No RFID revolution until 2010, predicts Gartner

Von Julian Bajkowski

Gartner Inc."s supply chain management (SCM) supremo has poured cold water on claims the great RFID (radio frequency identification) revolution is now upon us, claiming that vendor RFID strategies are still missing the big picture when it comes to supply chain and business process.

Speaking at the Symposium 2004 conference in Sydney last week, Gartner research vice president (ERP and supply chain) Brian Zrimsek warned current RFID deployments remain merely an enhancement to established business processes.

Zrimsek said that despite vendor publicity, compulsory RFID mandates to suppliers such as Wal-Mart has made did not yet meet a critical RFID-centric business process test known as "act-on-fact".

Act-on-fact is when an enterprise in a supply chain is literally "able to execute on an order the moment it comes in" rather than in minutes, hours or days Zrimsek said.

"I don"t think we will see mass RFID until at least 2010. (RFID trophy case) Wal-Mart is working on a tactical (rather than strategic) solution for its supply chain management with RFID. It"s basically another labelling system," Zrimsek said.

However, Zrimsek said suppliers should watch supply chain and sensory technology developments very carefully because heavyweights like Wal-Mart are ultimately seeking to redefine supplier relationships so they held no inventory - only goods on consignment.

"The question is whether you can tag stuff at an individual (stock keeping unit) level so (merchandise is held on) consignment... so you pay the supplier when you sell the product (rather than purchasing the product from the supplier).

"The question is if you can free up (in the case of Wal-Mart) the $20 billion or so of (capital for) inventory and put that into something else. This is the end game for Wal-Mart," Zrimsek said.

In terms of the vendor landscape, Zrimsek warned a chasm still existed between small, specialized supply chain firms and big ERP players when it came to melding fitness for purpose and scalability - naming smaller SCM player i2 and SAP as examples.

"Supply chain has not been a great focus for SAP. They are still very enterprise-centric. When they released the new version of R3 they called it R3 Enterprise... not R3 Supply Chain," he said.

In terms of immediate advice for IT managers, Zrimsek said enterprises should immediately start trialling RFID and other sensory technologies as tactical point solutions, but ultimately be prepared for the uncertainty of the act-on-fact business model.

"Maybe we need a Dr Seuss book called act-on-fact to get it through to (vendor and enterprise) management," Zrimsek said.