Five years ago, when Wal-Mart Stores issued a startling mandate that its suppliers must adopt radio frequency identification technology, Daisy Brand quickly volunteered to be first out of the gate.
Today, the family-owned dairy products supplier is fully compliant with those Wal-Mart requirements, tagging every pallet that leaves its warehouses. The effort has been a boon to US-based Daisy Brand, cutting in half the time it takes to load its delivery trucks.
But Wal-Mart's mandate didn't work out so well -- or even work out at all -- for most of its other suppliers. The retail giant says that many of its 600 top suppliers, which account for three-fourths of the company's sales volume, use RFID technology today to "some degree." Most of the rest -- some 60,000 strong -- are not using it at all.
Once the implementation difficulties for its suppliers -- and for Wal-Mart itself -- became clear, the retailer backed away from the RFID mandate, which remains in limbo today.
For many of the small and midsize businesses that make a good chunk of revenue selling products to Wal-Mart stores around the country, the long-term benefits of RFID are still not top of mind, but the expense is.
While analysts bicker over exactly how much it costs to implement RFID technology, there's a general consensus that a small supplier would have to spend between US$15,000 and $20,000 just for the tags, readers and middleware needed to get started. Add the cost of planning, training and handling all the new information compiled by RFID systems, and the price keeps escalating.
Such a significant expense, especially for suppliers that may still be struggling to get bar codes in the right places, is a lot to ask to keep just one customer happy -- even one the size of Wal-Mart.
"Without the clarity of immediate benefits, the majority of suppliers are willing to risk not being the perfect trading partner," said Roy Wildeman, an analyst at Forrester Research.
It all started back in 2003, when Wal-Mart first announced that its suppliers would have to tag crates and pallets. At the time, Wal-Mart mandated that its top 100 suppliers would have to complete the move by January 2005.
Wal-Mart was the first major US retailer to demand that its suppliers use RFID technology. The move meant that companies were suddenly confronted with learning the new technology -- and paying for it.
While some suppliers, like Daisy Brand, quickly jumped on board, most were less amenable to the plan.
Part of the problem was that the plan was unveiled before the RFID industry was ready for it, users and analysts said. There were no standards, the technology was in its infancy, prices were high, and fly-by-night vendors and consultants littered the industry.
"Gosh, if [someone] could spell 'RFID,' it seemed they thought they could hang out a shingle," said Tom Shields, educational technology service and RFID manager at Texas Instruments (TI), which became compliant with Wal-Mart's requirements in January 2006.