Suppliers are now at a crossroad. "The possibilities [for RFID] are endless," says Fontanella, "but companies have to take the next step" to get any value from their investment.

The RFID Paradox, or the Suppliers’ Dilemma

According to several surveys, suppliers are conflicted. More than 50 percent of 250 executives surveyed by Aberdeen Group said the inability to show a value proposition for RFID was the single most difficult obstacle in gaining support for further adoption. The survey also found that

60 percent of respondents claimed RFID holds great potential value for their companies, and two-thirds said RFID would help them create significant competitive differentiation in their business processes.

"The data is still exploratory for us," says Chris Parker, manager of IT infrastructure and strategic planning at the Texas Instruments’ Educational & Productivity Solutions (E&PS) division, which makes calculators and is a midlevel (tier two) Wal-Mart supplier. So far, the RFID tagging of 12 of its products, begun in December 2005, has yet to deliver any big change in Texas Instruments’ supply chain processes or planning. "Right now we’re just testing the waters," says Parker.

"We know we want to do something with [the data]," says Terry Bargy, VP and CIO of Thomasville Furniture, which makes both furniture-in-a-box products as well as more upscale lines and is also a tier-two Wal-Mart supplier. "[But] it still seems to be something that we don’t have our arms around."

Like hundreds of other Wal-Mart suppliers, Texas Instruments’ E&PS group and Thomasville see RFID’s potential to transform their demand planning processes, analysis and warehouse management. "Our thought is, How can we leverage these [EPC serial] numbers, using some sort of data warehouse and drill into the numbers?" Bargy says.

But that seems a distant goal. TI’s E&PS group, for example, can access the EPC data for those 12 tagged products through Wal-Mart’s Retail Link system. But the EPC data E&PS can access is case-and-pallet-level information—not item (or product) specific, which experts agree is where the most benefit for suppliers will come from. "Folks that are on the receiving end of all the benefits of the data [right now] are the people handing out those mandates," says ABI’s Liard.

The ROI of Data

For all that manufacturers and retailers know about their supply chains in 2006, there are still a few black holes that RFID-derived data can fill—for example, chargebacks. It’s not unusual for retailers to claim that they received a different quantity of goods from a manufacturer (say, 90 cases on a pallet) than what the manufacturer believes it shipped (say, 100 cases). Retailers don’t pay for cases they claim they never received. That’s a chargeback. Patrick Sweeney, president and CEO of ODIN Technologies, an RFID integration and software company, says that consumer product companies have entire departments that do nothing but track where the goods could have gone and look over invoices and receipts to fix discrepancies. But because RFID tags have serialized numbering of the EPC data on each case, "there is verification of when these things come in, and the money they spent just disputing these things goes away," Sweeney says, adding that some of ODIN’s clients are doing this right now.