Radio Frequency Identification (RFID) technology can track individual items, not just pallets or cases of consumer goods headed for retail shelves. Of course, wanting to follow a single good at every point along your distribution chain has never been a question for your large apparel company. You know that RFID offers tantalizing efficiencies, from reduced theft and out-of-stock losses to improved warehouse stocking and insight into customer demand. But the return on investment and costs of RFID tags are another story, and those reports of 50% tag-read accuracy rates make you downright nervous.

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You have to deal with that nervousness. "You can't afford to sit on the sidelines," says Jim Marshall, a general partner who tracks RFID technology for Menlo Park, Calif.-based Selby Venture Partners. Consider a pilot project to test item-level tracking, Marshall says. That way, you can work through the inevitable disappointments and implementation bumps in this technology, which is becoming a supply-chain must.

But keep the test simple. Pick a line of clothing that can be tracked from a single assembly plant and distribution center down to the shelves and display racks of two test stores. You'll need fixed and handheld RFID readers all down the line to follow the credit-card-size tags attached to the clothing. A new application module in your supply-chain management system will make sense of the data, with help from special middleware that pulls the data from the readers.

Keep your expectations in check, Marshall cautions. The accuracy of reading tags on individual items still has a long way to go. That's another reason to keep your pilot closely controlled. According to Royanna Chappell, vice president of marketing for RFID at logistics specialist RedPrairie in Waukesha, Wis., a wave of next-generation equipment will arrive later this year, with improved reliability.

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