Where should the data be stored? Can VeriSign, which has been hired to administer the new product codes and technical standards associated with RFID, guarantee safety and privacy of information attached to RFID tags? Which tag standard—which determines how many times a tag can be read and written—will be accepted by the International Standards Organization? How should the data be secured and maintained? And what is the best method to integrate RFID technologies with existing operational software, such as enterprise resource planning applications, and business software, such as financial applications? Enterprises must tread with caution until these questions are answered.

Wal-Marts RFID is also an example of how the technology extends—and must be managed—beyond the IT department. Privacy concerns and a misunderstanding of the technology forced Wal-Mart to cancel an RFID trial last year when the company sought to tag retail items on shelves. Retailers may not benefit from knowing the location of their goods if customers fear retailers could assume the role of Big Brother in tracking their behavior.

A successful RFID deployment will be managed with the understanding that such projects are about much more than the technology. The level of misunderstanding in the marketplace is high, and backlash is inevitable for companies that fail to heed consumer fears. Enterprises that succeed with RFID will ensure questions about the technology are answered in the boardroom before it is deployed in the stockroom.

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