Study: RFID saves money, displaces workers

SAN MATEO, Calif. — As companies spend several billion dollars over the next three years installing inventory-tracking technology, the financial benefits they reap from increased supply-chain efficiency will be at the expense of millions of displaced workers, a research firm said Wednesday (June 30).

Manufacturers are expected to spend as much as $5 billion over the next three years in hardware, software and services related to data-collection technology, radio- frequency identification, Yankee Group said. In deploying RFID, however, 4 million jobs in the U.S. alone are expected to vanish.

"Nothing is going to happen overnight, but there's 4 million people who carry around barcode scanning devices today, and that function is going to change and ultimately be eliminated as RFID is introduced into the market," Yankee analyst Adam Zawel said. "But it will take a decade or more before the move from barcodes to RFID is complete."

Not all the workers affected by the technology shift will lose their jobs, since others will be created within the new supply chains. However, efficiencies driven by technology will ultimately mean fewer jobs.

"Overall, the idea is to have these operations take place without a lot of human intervention," Zawel said. "The migration, however, may be slow enough that it won't disrupt labor significantly."

RFID technology is being deployed in warehouses, factory floors and retail outlets to track goods through the use of electronic tags, which can reduce costs and improve sales by bringing supply closer to actual demand, proponents say.

An example of the impact RFID is expected to have on retail workers is on the store floor. Today, people stocking shelves use barcode scanners to track store inventory. The technology, however, does not provide a way to check inventory in a storeroom, without leaving the store floor. RFID, on the other hand, would enable a worker to use a handheld computer to check for a customer whether a store has a particular product in the back or in another location.

Driving rapid adoption of the technology are mandates from Wal-Mart Stores Inc., the world's largest retailer, and Target Corp., which are requiring their largest suppliers to use RFID to track pallets and cases of goods in 2005. Food and drug retailer Albertsons Inc., the Defense Department and other organizations, have also launched initiatives.

Over the next three years, suppliers are expected to spend most of their money on RFID infrastructure, which means a lot of the money will find its way to companies that provide consulting and systems integration services, Yankee analyst Michael Dominy said. Manufacturers are expected to spend $3 billion on RFID technology and services in 2007 from $500 million this year.

Accenture Ltd., Computer Sciences Corp., Deloitte Touche Tohmatsu and IBM are among the technology consulting companies expected to benefit the most from initial RFID deployments, Dominy said. Large software vendors, such as SAP AG, Oracle Corp. and PeopleSoft Inc., are also expected to benefit, along with more specialized software companies, including Manhattan Associates Inc., Manugistics Group Inc. and RedPrairie Corp.