IBM Investment Gives Boost to RFID

In addition to developing hardware, including the wireless tags and readers, IBM also plans to provide software and integrated support systems that will allow vendors to track goods and monitor shipping schedules in a streamlined fashion.

"It's about more than just RFID," said Christine Overby, senior analyst in consumer markets for Forrester Research. IBM's investment will also influence its Sensors and Actuators Solutions business unit and other RFID-linked technologies across IBM's services, software and hardware groups.

Many see the method as the eventual replacement for traditional barcode supply-chain tracking and inventory oversight. According to Overby's research, 37 percent of IT decision makers expect that RFID deployments will increase over the next 12 months.

Equal Opportunity Deployment

The technology gives manufacturers and the distribution outlets they serve continuous visibility of the movement of goods in the supply chain and warehouse all the way through to delivery to customers. Because data stored in the tags includes such information as manufacture and expiration dates, food and drug companies will have the benefit of checking the condition of perishable products while they are still on pallets.

Retail giant Wal-Mart (NYSE: WMT) has issued a directive for its suppliers requiring them to employ radio tagging by January 2005, and the U.S. Department of Defense, Honeywell, Phillips and Michelin have already widened their IT perspectives to embrace RFID as well. Andy Efstathiou, program manager at the Yankee Group, told CRM Buyer that smaller retailers and business-to-business organizations will not be left behind.

"Certainly IBM's announcement will make RFID adoption more likely and more easy," he said. Small retailers will seize on the advances their suppliers, common to Wal-Mart, have made to comply with the uberstore's command and require an increasing portion of manufacturers to tag boxes and pallets arriving at their stores or warehouses.

Monitoring Products

"When you talk about smaller retailers, they're certainly going to try to benefit from having suppliers that have done this as a part of supplying to Wal-Mart. Most of that is going to be with management of inventory in the back room and from the back room to the front room or the store shelf," he said.

In retailers large and small, problems occur with monitoring product movement from the storeroom to the shelf, he said. Typically, the supplier gets the signature of the clerk checking a product in at the receiving dock, and all product movement is dutifully recorded up until that point, but some retailers still lose goods between their own storage space and the point of sale.

RFID would provide extra security and inventory accountability, but its adoption could be a slow process. With IBM's announcement, Efstathiou said, the technology will be available and will be affordable.

"For IBM to make that kind of investment is going to reduce the cost of adoption, and a much broader market will benefit from the technology," he said.

Casing out RFID

In the early stages of adoption, boxes and pallets will carry radio tags but fewer individual consumer products will have such devices. As privacy concerns wane and middleware and other supportive software surfaces are developed to use the data RFID can provide, more and more smaller companies are likely to get involved in the trend.

"I believe the sporting goods retail industry is a little behind in this initiative," Jeff Raltz, manager of engineering for Dick's Sporting Goods, told CRM Buyer. "We've explored it but haven't found RFID as a good fit yet. We worked on a project at Galyans last year in one of our operations to determine the benefits of RFID. At that time it didn't deliver enough for us to proceed."

But Raltz said that as large retailers like Wal-Mart and Target get their deployments in place, Dick's will fall in line. "Sporting goods could follow suit but not for a while," he said.

"A lot would depend on which Wal-Mart and Target vendors participate. From a sporting goods retail perspective, Wal-Mart and Target are the giants in comparison to Dick's and the Sports Authority/Gart's."

Smaller competitors will follow at some point, he said. "I've been to enough conferences to see that RFID is the wave of the future, but I don't know if there is enough penetration for this to happen in the near term," Raltz concluded.