Logistics Executives Question Benefits of RFID

Senior logistics executives attending the Logistics Forum aboard the Norwegian Dawn May 11-13 said they see compliance as their only answer to radio frequency identification (RFID) initiatives put in place by major retailers and the U.S. Department of Defense. 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 the serious question of where they will find value in the tagging initiatives of their major customers. One executive confided that he would 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 said part of his company's challenge was that applying the 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 didn't see how he could justify a cost of 30-40 cents per tag, even when the tags were applied to packaging during the manufacturing process. Others said they would have to start with "slap and ship" compliance with no benefit for internal inventory management or tracking.

A slightly more optimistic view suggested the slap-and-ship application of RFID labels prior to shipping product to the customer is only the first phase of tagging. Eventually, those companies just up the supply chain from 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.

As one of the private "war room" sessions ended, a manufacturer summed up the attitude of those present when he said, "We're trying to drive cost out, not add it." Everyone present agreed it will take time for the RFID initiatives to begin driving cost out of the supply chain.

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