The RFID Hype Effect

News Analysis: Deployment has slowed and even the players that gave RFID its first boost-including Wal-Mart-are starting to cool.

RFID was supposed to revolutionize the supply chain and—by mid-2006—dominate most aspects of product handling within retail and manufacturing. Today, even the most ardent RFID advocates are conceding that hasnt happened and its quite frankly not even close.

There are many reasons why RFIDs progression has been disappointing so far, but the most likely culprit is that the initial expectations were not realistically set in the first place.

The fact that many vendors, retailers and manufacturers overhyped RFIDs likely timetable is not news, but the extent to which the hype was believed may be.

"My expectations were that things were going to progress further," said ABI Research RFID analyst Sarah Shah. "People have been less eager to actually jump into the technology" than they were to talk about it. "Obviously, there is initial hesitation."

Two events have signaled RFIDs troubles. The first was Wal-Mart.

Its fair to say that Wal-Mart—along with Gillette and Germanys Metro Group—truly created the momentum for the RFID market.

After all, the theory went, the suppliers of those huge companies would have to go along. If Wal-Mart mandated it, what supplier would dare say no?

/zimages/2/28571.gifNATO isnt waiting for RFID to catch on; it has already built a global supply chain with the technology. Click here to read more.

Initially, that is precisely what happened. But after error problems, conflicts, and extensive and expensive investments, even many of Wal-Marts suppliers suddenly developed into vertebrates.

And Wal-Mart, which has a well-earned reputation among suppliers of being one of the few companies that can make dealing with Microsoft seem comparatively pleasant, also backed off.

One of the key factors that buoyed those Wal-Mart suppliers is that they were also suppliers for many other major retailers, and those other retailers were starting to ease off the RFID gas peddle. It wasnt as though retailers started issuing statements saying they no longer cared about RFID, but around the summer of 2005, the "urgency left. It dissipated. Suddenly, the retailers stopped asking about RFID," said a consultant to one of the larger suppliers.

The suppliers initially suffered from "unnecessary fear about what big, bag Wal-Mart would do" if they didnt enthusiastically deliver on Wal-Marts RFID mandate, said ABI Researchs Shah. But suppliers soon "saw hesitation on Wal-Marts part, too."

One of the earliest proponents of RFID, Wal-Mart had an internal secret program to create its own proprietary version of RFID, said Randy Sweeney, one of the founding members of MITs AutoID Center, which itself was replaced by EPC Global. Sweeney today works as a senior IT executive with a $90 billion global manufacturer.

Wal-Mart ultimately gave up on its proprietary efforts and joined other retailers and manufacturers forming MITs AutoID Center, Sweeney said.

Wal-Mart executives "always believed that the kickoff date for RFID should have been 2003. They had no basis to believe that it was that close, but their pushing for it led to the earlier adoption of large-scale testing," Sweeney said. "It really led to expectations within the industry that things were farther along than they were."

Sweeney argues that Wal-Marts attitude smacked of arrogance, that the company could make things happen by ordering them to happen. "Theres a fundamental reality that we all live in, and that reality cant be changed by fiat," he said. "If you believe that sheer force of will can make anything happen quickly, that in and of itself is a misunderstanding of the world. Its not like with nine women and one month, you can get a baby. You still need the time."

Next Page: "Slow, gradual adoption."