Pentagon officials refining requirements for smart tags on military shipments.

The Defense Department is banking on the success of a new smart-tag technology to improve the management and tracking of shipments moving in and out of major depots.

Although the electronic-labeling technology--known as passive radio-frequency identification--continues to evolve and has yet to be perfected, the Pentagon and retail giants such as Wal-Mart are hoping that their extraordinary buying clout will bolster manufacturers' investments in passive RFID.

Beginning in January 2005, Defense Department suppliers shipping repair parts, clothing and other military gear to Defense Logistics Agency depots in Pennsylvania and California will be required to identify the contents of every pallet with a passive RFID tag.

RFID tags electronically store information about the contents of a shipment, making it easier to sort and track the equipment during transportation. A scanner or reader device is needed to retrieve the data.

Although the Pentagon is just now beginning to introduce the passive RFID technology, it has been a user of active RFID tags for decades. Active tags contain an internal power source, enabling the tag to hold more data and providing a longer "read" range. Passive tags are a much newer technology. They have no power source, hold a minimum of data and have a shorter "read" range.

The Defense Department has embraced the passive RFID technology, because the tags are, at 40 cents each, much cheaper than the active tags, which cost at least $120 each. Active lags are used on large shipping containers. The passive tags will identify the contents of warehouse pallets.

The most recent Defense Department policy, released in late July, will require suppliers to attach passive RFID tags on cases and pallets by January 2005. The mandate only applies to shipments made to Defense Logistics Agency depots in Susquehanna, Pa., and San Joaquin, Calif.

Certain shipments of raw materials will be exempted from the RFTD policy. These include bulk commodities--sand, gravel, liquids, concrete, coal and agricultural products--that are shipped in rail cars and tanker trucks. These materials interfere with the radio signals.

The RFID tags will be employed on an experimental basis for the time being, even though the plan is to expand the technology to all defense depots in the United States and eventually to overseas installations, said Alan Estevez, assistant deputy undersecretary of defense for supply chain integration.

It is unlikely that any shipments to Iraq will require passive RFID tags, at least for the foreseeable future, Estevez said in an interview.

"If we did something in the field, it would be on a pilot level," he said. "I don't think Iraq is where we want to do our experimentation."

The technology is too complex for field operations, he explained. "You need some technical expertise to set up the network. You need readers, you need to build connectivity to the data systems to provide meaningful data.

"We want to gain that experience in the U.S.," said Estevez. "We want to learn those lessons here before we start going into Iraq given the current operational conditions."

Estevez insisted that it's premature to predict how successful or how widespread this technology will become. "Until we have some hands-on experience in implementation, it's still theory," he said. "I want to put together a solid case, show results of our initial implementation."

Both the Pentagon and Wal-Mart have adopted the Electronic Product Code passive RFID tags, called EPC class 0 and class 1. Each requires a different reader, but many vendors now are supplying readers that work with both cards.

The commercial industry eventually warns to move to a more sophisticated tag, called UHF Gen 2, that is expected to become a worldwide standard. But the Defense Department wanted to go ahead with the EPC cards, because it is not yet clear when the UHF Gen 2 technology will be available.

"This is evolving in the commercial sector," said Estevez. "We are on par with the commercial world in implementation."

Wal-Mart also set a January 2005 deadline for its top 130 vendors to use RFID tags for all shipments sent to the retailer's two major distribution centers in Texas.

Industry experts, meanwhile, question why the Pentagon would rush to mandate the RFID tags before the commercial industry adopts a universal standard.

"The lack of standards is a serious impediment," said Mike Sheriff, chief executive officer of AirGate Technologies, a company that advises commercial manufacturers on RFID technology.

The UHF Gen 2 is one to two years away, Sheriff said. The Class 0 and Class 1 tags are what's available today, but still have lots of quality problems, he noted.

Up to 20 percent of the smart tags are "dead on arrival," he said. The reason is that the technology is still somewhat immature. Manufacturers continue to grapple with how to attach such small antennas on computer chips.

Both the Defense Department and Wal-Mart said they want to see a "100 percent read" on every pallet, but that is not likely to happen, said Sheriff. "There are issues with readers and antennas.... Vendors need to make major investments in infrastructure."

It is understandable why the Defense Department and Wal-Mart are making a major push, he said. They want the technology to succeed and become mainstream. "The are putting the best face on it, until the technology can fully deliver."

Broadly speaking, "there is no doubt that the technology offers great improvements in the supply chain," Sheriff said. "But it's an emerging technology. It's not done elegantly yet. Organizations have to he prepared for a bumpy ride."