CIO —

Wal-Mart’s quest to use radio frequency identification (RFID) technology to track shipments will reach a new milestone in January: The company is requiring 200 of its second-tier suppliers to begin tagging cases and pallets with the chips.

Last year, Wal-Mart pushed its 100 largest suppliers to attach RFID tags to some of their shipments. At the time, the technology was immature, standards half-baked and projects lacked ROI. (See "Tag, You’re Late," www.cio.com/120105.) Not much has changed, but Wal-Mart contends—without revealing any metrics—that the experiment has been successful.

William Terrill, a senior analyst with the Burton Group, says the next 200 suppliers could benefit even more from RFIDs than the large suppliers. He says the smaller suppliers are more apt to run out of inventory in Wal-Mart’s warehouses when items sell more quickly than planned, and there’s no good way for them to track that now. However, the ROI remains uncertain. Terrill says tag prices are still too high to make economic sense for use with high-volume, low-value items.

But a deadline is a deadline. And, notes Kara Romanow, a research director with AMR Research, mandates such as Wal-Mart’s encourage vendors to develop RFID applications—no matter the costs for everyone else.