))) Forum Explores Cargo ID Chips,
a Wal-Mart Demand by '05

Alex Daniels
November 6, 2003

Since Wal-Mart announced in June that it would require its top suppliers to attach computer chips to shipments by 2005, the suppliers have scrambled to understand the technology. Wal-Mart promises the devices will make it easier to track products and ultimately increase sales.

Tuesday and Wednesday, about 500 people from four dozen technology companies gathered at the Springdale Convention Center to discuss radio frequency identification systems, in which reader devices use radio waves to communicate with chips like the ones that will be attached to products shipped to the Bentonville-based retailer.

The event was sponsored by EPC Global, an international industry group that is developing technology standards for radio chip systems.

With just over a year left before Wal-Mart's deadline, it is becoming a little more clear what shape radio frequency identification technology — RFID in industry parlance — will take.

At meetings with suppliers and technology companies in Springdale this week that were closed to the news media, Wal-Mart told the companies it would adopt broad industry standards used in the manufacturing of chips and the use of data they generate.

"We were very pleased with the level of standards Wal-Mart is supporting. This is a great step forward for the industry," said Ard Jan Vethman, managing consultant with Cap Gemini Ernst & Young.

But Vethman, who traveled to Springdale from Utrech, Holland, and other participants said there were still matters to be worked out.

EPC Global has adopted standards for communications frequencies that critics say will be difficult to use in Europe and Asia - regions that have different communication regulations and networks.

"Those standards were developed with the U.S. in mind," said Bill Allen, a Texas Instruments spokesman. "It is imperative the industry get together to adopt standards with a global perspective."

Allen said Texas Instruments plans to make a next generation chip that could be used to tag shipments but will hold off until industry standards are developed.

Wal-Mart said suppliers could use chips that comply with the existing standard, but the company suggested they invest in chip readers that could be easily upgraded when a new standard is adopted.

"We are driving for one open, globally accepted communications protocol," said Tom Williams, a Wal-Mart spokesman.

"That doesn't mean deployment is going to be delayed," Williams said. "The timetable is definitely on," he said, reiterating the company's January 2005 deadline for its top 100 suppliers to put the chips on pallet and carton shipments to Wal-Mart.

Williams said Wal-Mart and its suppliers will benefit from the tracking systems, which allow goods to be tracked from the manufacturing floor, through shipping, all the way to the sales floor.

Perhaps most important, Williams said, the systems will help prevent items from being out of stock on the sales floor. Mike Meranda, vice president of EPC Global, said Wal-Mart is working with its suppliers to ensure they benefit from the new systems.

He said Wal-Mart urged suppliers to invest in computer systems that can interpret the data generated by the chips, instead of simply slapping them on shipments.

"It just adds an additional cost, and nothing more," he said. "If suppliers aren't successful, Wal-Mart's not successful."

While Meranda praised Wal-Mart for adopting industry standards developed by EPC Global, he said standards are constantly being revised. Before chip makers and other technology firms invest in fabrication plants, he said, more clarity about the communications standards is needed.

"This is an issue that needs to be resolved quickly," he said.

Even though Wal-Mart's mandate is propelling industry players to adopt the technology, it could be a while before participants agree on the shape the technology takes. "These things can take longer than they should," said Texas Instruments' Allen.

"I don't think we're very close," agreed Marco Ziegler, a partner with Dallas consulting firm Accenture. "By the middle of 2004 we'll have some good standards."