Call for Help

By Joseph C. Panettieri  |  Posted 2004-01-12 Print this article Print

Call for Help

Accenture and many other solutions providers are more than happy to help manufacturers sort through the RFID market. Roughly 72 percent of solutions providers consider RFID a major business opportunity, and more than half say their customers are requesting RFID integration services, according to a mid-2003 survey conducted by Texas Instruments Inc.s RFID organization, known as TI-RFID Systems.

Such demand is fueling aggressive market speculation. Wireless Data Research Group, of San Mateo, Calif., for example, predicts RFID hardware, software and services will triple from $1 billion in 2003 to $3 billion in 2007.

But reaching these heights wont be easy—or painless. Wal-Marts RFID mandate could cost a typical CPG manufacturer $13 million to $23 million in IT costs, according to AMR Research Inc., of Boston. The hefty price tag includes $5 million to $10 million for tags and readers and $8 million to $13 million on systems integration.

Wal-Mart attempted to downplay RFIDs costs during a meeting with partners last November, but theres no denying that manufacturers are proceeding cautiously. Indeed, only 18 percent of manufacturers currently use RFID, and 70 percent have no plans to deploy RFID in the next six months, according to Nucleus Research Inc.

"Over the long term, we expect RFID technology to provide significant business benefits to the manufacturing industry," said Nucleus analyst Barry Mason, in Wellesley, Mass. "RFID will reduce stock-outs, labor costs, theft and inventory levels. But without new processes and systems in place, manufacturers arent prepared to handle real-time RFID data streams from thousands of parts and unfinished goods."

A.T. Kearney Inc., of Chicago, holds a similar view. The division of Electronic Data Systems Corp. says RFID can save retailers 5 percent on inventory costs and 7.5 percent on warehouse labor, but manufacturers may wind up footing the bill for such benefits. A.T. Kearney drew that conclusion after examining RFIDs impact at a grocery manufacturer and an over-the-counter drug manufacturer. Each manufacturer, averaging about $5 billion in annual sales, will likely take a $155 million cash-flow hit over a 10-year period to pay for the RFID tags and readers.

Privacy concerns also threaten to slow RFIDs progress. An activist group, known as Consumers Against Supermarket Privacy Invasion and Numbering, has lobbied against RFID because the technology may track a products every movement—from manufacturer to retailer to consumer. Tesco Ltd. (Britains largest retailer) and The Gillette Co. came under fire in mid-2003 when Tesco stocked Gillette razors with RFID tags as part of a limited test. CASPIAN vowed to organize a boycott against Gillette products, but the effort didnt affect Gillettes sales.


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