Forget the 5 Cent RFID Tag!

Clamor around cheap tags for radio frequency identification compliance overshadowing bigger issues, says ABI Research

Clamor around cheap tags for radio frequency identification compliance overshadowing bigger issues, says ABI Research

Oyster Bay, NY — April 9, 2004 — Recent rumblings regarding radio frequency identification (RFID) — a market brought into the limelight with Wal-Mart's mandate announcement last June — have centered on RFID tags becoming available at a price point of five cents in large volumes. But the clamor around the "five cent tag" is overshadowing more important issues in the RFID space, says technology research firm ABI Research.

"Five cent tags are a component to the overall success of RFID, but they are not one of the top five most important elements," says Erik Michielsen, ABI Research principal analyst covering RFID. "Without proper commitment, planning and partnering, cheap RFID hardware is not sufficient to make a sustainable long-term difference with consumer packaged goods suppliers looking to benefit from RFID."

Compliance with mandates requires that companies invest in RFID regardless of tag costs. As a result, many companies have embraced cheap tags as a way to reduce compliance costs. Some companies have adopted a delaying strategy solely in hopes that tag prices will decrease.

ABI contends that non-RFID compliance with Wal-Mart's January 1, 2005, deadline is not a win-lose scenario. RFID is not Y2K, the researchers assert.

Recent pro-compliance concerns from Deloitte, IBM and others have merit in that they promote RFID understanding; however, pro-compliance efforts for the sake of compliance alone may prove more hurtful than helpful in forging a stronger relationship with Wal-Mart and other retail giants. "Commitment trumps compliance," adds Michielsen.

Mandates such as Wal-Mart's provide RFID rollout incentives, but a structured RFID strategy built around creating internal and external awareness and commitment is absolutely critical, says ABI, to creating agile organizations that can embrace the seismic changes RFID will present to suppliers and industry relationships over the next decade.

For more information on trends relating to RFID, see the following articles:

For more information on the use of RFID solutions in the supply chain, see "Needle in a Supply Chain Haystack," the Net Best Thing column in the January 2002 issue of iSource Business (now Supply & Demand Chain Executive) magazine.