Economists have coined an expression, “Wal-Mart effect,” to describe the combination of high productivity and low inflation that the retailer has furthered in the U.S. economy. The companys status as the worlds “reseller in chief” has given it the power to infuse impressive efficiencies into consumer goods industries formerly known for leisurely technology cycles. We have to wonder, though, if some of Wal-Marts worldwide supply chain may soon be carrying more load than it can handle in the form of premature, excessive investments in RFID technology.
Providing hands-free tracking of goods in motion, radio-frequency ID is an infrastructure that Wal-Mart hopes will reduce its costs. Based on what weve heard, were not confident that all suppliers for Wal-Mart can meet the retailers Jan. 1 deadline for deploying RFID systems and data feeds securely and cost-effectively.
Wal-Mart is not alone. The U.S. Department of Defense has its own ideas about whos giving the orders in the worlds warehouses, and DOD also likes RFID. Streamlining front-line logistics by eliminating the need for line-of-sight access to conventional bar-code labels no doubt looks to DOD like a force-multiplying innovation.
The question is whether even a pair of their magnitude has the power to move the mountain of enterprise IT, not only in terms of capital investment but also in terms of developing necessary skills and devising adequately robust databases and applications.
The RFID tags coming into Wal-Marts state-of-the-art stores were initially overwhelming the companys systems with more data than they could handle, according to a recent report of remarks by Wal-Mart CIO Linda Dillman.
In response, Wal-Mart had to tune its process to acquire only data actually needed at the time. Other companies will find that they, too, need new technology and new skill sets to deal with the advent of RFID.
We see the potential for an unfortunate paradox in RFIDs injection of floods of data into enterprise systems—putting pressure on IT operators to speed things up—even as the privacy concerns of hands-free item tracking create new demand for system-straining security protocols.
We favor the adoption of new technology for competitive advantage, but we dont believe in adopting technology for its own sake—or when its not cost-effective for a business to do so.
Imposing an artificial deadline makes this effort too-closely resemble the Y2K rush or even regulatory compliance mandates such as the Sarbanes-Oxley Act—a cost burden without a corresponding return on investment.
We urge Wal-Mart, DOD and others in a position to drive RFID forward to establish a pace that others can safely match.
The invisible hand of the market is generally more effective than the clenched fist of a business partner.
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