The U.S. Department of Defense wants to leverage radio frequency identification technology that's being developed for use in commercial supply chains. But a Pentagon official this week said the RFID tags used by the military must conform to upcoming specifications from the International Standards Organization.
In contrast, Wal-Mart Stores Inc. and other corporate users have said they plan to adopt an electronic product code standard that's being devised by EPCglobal Inc.
Some suppliers and analysts voiced concerns that the use of different standards could result in higher costs for companies that have to meet mandates from both Wal-Mart and the DOD to start putting RFID tags on shipping pallets and cases by January 2005.
Larry Kellam, director of supply network innovation at Procter & Gamble Co., said there would be "a significant cost impact" if the DOD and corporate users don't agree on a common standard. IT expenses would likely increase, as would inventory and product-handling costs, he said.
Kellam added that different standards would also make it harder to meet a goal of reducing the cost of RFID tags to as low as five cents each, the level Wal-Mart wants to see. "Tag costs would still never get as low as with a single, global standard," he said. P&G is among the top 100 suppliers of both Wal-Mart and the DOD.
The Pentagon this month said that all of its 23,000-plus suppliers will be required to use passive RFID tags to help military officials identify and track more than 45 million line items. That followed a similar edict issued by Bentonville, Ark.-based Wal-Mart to its top 100 suppliers in June.
The military would like to support the EPC standard, said Maurice Stewart, deputy chief of the DOD's Automatic Identification Technology office. But the Pentagon has "embraced ISO standards, because that is the way we do business," Stewart said. He added that many of the DOD's suppliers have already adopted draft versions of the ISO 18000 RFID standards and that those specifications should provide trading partners with plug-and-play capabilities.
EPCglobal is a joint venture between Uniform Code Council Inc. in Lawrenceville, N.J., and EAN International in Brussels. Bernie Hogan, chief technology officer at the UCC, said he has a hard time understanding why the Pentagon is "so hung up" on the differences between the two standards this early in the RFID adoption process.
Hogan said the standards will likely converge over time, with the ISO 18000 specifications being incorporated into the EPC ones. He added that the UCC is heavily involved in the development of ISO 18000.
EPCglobal last month released the specifications for an RFID-based EPC network and supporting technology. The EPC standard is much narrower in scope than the ISO's and doesn't take into account the use of different frequency ranges, which the military requires, said Steve Halliday, an analyst at consultancy High Tech Aid in Gibsonia, Pa.
Halliday, who expects a final version of the ISO standard to be released in a matter of months, said that failing to find common ground on the issue would have "disastrous" consequences for the DOD's suppliers and corporate supply chains.