RFID Kick-Start 2

Technical hurdles also have cropped up. Unlike active RFID tags, which have been around for some time and are more often used to track high-value goods, passive tags, required by Wal-Mart, Defense, and others, don't come with their own batteries, and materials such as metal or liquid can block their ability to draw enough power from an RFID reader to emit signals. Then there's cost--the 5-cent tag remains a long way off, with prices today ranging from around 35 cents a tag for volume orders to as much as 70 cents, analysts say.

No major consumer-goods manufacturer can afford to say no to Wal-Mart. Yet analysts and IT execs say Wal-Mart hasn't forced RFID through without regard for cost or disruption to its suppliers. "Wal-Mart has a mandate, but they're looking to all of their suppliers to be smart about implementation," says Ian Robertson, director of IT in the Americas for gummaker Wrigley Co. "They don't want it to cost too much for us because they know that would ultimately come back to them." Wrigley, which has until January 2006 to start tagging its cases and pallets bound for Wal-Mart since it's not a top-100 supplier, plans to start an RFID pilot toward the end of this year.

Wal-Mart initially told its top 100 suppliers that it expected all their cases and pallets bound for the Texas distribution center to be tagged by January; now it's saying, on average, 65% will be tagged. Wal-Mart also accommodated suppliers that needed more time, Duke said. "There are a couple cases where we worked with suppliers that had other business strategies they thought they needed to address first," he said.

Wal-Mart is nearly a month into its live test with Gillette, Hewlett-Packard, Johnson & Johnson, Kimberly-Clark, Kraft Foods, Nestlé, Purina PetCare, Procter & Gamble, and Unilever. The test involves just 21 of more than 100,000 products carried in a typical Wal-Mart Supercenter and is limited to seven Wal-Mart stores in the Dallas/Fort Worth area. It includes an elegantly simple process for recording when products move from back room to store shelves: Readers scan empty boxes before they're thrown into trash bins, sending a signal that the products formerly in the boxes have moved to the shelves and a case will need replacing.

Ultimately, RFID's success will require much more than just meeting big businesses' mandates. Kimberly-Clark, while keeping attention on retailers' directives, continues to evaluate how RFID can benefit its operations. The company hasn't issued any mandates of its own, but it's considering tagging raw materials--or having its suppliers do that--so materials can be replenished on an as-needed basis. Says O'Shea, "There are advantages to RFID that can be realized through the entire value chain."

-- With Chris Murphy and Rick Whiting