...Wal-Mart announced its top 100 suppliers would be required to implement radio frequency identification (RFID) tags on all cases and pallets by 2005, with all other suppliers expected to follow by 2006. Soon after, the Department of Defense announced similar plan, requiring its top 100 suppliers to place RFID tags on all pallets and cases by 2005, and all other suppliers to do so by 2006.

It's an expensive proposition.

According to a recent report by the management consulting firm A.T. Kearney, the price of adoption will be about $400,000 per distribution center, plus an additional $35-40 million company-wide for systems integration. For manufacturers of high-end goods like clothing and electronics, these costs will be much more manageable than they will be for food and grocery manufacturers.

Because more volume means more RFID tags to buy, food and grocery manufacturers who produce larger numbers of cheaper goods will have to spend a lot more to meet the mandates. "The high-volume manufacturers will see the greatest cash-flow impact," says A.T. Kearney vice president Dave Donnan.

Still, the advantages of tracking every case and pallet with RFID tags can be enormous for manufacturers and retailers alike. Because the tags can be read automatically from a distance and don't have to be scanned directly like bar codes, companies can save enormous time and effort by switching to RFID.

A.T....

NOTE: All illustrations and photos have been removed from this article.



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