A new report raises more concerns for shippers that are worried about the cost of complying with mandates to mark shipments with radio frequency identification (RFID) tags. That report, from market research firm Venture Development Corp. (VDC) of Natick, Mass., says that revenues for the RFID market will be far higher than originally forecast.

Senior analyst Michael J. Liard expects that revenues for RFID software and systems will reach $2.13 billion in 2005, rather than the $1.6 billion originally forecasted. Driving that growth in large part will be rising costs for the equipment needed to comply with RFID mandates. Over time, the recurring costs of transponders (the transmitters that will be attached to pallets and cartons) will represent a sizeable component of implementing an RFID system, Liard wrote in "RFID in the Supply Chain: The Wal-Mart Factor, Part Two: Impact on Near-Term Market Growth."

Companies will also have to make costly short-term capital outlays for RFID readers, software, services, and support. "Roughly two-thirds to three-quarters of the total RFID investment may be attributed to infrastructure costs," Liard wrote. In addition, companies will have to integrate RFID systems into existing software applications such as enterprise resource planning (ERP), customer relationship management (CRM), and warehouse management systems (WMS) to achieve their objectives for shipment visibility throughout the supply chain, he said.

The VDC study joins several others that are raising doubts about the cost and pace of RFID implementation. A study published last year by the consulting firm A.T. Kearney said that RFID technology and systems would cost each distribution center about $400,000. Another study by Forrester Research Inc. projected that it would cost a typical Wal-Mart supplier some $9 million a year to meet the RFID mandate.

Liard also shares those concerns. In the conclusion of his report, Liard wrote, "By pushing an emerging technology that remains clouded by challenges, it is possible that the RFID community is moving too fast toward implementation."