RFID's Hidden Costs and Opportunities

Feb 5, 2004

Susan Kuchinskas

Companies struggling to meet the so-called Wal-Mart mandate, which requires the retailer's top 100 suppliers to enable tracking using RFID tags by the end of the year, plan to spend around $2 million each, according to research firm ABI.

As RFID tags, readers, software, and electronic product codes (EPC) evolve, tying them together becomes harder, the Oyster Bay, N.Y., research firm said in a report. In the short-term scramble, "There's not going to be a whole lot of integration," said ABI senior analyst Erik Michielsen. "Companies are taking existing ERP suites or warehouse management applications and plugging in a short-term solution that doesn't require a whole lot of money or personnel."

But that situation will change, and suppliers will begin to evaluate how RFID can provide business benefits in the long term. "Large companies don't want to just do this for Wal-Mart," Michielsen said. "They're digging in deep to learn how they can use that data effectively across the enterprise. That's a multimillion-dollar project -- and a long-term project." Michielsen said any changes to existing enterprise systems require architectural mapping, systems programming and testing, plus company-wide changes in business processes.

When huge suppliers such as consumer products giant Procter & Gamble get ready to connect RFID databases and management applications to their multi-vendor corporate systems, they're going to need help. Lots of help, to the tune of $1 billion by 2006.

ABI says that by 2007, RFID integration revenue will surpass that of RFID products.

Business consultants are gearing up to get a slice of this consulting pie, by staffing up and adding training. But, said Michielsen, they have a long way to go. Until these new consultants are put to work in the field, he said, "They won't know how it's going to work out, and whether that preparation was good enough."


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