Heard & Overheard- Logistics Professionals question benefits of RFID

Heard & Overheard
Logistics executives question benefits of RFID

Top logistics executives from various industry sectors remain unconvinced that they'll find value in the radio frequency identification (RFID) initiatives of Wal-Mart Stores Inc. and the U.S. Department of Defense.

Senior logistics executives attending last month's Logistics Forum aboard the Norwegian Dawn cruise ship say they see compliance as their only answer to RFID initiatives put in place by Wal-Mart, other large retailers and the DOD. Beyond that, they have serious doubts about when and how they will be able to achieve any internal benefits from the use of RFID tags.

During closed sessions, small groups of executives from different industry sectors (including pharmaceutical, retail and manufacturing) discussed where — and if — they will find value in the tagging initiatives of their major customers. One executive confides that he will sit back and wait for the suppliers who are covered by initial mandates to pay with their experience, and then he would learn from them.

Another executive says part of his company's challenge is that applying RFID tags during the manufacturing process is an all-or-nothing proposition. The process doesn't allow the tags to be applied to products going to one distribution center or even one customer. He doesn't see how he can justify a cost of 30-40 cents per tag, even when the tags are applied to packaging during the manufacturing process. Others say they'll have to start with “slap-and-ship” compliance with no benefit for internal inventory management or tracking.

A slightly more optimistic view suggests the slap-and-ship application of RFID labels prior to shipping product to the customer is only the first phase of tagging. Eventually, the companies closest in the supply chain to the RFID-capable customer will be able to apply tags earlier in their processes and take advantage of them while the product is in their custody. The third phase will be when upstream suppliers start applying the tags and they are read throughout the distribution cycle.

Everyone present agreed it will take time for the RFID initiatives to begin driving cost out of the supply chain. LT

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June, 2004

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