Subject: [NEXTEL-1] DoD pumps up RFID effort

From: [email-masked]
Date: Tue, 27 Apr 2004 03:37:20 -0400

DoD pumps up RFID effort
By Ann Bednarz
http://www.nwfusion.com/news/2004/0419dod.html
Network World, 04/19/04

U.S. Department of Defense suppliers should expect to see a new clause
in 
their contracts soon that require the use of radio frequency
identification 
technology. 

Making RFID tagging a contractual term is a key step in the Defense 
Department's RFID adoption schedule. However, there's a lot of work to
be 
done to finalize the agency's RFID plans and iron out suppliers' 
implementation strategies. 

Last October the Defense Department unveiled its RFID policy, which 
requires suppliers to put passive RFID tags (those without an integrated 
power supply) on individual parts, cases or pallets by January 2005. The 
agency expects that with RFID-tagged items and containers, logistics 
experts could more efficiently track the progress of military supplies
en 
route to personnel. 

"The way we fight wars is changing. We need to keep abreast of changes
in 
the way that we do logistics in order to maintain the support that our 
forces deserve," says Alan Estevez, assistant deputy under secretary of 
defense for supply-chain integration. "We feel that the use of RFID 
technology is critical to doing that." 

Estevez took part in a Defense Department summit earlier this month in 
Washington, D.C. The summit's purpose was to update suppliers on the 
agency's RFID plans and get feedback on their implementation progress. 

At the summit, the biggest concern suppliers raised was compatibility 
between the Defense Department's existing unique identifier (UID) naming 
convention and new electronic product code (EPC) identifiers, Estevez
says. 

The Defense Department uses UIDs to distinguish materials that require
life 
cycle tracking - weapons, aircraft parts and big-ticket items that cost 
more than $5,000, for example. Global standards bodies manage the
assigning 
of EPC numbers to be embedded in RFID tags to identify a specific item
in 
the supply chain. 

"Some of our larger UID constructs will not fit on the current tag 
capabilities," Estevez says. The Defense Department plans to work with 
suppliers individually to resolve incompatibilities, he says. 
Meanwhile, "the technology is evolving rapidly, and as the next
generation 
of tags and readers becomes available, we believe that most of those
issues 
will be resolved," Estevez says. 

Analysts are skeptical of manufacturers' ability to keep pace with RFID 
mandates from retailers such as Albertsons, the Defense Department,
Target 
and Wal-Mart. Forrester Research predicts that only 25% of suppliers
will 
meet Wal-Mart's January 2005 mandate, for example. 

Compliance costs
Suppliers facing RFID mandates from the Defense Department, Wal-Mart, 
Target and others will be spending big. Forrester Research estimates it 
will cost a $12 billion supplier that ships 15.6 million cases to
Wal-Mart 
more than $9 million to roll out RFID and fund one year of maintenance. 
Item Cost 
Tags
 $7,594,971 
Hardware $328,668 
Software $183,000 
Consulting and integration services $127,500 
Internal RFID team $314,600 
Tag and reading testing $79,500 
Additional warehouse labor $469,238 
Training for warehouse labor $39,221 
Total $9,136,698 
 
"There is no business case for most suppliers in the short term," says 
Christine Spivey Overby, a senior analyst at Forrester. "The technology
is 
not ready, and there is a lack of deep expertise in the industry to help 
suppliers implement RFID." 

Whether the Defense Department's mandate will launch on time remains to
be 
seen. Estevez says the Defense Department is on track. "We're not
looking 
at any slips in time frames," he says. 

This summer, the agency will release details about the forthcoming RFID 
contract clause for public comment. Provisions of the clause will be 
finalized in August and September, after which it will begin to appear
in 
all supplier contracts, Estevez says. 

Suppliers are onboard, he insists. "They understand that this is going
to 
be a difficult road. There are going to be some upfront costs, but if
you 
do this properly, the upfront costs will come back in an ROI," Estevez 
says. 

Exemptions are not planned, but not impossible, Estevez says. "We're not 
looking at any measure of leniency. Depending on the contract terms and 
depending on the availability of the material, contracting officers do
have 
the ability to waive certain contract clauses. But that is not our
intent, 
and that will have to be done on case-by-case, completely unique basis,"
he 
says. 

Since launching its RFID initiative last July, the Defense Department
has 
been in contact with other agencies including the General Services 
Administration, the Food and Drug Administration and the Department of 
Homeland Security to discuss RFID technologies and coordinate their 
programs, Estevez says. 

Looking ahead, the Defense Department plans to take part in a meeting in 
the next few months with fellow agencies to compare RFID notes and 
investigate ways to achieve a consistent RFID policy - particularly
because 
many of the agencies buy from the same suppliers. "We believe the time
is 
ripe to host an inter-government meeting to talk about what programs 
everyone is doing and try to get us all in sync," Estevez says.

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