Speaking at a round table discussion hosted by standards body The e-centre, Nestlé business technology manager Paul Roberts said: “The cost is a major concern. However, we don’t want to say an outright no to our big customers and come back with egg on our face when they point out cost savings.”
His comments come as Tesco and Wal-Mart prepare for a massive roll-out of the RFID technology in their chains.
Tesco begins tagging cases travelling between its RDCs and stores from April. Suppliers have been asked to tag all cases that are destined for its distribution centres by 2006.
Some of Roberts’ concerns were echoed by a new survey conducted by The e-centre, which revealed that 47% of supply chain managers thought the costs of RFID outweighed the potential benefits compared to 37%, who believed there was a stronger business case.
Currently, tags cost 20c to 30c each and readers up to $2,500, which made rollout impractical, said Roberts. But he stressed Nestlé would co-operate with Tesco, which plans to start deploying RFID in its supply chain later this year.
However, there was no “big pot of money” to fund RFID and each project required a viable business case, he added.
Nestlé executives needed to be persuaded that the company would recoup costs though improved availability and better supply chain visibility.
Investment in infrastructure, tags, readers, training and software development had to be justified before pilots were scaled up, he added.
Software provider Integrated Product Intelligence, also at the round table discussion along with a representative from Safeway, said costs for manufacturers in implementing RFID could be “horrendous”.
Chief executive Martin Swerdlow said: “There needs to be more of a business case to persuade suppliers like Nestlé and Gillette to part with their bottom line.”
RFID would have immediate benefits for retailers, he claimed. But those to manufacturers were less obvious.
Steve Coussins, chief executive of The e-centre, agreed that RFID involved huge cost for manufacturers.
“They are doing it because the major retailers are driving it. Most are writing it off as research and development spend, the level of cost is not sustainable,” he added.
Safeway business systems manager Andy McLean revealed Safeway had scheduled a fast-track rollout of RFID for winter 2004. But that project would now depend on the priorities of Morrisons, which takes over Safeway on Monday (see story on the right).
The Grocer news team