C-level executives in Australia are embracing the RFID dream but IBM's Asia Pacific supply chain leader John LaVacca admits there will be plenty of IT challenges along the way.
Presented at an IBM roundtable this month this dream shows a truck with tagged items gliding through warehouse gates where all tags are read and accounted for. With such great stock visibility, store shelves are never empty.
There are no product shortages in this dream and the tags are still active when the shopper arrives home; the tags busily collect data while shoppers stock their Internet-enabled fridge.
With more than a dozen local pilots are under way in Australia, LaVacca expects case tagging to be widespread by 2005 and individual items tagged by 2007.
He estimates between 40 to 70 per cent of warehouse labour costs are spent on recordkeeping and that tags will address the costly burden of human error in manual stock-keeping processes.
While business executives are pushing staged rollouts over the next 12 months, LaVacca admits there is some supplier resistance which is why proof of concepts are still being tackled internally.
This is no easy challenge. IBM research shows an estimated 44 per cent of suppliers are not willing to spend money to comply with this RFID vision. However, the reality is that suppliers cannot say no to the likes of a Wal-Mart or their products will disappear from shop shelves.
While chip prices have dropped sharply they are still expensive ranging in price from five cents to more than $1 depending on their use and whether they are active, passive, read-only or memory tags.
LaVacca said industries leading the charge are pharmaceuticals, retail, transport and manufacturing but the real challenges will be implementing standards and managing the data.
As the pilots are seen as a competitive advantage, LaVacca was unwilling to speak about specific customers but an IBM customer lists include Target, L'Oreal, Philips, Kimberly-Clark and Gillette.
IBM has also prepared a series of whitepapers with 35 companies including Johnson & Johnson which were undertaken with the Auto-ID centre which is developing RFID standards.
Headed by Professor Peter Cole, the Auto-ID centre is located at the University of Adelaide and joins other labs set up in Japan, China, Switzerland and the UK and boasts more than 100 industry sponsors (www.epcglobalinc.org).
Professor Cole likens the privacy concerns surrounding the chips to Hollywood science fiction films and the introduction of barcodes in the 1970s.
"Privacy issues will have to be addressed before there is widespread adoption, but it won't require legislation just education," he said.
Despite the disconnect between suppliers and retail, IBM's Asia Pacific wireless leader Will Duckworth is optimistic Australia will be an innovator in the RFID space.
"When it comes to application use and the kind of trials being done here, Australian customers are much more diverse than elsewhere in the world. While more than 60 per cent are still looking at tagging at the case level, individual tagging is still a few years away," Duckworth said.
In its simplest form, he said, tags are being used to track assets within organisations, but even as a tracking device Duckworth has already seen big savings.
For example, a UK brewery has $800 million worth of beer kegs, a substantial asset with hundreds of kegs disappearing each year.
Duckworth said tags have solved the problem of missing kegs which was costing up to $20 million per year.
One Australian organisation that is known to be a big RFID fan is the Department of Defence, but officials did not return calls by print deadline.