Then Analyst Jeff Woods was Mostly Spot on in Predicting Disillusionment Just as Walmart Mandate was Getting Started

It was 2004. The Walmart RFID mandate was just beginning. The RFID hype machine may have been at its apex.

That's when Jeff Woods, then a smart young analyst at Gartner (now an executive at SAP), wrote a rather interesting research note offering a cautionary if nevertheless long-term positive view of RFID. The note was as titled "Prepare for RFID Disillusionment," a reference to Garnter's well-known technology hype cycles, which track how new "solutions" invariably follow a path ofreaching maximum hype, only to fall into a "trough of disillusionment," hopefully to eventually reach a "slope of enlightenment."

Supply Chain Digest Says... 2018 was a long time out in 2004. But it turns out Woods might have been more accurate if he had cited 2028 instead. What do you say? Click here to send us your comments Click here to see reader feedback

Let's take a look at see what Woods wrote in 2004 – and how it relates to where we are today with RFID.

"In the short term, radio frequency identification (RFID) cannot live up to the promises that have been made for the technology. When this fact becomes obvious, RFID users will experience the inevitable disillusionment," Woods wrote, in perhaps the most prescient prediction a supply chain analyst has ever made.

That disillusionment began in force not long after, and the Walmart mandate that drive the hype was shut down by 2008.

Woods also noted that "If your justification for exploring RFID is that Walmart and other commercial leaders are using the technology, begin shifting your internal message immediately to avoid being caught in the coming RFID 'downdraft.'"

What downdraft?

"Get the word out among executives and managers in your organization that RFID has been tremendously overhyped," Woods wrote.

That was a pretty bold statement to make at the time – but right on, at least in terms of RFID in the supply chain.

Woods also recommended that companies should "Prepare to meet RFID project deadlines mandated by customers and trading partners with minimally disruptive and inexpensive processes."

That last recommendation was especially spot on. Those companies - such as Kimberly-Clark to cite just one of many examples - that invested heavily in RFID capabilities and research soon enough almost all of that money turning out to be wasted in the end.

In fact, the significant number of the Walmart top 200 and then 300 suppliers that basically ignored the RFID mandate altogether turned to be the smart ones.

Woods did recommend that companies "have a written RFID plan ready to share with your board and senior management to show that you've completed an in-depth assessment of RFID."

That, it turned out, was not really necessary for most, but understandable advice at the time.

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One of the most interesting aspects of the Walmart mandate had to do was whether there was anything for suppliers from the "investment" in RFID. Many companies in fact pushed back on Walmart because they only saw big expense and no return.

"An easy way for many suppliers to adopt RFID seemed to be to leverage their largest customer's business case. However, Walmart's suppliers have gone through a complete turnaround since their initial experiences with the technology," Woods wrote in 2004.

As Gartner had started getting calls from Walmart suppliers getting word of the coming RFID mandate, it was hearing mostly positive sentiment from suppliers confident they could find a way to get value from RFID compliance.

"This misunderstanding was not the fault of the individual companies involved, and it was certainly not Walmart's fault, because Walmart has been realistic about the technology, Woods wrote, adding that "However, RFID was being portrayed in the press as significantly more mature as it actually was."

Here, SCDigest will take a differing view. Walmart's story on the value to suppliers changed several times. Walmart ignored the advice of Procter & Gamble, which argued Walmart should start with "advantaged' products for which there was a clear ROI, not all SKUs from the get-go, including lower value SKUs where the returns were dubious.

Blaming the press for the hype was also an easy way out. The press around RFID simply reflected what technology companies, consultants, some academics, and Yes Walmart were saying – and that was that RFID was soon going to change the supply chain world.

The reality arrived soon enough. Woods said that by Q1 2004, , Gartner began to notice a marked change in Walmart supplier sentiment.

"The suppliers started asking questions such as, "Are we the only ones who can't find a business case? At this point, our only business case is to satisfy Wal-Mart." Gartner has not found a supplier with an internal operational justification for RFID that is willing to explain what its internal use case would be," Woods said in 2004.

That is really saying something, though clearly P&G, Kimberly-Clark, Unilever and a few others had developed strong RFID business cases – though for a different deployment model than Walmart wound up using.

"Walmart might be able to get enough benefits from RFID to bear the total cost of the RFID tags on its own, but this remains to be seen," Woods added. "Without seeing the actual data that will be generated by the [initial] Dallas trial and testing it against some planning algorithms, it will be impossible to predict whether this will be a success until Q2 2005. For its part, Walmart has always committed to being a good, collaborative trading partner that pushes only win-win business cases. We expect the company to change and adapt its strategy based on what's successful and what isn't."

Here Woods was too optimistic. As noted above, Walmart took an overly broad approach instead of focusing on the areas where key suppliers said there was value – and then couldn't even execute the RFID program for promotional displays, for which P&G said there was an overwhelming ROI.

Woods then cited one one distribution organization that spoke to Gartner about its experience with RFID tags, a company said to have an in-depth of understanding about bar code technology.

Woods said this company had tested RFID in almost every process in its business, and has concluded that there is nothing it can do with RFID that it can't do faster and more accurately with bar coding. That is, it concluded that, for its processes, even if RFID cost the same as bar coding, bar coding would still be the superior technology.

"This doesn't have anything to do with the cost or maturity of the technology - it involves the suitability of RFID for different data-collecting processes," Woods wrote.

SCDigest believes this may be overstating the case a bit – RFID has many advantages over bar coding, though it is more expensive. But the minor level of RFID penetration in distribution and manufacturing – except for some work-in-process tracking mostly using re-usable containers – in general show Woods to be correct.

Woods concludedis note hby writing that "Gartner remains positive about the technology for the long term, and RFID will be one of the most-strategic technologies that enterprises will embrace through 2018."

2018 was a long time out in 2004. But it turns out Woods might have been more accurate if he had cited 2028 instead.

What's your reaction to Jeff Woods' 2004 take on RFID here in 2018? Let us know your thoughts at the Feedback section below.

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