RFID's First Real Hurdle: Bar CodesRFID's First Real Hurdle: Bar Codes

It's standards inertia and not consumer privacy worries that will hold back early adoption of radio-frequency identification, according to a panel discussion Tuesday at the information Spring 2004 Conference.

Those fears could create turmoil next year, when companies start to load value-added data on the tags. Right now, "it's a closed loop currently for RFID between our distribution partners and us," said Sherry Aaholm, senior VP at FedEx Corp. "We expect to deal with whole different levels of privacy and security [concerns] next year when we make much more information available through radio frequency."

Gene Alvarez, a technology resource services analyst at Meta Group, said companies investigating RFID are just trying to ensure that accurate information makes its way through the supply chain. "They attach a label on the box facing in, and it's damaged from the fork lift," he said during the RFID Reality Check panel discussion. "They install it facing the outside, and it gets pushed off."

Many RFID projects, driven by Wal-Mart Stores Inc. and Department of Defense mandates, will take off this year. "Companies are conducting pilots now and plan to find the business case nine months from now," said Eric Peters, executive VP of strategy and business development at logistical-software maker Manhattan Associates Inc.

According to Meta's Alvarez, the money being spent investigating and testing RFID isn't a serious threat to the de facto industry standard, bar codes.

"It would be monumental for us to replace the bar-code technology," said Aaholm of FedEx, "so we'll start off with RFID as a supplemental offering with some suppliers."

And, if Peters is correct, the cost of the first limited implementations of RFID will impact the bottom line.

"Even if you add just 5 cents to the cost [of a product] per tag, don't expect Wal-Mart to reflect it on their shelves," he said. "Trading partners in that case must fold in the additional costs, like they did when bar-code technology first came out."