RFID buzz creates market for services

The recent push by retailers to introduce radio frequency identification (RFID) tagging into supply chains has not only sparked a frenzy of RFID-related activity by suppliers needing to satisfy retailer demands, it has also created a market for service providers offering to aid in implementation.

Hewlett-Packard, for instance, introduced three new RFID services Monday, as it continues to expand its offerings in the category, saying that it expects the market to grow from $1 billion today to $3 billion by 2008.

On top of the range of RFID consulting and integration services it already offers, HP is now introducing a Discovery Service, to help customers design their RFID strategy, an RFID Adaptive Starter Kit for building a proof of concept and RFID Readiness Assessment and Roadmap Planning for customers keen to develop and implement the technology.

RFID, which is being used by companies to track the shipment and delivery of products in an effort to cut costs through inventory control, is a perfect example of HP's Adaptive Enterprise strategy, according to Salil Pradhan, chief technology officer of the company's RFID Program.

"Fundamentally what RFID is all about is collecting data at an operations level by looking at the physical layer and then applying that to the business layer," Pradhan said.

The technology is being implemented in the supply chain by placing tags on product cases and pallets, which contain an RFID chip with a small antenna that emits a unique product identifier code when passed near an RFID reader. That information is then transmitted to an inventory control system.

Use of the technology creates a potential boon for vendors selling related hardware, software and services. What's more, recent mandates issued by heavyweight retailers such as Wal-Mart Stories Inc. for their suppliers to get RFID ready have only hastened adoption of the technology. Last year Wal-Mart set a January 2005 date for their top 100 suppliers to start using RFID tagging at a case and pallet level, and began the march toward that goal late last month with a real world trial in seven stores and a distribution center in Texas.

"Wal-Mart has clearly given a strong push to the market. RFID has been used for a number of years in closed loops of supply chains but now it is being considered for open loops," Pradhan said.

HP has been working closely with Wal-Mart on RFID as a supplier, and plans to continue cooperation under the banner of the EPCglobal group, which is working to define international standards for RFID standards. HP said Monday that it has joined the board of EPCglobal.

HP isn't the only IT vendor with its sights on the RFID market, however, as Microsoft Corp., Sun Microsystems Inc., and others have laid out RFID initiatives. Last week Sun opened a plant in Dallas to test radio tags for tracking consumer products and inventory control, and plans to open a similar plant in Scotland in coming months. Sun is also working with Wal-Mart suppliers to help them meet the January deadline.

While RFID holds the promise of cost savings via a well-tuned supply chain process, even advocates of the technology admit that challenges exist, such as organizing collaboration between trading partners, suppliers and customers and the added costs of buying new hardware and software to implement it. That's where RFID services come in, as vendors offer to help companies find their way through the muddle.