RealTime IT News

Sean Campbell, RFID Leader, IBM Business Consulting

Sean CampbellRadio frequency identification was thrust into the IT consciousness in late 2003 when Wal-Mart and the Department of Defense mandated that their top suppliers use the wireless tracking technology.

Since then, there's been a lot of work in the field. RFID components, including tags and readers, are more reliable than earlier versions. Systems integrators have a better idea of how to get RFID data into enterprise resource planning (ERP) applications. And manufacturers are hammering out standards crucial to interoperability.

But IT managers, especially those not under orders from business partners, are still grappling with questions. The most pressing is whether a large-scale RFID rollout makes economic sense.

As the worldwide RFID leader for IBM's business consulting services, it's Sean Campbell's job to help provide answers. Campbell recently sat down with internetnews.com to talk about the state of RFID and what's being done to help speed its adoption.

Q: RFID has been on the minds of large companies for a couple of years now, but how far along are they in implementing it?

It varies significantly by industry. Consumer goods and retail are the farthest along. We're still very much at the beginning of what's going to be a long journey. Wal-Mart, Target, Albertson's and Best Buy have rolled out [RFID], or are starting to roll it out. Wal-Mart has 137 suppliers and is asking the next 200 or so to be compliant by January of next year.

We're still in a very collaborative mode, figuring out how to deploy this technology in distribution centers and in stores to drive value. The focus will be on pallets and cases for a while, and we're starting to get more into thorny supply chain issues.

Item-level tagging is something that's an economic issue, and it will take a while to get there. It's logical for high-shrink, high-counterfeit items like DVDs and apparel, but tags are still a little too high to put on everyday goods.

Q: Besides consumer-packaged goods and retail, the pharmaceutical industry has been identified as a logical RFID user. What's happening there?

Pharma has a major issue with counterfeiting, and the FDA has said that RFID may be a good way to address it. We're starting to see a couple of pharma companies start tagging certain products that have been counterfeited. It's very much in its early stages. GlaxoSmithKline has said by the end of this year it will begin tagging products at one of its distribution centers.

One [of the compelling reasons for pharma to use RFID] is that the tag price is not as significant when you're dealing with drugs that cost thousands of dollars.

The state of Florida has said that by July 2006, all [pharma] products have to have an electronic pedigree associated with it. So RFID is a way to do data capture, and that could spur some activity in the pharma sector. California, Illinois and other states are considering similar laws.

The business case is just much more prevalent when you have high-margin, high-dollar items as opposed to a box of crackers or biscuits.

Q: You mentioned the price of tags. Industry watchers have said that potential buyers are waiting for the tag prices to drop to 5 cents or fewer before committing to RFID. Where do tag prices stand and what are the chances of hitting the nickel mark?

Tag prices are still all over the map and are a function of a variety of variables, the largest being the volume [the buyers] are purchasing. It's basically a volume play. What will you commit to now and for the future? Companies without [large volume deals] are in the 20- to 35- to 40-cent range.

We expect that will continue to come down. Essentially we have two vendors, Matrix and Alien. As more vendors enter that space, there will be more options to purchase from. And if adoption continues ... that will also assist with industry-wide prices. But I don't think the 5-cent tag is anything we'll see in the near-term.

Q: What role will standards play in speeding adoption?

There are different types of standards that concern how tags and readers communicate or how readers will communicate with software. We've now gotten a standard protocol between tags and readers to drive interoperability. Next will be [a standard protocol between] readers and software and next [a standard protocol for] data sharing between companies. There's still quite a bit more work here.