RFID: Too few experts, too dear and tech not good enough

Major retailers' tactic of laying down the law and demanding all suppliers get RFID may well help speed up adoption of the technology. However, it looks like their strategy might be about to backfire on them.

A report by Forrester Group, RFID at what cost?, shows that just one quarter of Wal-Mart's suppliers – who were ordered by the retail giant to be RFID-enabled by 1 January next year – will actually be using the technology.

It's not surprising that suppliers may as yet be reluctant to fork out to set up the tagging technology, especially when the estimated set up costs for the average Wal-Mart supplier would run to $9m.

For those opting for item rather than case- and pallet-level tagging, the costs start to spiral even more – reaching up to $100m. And that's why the Forrester Research report believes that only a few scanty early adopters will make the jump to the tracking tags at item level, despite the benefits that source-level tagging can bring.

And while Wal-Mart and others may trumpet the savings that installing the technology may bring, Forrester believes that the current pricing of tags means that most suppliers will steer clear for the foreseeable future.

RFID's novelty might be keeping chip prices high but its lack of maturity is also slowing adoption in other ways. Because RFID is still tech's new kid on the block, the amount of RFID specialists remains relatively small – meaning that hiring out professionals to help with distribution centre set-up costs a pretty penny and, Forrester believes, will only go up.

Labour costs in general will also follow the skyward trend as vendors have yet to streamline automated tagging, meaning that suppliers will need extra hands to get the chips into packaging.

But for those under the cosh of retail's heavyweights, there are ways to save money. The analyst house recommends that Wal-Mart lead from the front and set up a buyers' consortium to help drive tag prices down.

It's also recommended retailers adopt the technology step-by-step rather than dictating blanket tagging

Christine Overby, senior analyst at Forrester Research, said that suppliers are still at a lost to justify the expense of adding RFID to the supply chain.

"There is no business case for most suppliers in the short term. The technology is not ready and there is lack of deep expertise in the industry to help suppliers implement RFID," she said in a statement.