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ID NEWS: Wal-Mart RFID goal problematic, says report

Wal-Mart's mandate that its top 100 suppliers deliver RFID (radio-frequency identification) tags on products by 2005 could cost suppliers more than $2 billion, according to an AMR Research report, as presented by the RFID Journal.

"CPG (consumer package goods) manufacturers can't afford to eat the cost of deploying RFID to Wal-Mart's specifications," says Kara Romanow, senior analyst and co-author of the AMR report.

A typical CPG manufacturer shipping 50 million cases per year would have to spend $13- $23 million to satisfy Wal-Mart's tagging requirement, according to this assessment. Tags and readers alone would cost $5-$10 million. An additional $8-$13 million would be required for system integration, changes to existing supply chain applications and upgrades to storage systems and analytics software.

Some of this anticipated cost results from Wal-Mart's stipulation that the RFID tag technology provide a read-write eight-digit store code for routing purposes. This would require tagging late in the production process, not as part of the packaging.

Moreover, inventory accuracy already is as high as 99.9%, and suppliers fear that RFID would offer little benefit, says the report.

Wal-Mart and its suppliers are set to meet in November to discuss RFID deployment. The major retailer-respected by distributors for its history of operational trend-setting efficiencies-may meet with a "backlash" here, unless a more realistic consensus is achieved, according to the report.
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