Manufacturers ready RFID rollouts

Driven by retailer mandates, suppliers are on the front lines of a battle to overhaul the supply chain.

A wireless inventory system that's worked for tracking cattle is winning converts in the retail industry, but it's the suppliers who are getting prodded to adopt radio frequency identification .

Retailers such as Wal-Mart, Target and Carrefour say using RFID tags that can store and communicate detailed item identification data will allow for more accurate inventory management, fewer out-of-stock conditions, and less shrinkage, or product loss, throughout the supply chain than conventional barcodes.

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A wireless inventory system that's worked for tracking cattle is winning converts in the retail industry, but it's the suppliers who are getting prodded to adopt radio frequency identification .

Retailers such as Wal-Mart, Target and Carrefour say using RFID tags that can store and communicate detailed item identification data will allow for more accurate inventory management, fewer out-of-stock conditions, and less shrinkage, or product loss, throughout the supply chain than conventional barcodes.

This vision is forcing their suppliers to join the RFID revolution. Consumer packaged goods manufacturers such as Gillette and Procter & Gamble are launching feasibility studies, planning pilots and drafting implementation plans.

Wal-Mart, Target and Albertsons have imposed deadlines for their suppliers to begin shipping RFID-tagged pallets and cases. So too, has the Department of Defense, which is one of the nation's largest consumer goods purchasers. Wal-Mart's deadline is the most pressing: As of January 2005, Wal-Mart will require its top 100 suppliers to use RFID tags that each contain a unique identifier - called an electronic product code (EPC) - that is referenced in corresponding electronic transaction documents, such as advance shipping notices.

Such deadlines add urgency to RFID rollouts, which are not without complexity. Implementing RFID requires not only investing in the RFID tags and readers, but also linking the readers to supply-chain systems and designing new processes that incorporate the collection and dissemination of RFID tag data.

As one of Wal-Mart's top 100 suppliers, Henkel Consumer Adhesives is directly affected by the retailer's RFID mandate, says Gene Obrock, vice president of operations at the Avon, Ohio, manufacturer.

In 2002, Henkel identified RFID as a system that could help improve internal efficiency and customer relations. "Now that the mandate has been declared, we are glad we had already been researching this technology," he says. The company plans to have RFID active by late this year in its three warehouses.

The company is rolling out Manhattan Associates' RFID-in-a-Box. According to the vendor, the bundle starts at $60,000 and includes RFID readers and tags from Alien Technology; a limited-license version of Manhattan Associates' Trading Partner Management application to generate RFID tags; professional services; and optional EPC printers to print the RFID tags.

Like Henkel, Larson Manufacturing Company already is thinking about future compliance. Ted Weinrich, MIS director at the Brooking, S.D., storm door maker, says his team has begun to discuss and research RFID.

"We're not pushing on RFID at the moment, but we want to make sure we're positioned properly when the time comes," Weinrich says. "It's not an 'if' but a 'when.'"

While Larson doesn't sell to Wal-Mart, it does sell to Lowe's and Home Depot. When those retailers make technology decisions, Larson needs to be able to react quickly, Weinrich says.

Sensing a buying spree, vendors are rushing RFID products out the door. Software makers with retail and warehouse management expertise, such as Manugistics and Manhattan Associates, are unveiling RFID-enabled packages. ERP  vendors such as Oracle, PeopleSoft and SAP are adding RFID capabilities to their suites, as are infrastructure software makers such as IBM, Sun, Tibco and webMethods. Countless services firms, systems integrators and consultants also are launching RFID programs.

Some vendors are going all out to help time-pressed consumer goods manufacturers. Sun , for example, built a 17,000-square-foot warehouse in Dallas that replicates a Wal-Mart site. The warehouse is outfitted with RFID readers, loading-dock bays and a high-speed conveyer belt. In this pseudo Wal-Mart environment, companies can test their RFID systems for compliance with Wal-Mart's standards - choosing which RFID tags to apply and where to place the tags, for example.