Not if but when RFID will dominate supply chain

It's not a question of if but when RFID (radio frequency identification) technology will dominate the supply chains of manufacturers, retailers and just about any company or organization that needs to trace products, parts and other items, according to senior executives at SAP AG.

"Everyone knows RFID is coming and wants to be prepared," said SAP Executive Board Member Claus Heinrich, in an interview at the company's European Sapphire customer event last week in Paris. "And, quite frankly, everyone is just waiting for tag prices to fall. A majority of business cases for RFID depend on the price of tags, especially those companies that need to tag large numbers of items."

Prices have been dropping, down to below US$0.10 per tag in large numbers from around $0.30, thanks in large part to the introduction the new Gen-2 standard, said Eric Donski, RFID solution director at SAP.

Even if the day when every yogurt container is tagged with a smart chip is still a few years away, a tag on numerous pharmaceutical drugs could be just around the corner, according to Donski. "Of all the industries looking at RFID, pharmaceutical has the best business case," he said. "The tracking and tracing of drugs from the manufacturer right up to the pharmacy is important for recalls and building consumer confidence."

Pharmaceutical companies are among the 450 customer RFID projects that SAP has running in 15 industries and 16 countries.

To date, one of the biggest users of the wireless identification technology is the retail sector, and one company in particular: Wal-Mart Stores Inc.

By the end of 2006, Wal-Mart plans to add more than 300 suppliers to its list of companies shipping products with RFID tags, bringing its total to nearly 600, according to Donski, who attended a recent meeting with the company. In addition, the retailer aims to have RFID in 1,000 of its more than 5,600 stores, beginning in the southern half of the U.S.

Privacy remains a prickly issue with RFID in many countries including Germany, where Metro AG, the world's fifth largest retailer, has encountered opposition from consumer groups to its use of the smart tag technology in stores.

Claus has been traveling around the globe, speaking with companies about RFID privacy. "Our duty is take this barrier way," he said. "We're proposing self-controlled transparency. Where RFID is used, consumers should be informed and also assured that there is no link to their personal identity."

The SAP board member is also quick to defuse any concerns about RFID generating so much data that conventional storage media could be easily overloaded. "We can expect to see a decentralized approach to managing RFID data," he said. "There's a lot of talk about the 'Internet of things' and about agent technology in this context" with products talking to products and making decisions.

Donski offers another view: companies and organizations will be able to manage different types of data at various levels, such as operational data versus historical data or summarized data versus detailed data, and to filter this data according to need. "They'll have access capabilities to pull down data when necessary and then let go rather than having to store it," he said.

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