Cost, Glitches Slow Wal-Mart's Adoption of RFID

Jan. 1 deadline might not be the big bang introduction RFID advocates hoped for

But the adoption of RFID has been slowed by glitches such as the interference of liquid or metal in the ability of tags to beam signals to tracking devices, called readers. Another drag has been the lengthy process of setting standards for the tags, readers, and interfacing software that would help push down costs. A set of standards was finally approved last week, but not soon enough to be included in the first RFID devices sold to Wal-Mart suppliers.

Many suppliers have been reluctant to invest in RFID infrastructure until the price of tags and readers drops to where they can realize efficiencies, said Beth Enslow, vice president of enterprise research for Aberdeen Group, a Boston research firm. She estimated that a quarter of the suppliers in Wal-Mart's pilot group are outsourcing their tagging as a cost-savings move.

"Right now, all the benefits are going to sit in Wal-Mart's lap," said Chris Jones, Aberdeen's senior vice president of research. "The suppliers are looking at it as a cost of doing business with Wal-Mart."

For many Wal-Mart suppliers, this has been a "test and learn year," said Jeannie Tharrington, a spokeswoman for Procter & Gamble Co. in Cincinnati. Procter & Gamble will be tagging shipments in only three of its more than 300 product lines come Jan. 1.

The company included its Pantene shampoos to work on overcoming the lower "read rates" it has experienced in tests on shipments containing liquid -- the result of signal interference. "We're getting better at knowing where the tags should be placed and how far they should be from the readers," Tharrington said.

"Certainly there's a great deal of up-front investment," she conceded. "That's why suppliers can't afford to tag 100 percent of their products. The costs are higher than we thought they'd be at this point."