Restrain Your Enthusiasm

By Larry Dignan  |  Posted 2005-08-31 Print this article Print

Big organizations are requiring radio tags on their merchandise, but suppliers have trouble justifying the expenditure.

Step 2: Wait. Watch. Buy only what you have to.

Given that the returns for RFID are still murky, Romanow says suppliers are waiting to buy tags, readers and software. AMR's survey found that only 35 percent of companies with more than 5,000 employees thought the technology was mature enough to deliver returns.

That's why companies may be waiting for "Generation 2" technology, which will work anywhere in the world, allow for data to be added to tags and offer features such as password protection.

Sun's Ellison said his lab hasn't conducted any Generation 2 pilots yet, but notes that companies are hanging back to see how the standards develop.

Matthews said he is hoping next-generation radio chips, which have attracted the likes of Texas Instruments Inc., are produced in volume to bring down prices. For Matthews, tag costs remain a big hurdle.

"The costs of tags are 40 cents, and it is 10 cents to put them on," he said. "But we're not getting a 50 cent return. If we're lucky, we get 7 cents."

Step 3: Find your tipping point.

Find out here if the cost of RFID makes sense for you.

According to Ellison, it's pivotal for companies to find their tipping point with radio tags. That's the point where enough products are being tagged that it makes sense to apply tags to all goods as they are manufactured.

While there is no magic percentage that applies to every company, Ellison said, it will make sense for a supplier serving Wal-Mart, Target and the Department of Defense to automate the affixing of tags to cases and pallets of products, just as bar codes are today.

Ellison added, "There will be an inflection point where it makes more sense to put on tags at the manufacturing level than to add another [manual] line for RFID-tagged goods."

Business Editor
Larry formerly served as the East Coast news editor and Finance Editor at CNET News.com. Prior to that, he was editor of Ziff Davis Inter@ctive Investor, which was, according to Barron's, a Top-10 financial site in the late 1990s. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism.

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