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Innovation

Target Aims Suppliers at RFID

Target has levied its Radio Frequency Identification (RFID) mandate, becoming the latest large and influential retailer to put pressure on the Consumer Products (CP) industry to adopt RFID. While Target’s news provides some direction, many questions remain unanswered.
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Written by Kara Romanow on

Target has levied its Radio Frequency Identification (RFID) mandate, becoming the latest large and influential retailer to put pressure on the Consumer Products (CP) industry to adopt RFID. While Target’s news provides some direction, many questions remain unanswered.

The Bottom Line: Until Target clarifies its program, CP suppliers should not drastically change their current RFID rollout plans geared toward mandates from Wal-Mart and the Department of Defense (DoD).

What It Means: Although light on the details, the memo issued to suppliers suggests a rollout very similar to rival Wal-Mart’s.

Here are some of the plans:

  • Scope--Target will require RFID tags on pallets and cases sent to particular regional Distribution Centers (DCs) by late Spring 2005, with the remaining suppliers complying by Spring 2007. Target has divulged a few details, including exactly which companies are top suppliers as well as which regions will be affected. The Takeaway: Without specific rollout details, it will be hard for suppliers to gauge whether their efforts to comply with Wal-Mart’s plans, which are being piloted in Texas, will be sufficient enough to meet Target’s requirements.
  • Technology--Target is backing ePC standards, requiring Class 0 or Class 1 protocol tags until Class 1 Gen 2 becomes widely adopted--this is when the retailer will migrate to the new standard. The Takeaway: Fortunately, this is the same direction Wal-Mart is taking. The DoD has also stated that it will eventually adopt ePC standards and will work toward the convergence of Independent Systems Operator (ISO) and ePC standards (see the AMR Research Report “The Department of Defense RFID Mandate: Answers to the Frequently Asked Questions,” February 2004).
Questions Remain: AMR Research expects Target to release more details about its expectations in the coming months. Questions remaining include which Target divisions are involved (Target stores only or Mervyn’s and Marshall Fields’ as well), and whether the retailer intends to use RFID to eventually move toward store-level deliveries. Technical details are still outstanding, encompassing issues like how ePC data is to be managed on documents like the Advanced Shipping Notice (ASN) and full pallet reading requirements. Lastly, suppliers will also need more information on pilot plans, lab testing facilities, and any preferred vendor partners. The Takeaway: CP manufacturers should assume that most of their retail customers will ultimately require RFID tagging in the not too distant future and plan their rollouts accordingly. Like Target, many will state their intent before working out all the details.

Conclusion: Most major retailers will likely fall into the fast follower category of RFID adoption, adopting the technology 6 to 12 months after Wal-Mart, in the hopes of not falling too far behind.

While most CP manufacturers are affected by prior mandates, RFID adoption, in general, will increase rapidly as more retailers state intent. Increased adoption throughout the industry will accelerate the pace of development to resolve the technical challenges that remain. Many retailers will start with the supply chain focus like Wal-Mart did, but some will branch out into other areas. Target, for example, imports many home design products and could benefit from customs tracking. However, most companies are likely to stay away from item-level tagging until the cost drops and the privacy hype dies down; no one wants protestors outside of their stores.

AMR Research originally published this article on 25 February 2004.

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