RFID: Still A Learning Process

Despite a looming January 2005 deadline and an ever-increasing buzz, companies are still in learning mode when it comes to radio-frequency ID technology. So said a group of IT executives and RFID experts during a roundtable this week hosted by Optimize and InformationWeek magazines.

"We have several global product initiatives going on to look at the technology, see where the gaps are, and develop a game plan going forward," said John Keith, senior VP IT applications at Unilever.

It's not that the consumer packaged-goods company is just now getting its feet wet--it has been working with RFID for at least three years, Keith said, and has been conducting RFID pilots and development for 12 to 18 months.

Unilever isn't the only company that's been investigating RFID for some time. United Parcel Service Inc. has been looking into RFID for as long as 10 years, said John Nallin, VP of information services. General Motors Corp. also has been looking at the technology for several years and is already using it--in limited cases--internally in some of its manufacturing plants, said Tony Scott, chief technology officer at GM's Global Technology Management Information Systems & Services.

Testing the technology is extremely important to companies, because RFID is likely to become a core part of their supply chains, which, for many, is the lifeline of their businesses. Marc West, senior VP and CIO at Electronic Arts Inc., said the maker of interactive entertainment software is getting ready to move a couple of pilots into production mode, but there are still challenges. "How do we get the process and mechanisms into repeatable modes that we can trust?" he said.

Despite the years of investigation under their collective belts, these IT execs say there are still roadblocks to full-scale production and broad adoption. For one, tag costs are still too high, averaging about 25 cents apiece. And that's just a drop in the bucket when companies start adding up the costs of retooling their infrastructures, smoothing out the kinks in communications networks with partners, and enabling back-office and legacy applications to handle RFID data.

"Cost has always been a primary concern of ours. I don't think it was that long ago when we concerned about the cost of bar coding," UPS's Nallin said. "Aside from the cost of the tags, obviously the scanners and handhelds have to be changed or added to the mix, which in our case is a significant cost."

Standards still need to be worked out. North America and Europe are looking at different standards, said Evangelos Simoudis, a partner at investment firm Apax Partners Fund. Standards in North America are still evolving, and some companies are waiting to see final specifications before moving RFID into production.

Despite the roadblocks, execs said their companies' management teams are definitely interested in RFID. "The one ray of hope that I see is we do have very, very senior management in participation of standards and in understanding the proposition because the cost of entry is significant," Unilever's Keith said. "There is a much better understanding of the concept and certainly an excitement. That is what I find encouraging at this time. I don't think anyone is looking for a home run to be hit on day one, but everyone is cautiously optimistic."