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Dallas Emerges As Power in Latest Technology Project

Posted on: Tuesday, 19 October 2004, 12:00 CDT

Oct. 17--Wal-Mart Stores Inc.'s latest technology project has brought economic energy to North Texas.

The retailer is using the Dallas area as a testing ground for a technology called radio-frequency identification, or RFID, fueling a mini-industry of start-ups and big technology companies that are helping clients with Wal-Mart's project and other RFID work.

Wal-Mart is asking its suppliers to start attaching radio-emitting tags to the crates and pallets of products they ship to the retailer's distribution centers.

Wal-Mart can use scanners to automatically detect when boxes enter and leave the centers, giving it a better way to track its inventory.

Dallas-area executives believe the Wal-Mart plan -- and the area's infrastructure of distribution warehouses and supply-chain experts -- could help make RFID an economic catalyst for the region.

"There's the same kind of buzz around Dallas with RFID as there was around Silicon Valley when the Internet was coming," said Shahram Moradpour, senior director for market development at Sun Microsystem Inc.

That doesn't mean Dallas could reach the Silicon Valley's size and influence anytime soon. The economic impact of RFID is difficult to measure, and executives agree it's still tiny compared with other industries.

In a small warehouse near the Dallas/Fort Worth International Airport, Dallas start-up Xterprise Solutions

Inc. is sending boxes of consumer products around in circles on conveyor belts, testing to see whether a radio-frequency scanner will detect them.

Sun Microsystems runs similar tests at a warehouse in Carrollton. International Business Machines Corp. invites executives from around the world to a briefing center in Roanoke to show them how a store shelf could one day detect that it's running low on inventory.

With a dozen or so small companies in the area starting up or swelling their staffs to meet demand, 250 to 300 jobs were created in the last year, said Dean Frew, Xterprise's chief executive. Then throw in the consulting firms and technology giants that are playing a role in RFID and each hiring a few people in the Dallas area.

"If you look at it that way, there are hundreds of people employed here in the RFID space that weren't a year ago," said Mr. Frew, who has about two dozen employees at Xterprise.

The focus on RFID has indirect economic implications, too. The Wal-Mart project has drawn executives from dozens of big retailers to the city, creating business for local airports, hotels and restaurants.

Tim Paydos, leader of IBM's RFID task force, estimated that he has flown to Dallas from Connecticut eight or nine times this year.

IBM has hosted five groups of executives at its 10-employee Roanoke RFID center since it opened six weeks ago.

After Wal-Mart announced its work in the Dallas area, Target Corp. said it would conduct a similar pilot project here. That made Dallas an even more important place for consumer products makers to visit.

Wal-Mart executives are also coming to Dallas more often, though they stick to the company's reputation for frugality.

"We certainly have associates visiting the area more often, but you have to remember we're Wal-Mart," spokesman Gus Whitcomb said in an e-mail. "We stay two to a room in budget accommodation."

But the area certainly could benefit from the RFID test, Mr. Whitcomb said.

"Our choosing DFW has certainly thrust the metroplex's name into every major news story on RFID," he said. "The connection between technology and Dallas-Fort Worth playing out in papers across the globe probably contributes to a progressive image for the area. Hopefully that will help spur additional economic benefit in the long run."

The next step, executives say, is to seize the momentum from the Wal-Mart initiative and make RFID a lasting part of Dallas' technology industry.

RFID has vast potential for uses outside the retail supply chain.

The North Texas Transit Authority uses RFID so drivers can wirelessly and electronically pay their tolls. It's also the technology behind ExxonMobil Corp.'s Speedpass payment system.

And RFID is being used to track everything from employees and assets to cattle herds.

While Wal-Mart's test may offer advantages for the Dallas area, the jobs and other benefits it brings don't dramatically alter the city's economic position, said Ian Robertson, RFID director at Hewlett-Packard Co., one of the first suppliers to participate in Wal-Mart's tests.

"I don't think it necessarily changes the people, the labor force profile, at all," he said. "It's still such a young industry. Although there isn't a great deal of RFID-related companies in Dallas today, that doesn't necessarily hold true for tomorrow."

Executives expect RFID companies will experience a boom-and-bust cycle similar to those of other new industries, but that the technology will thrive for years to come.

"We haven't seen maybe even half of the RFID start-ups happen," said Steve Roemerman, chief executive of Incucomm Inc., a venture and consulting firm that's investing in Xterprise.

Dallas does have competition for the title of RFID Capital.

The standards behind the technology's retail uses were developed at the Massachusetts Institute of Technology, and much of the engineering and physics work around RFID takes place in the Boston area.

Other big distribution hubs such as Chicago and Atlanta and traditional technology centers such as the Silicon Valley also have plenty of assets.

But Dallas has a unique profile that may help it sustain the momentum from Wal-Mart. It's the intersection of shipping traffic for much of the southern half of the United States, with a deep pool of workers trained in the art and technology of tracking inventory around the world.

Although much of the work on the Wal-Mart project is technical, its suppliers also need help figuring out how to use the data that RFID tags generate to make themselves more efficient. Shipping and logistics experts are needed to sift through that information.

Dallas has a long history of work on wireless technology, emanating from Texas Instruments Inc. and telecommunications companies in the northern suburbs. TI has an RFID unit that makes chips for the Speedpass and other applications, and some of its employees, including Mr. Frew of Xterprise, have gone on to start or join other RFID businesses.

Wireless engineers can't necessarily make the transition from working on other technologies to doing RFID work. But they do understand physics and engineering problems that are useful in the industry, said Mr. Roemerman of Incucomm.

"There are things people who have worked with wireless just intuitively know," such as how radio interference will affect transmissions, he said.

In the long run, though, the Dallas area will probably benefit more from the software and services around RFID than from the sophisticated technology itself, executives say.

"We may not make the actual hardware, but I think our strength is as a mercantile city," said Patrick Seaman, chief executive of the National RFID Center, which is studying homeland security uses for RFID. "We can establish Texas as the world's leading location for logistics and integration of these technologies."

WHAT IS RFID? Radio-frequency identification uses wireless signals to locate objects. A chip that stores data is attached to a radio antenna that broadcasts the information to a reader. The North Texas Tollway Authority, for instance, puts RFID chips in toll tags.

WHAT IS WAL-MART DOING WITH IT? The retailer wants to attach RFID tags to containers that enter its distribution centers and stores. Wal-Mart believes the automatic system will help it sense more quickly when it's running low on stock.

SOURCE: Dallas Morning News research

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Source: The Dallas Morning News

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