Pacific Coast Producers might never have considered radio frequency identification technology had Wal-Mart not mandated in 2003 that its suppliers start tagging cases and pallets of merchandise.

See a slideshow of the Pacific Coast's RFID project.

But when CIO Peter Wtulich took a closer look at the technology, he became convinced that RFID could deliver significant ROI to the $450 million canned fruit company.

"A lot of other companies saw this as a tax on their business, but we saw a way to enhance our business and improve overall as a company that is forward looking and customer focused," Wtulich says.

Adds distribution center manager Jim Farmer, "RFID was out there and we'd heard about it, but we didn't deploy it until Wal-Mart mandated it. But at that point, we decided to really commit to the technology, and we went beyond the mandate to make it a more valuable addition to the company."

Today, Pacific Coast Producers downloads data from Wal-Mart's RetailLink supply chain system to its own Oat Systems RFID software. As a result, Wtulich says, the company has gone from having no way to analyze where inventory is, to having a complete picture. Bottom line: out-of-stocks have been reduced by about 50%.

Pacific Coast Producers represents an important RFID success story, but the company's enthusiastic embrace of the technology is the exception more than the rule.

The more typical reaction of suppliers faced with Wal-Mart's mandate was: "I have to do this now, but what's in it for me? What do you do with the data? What will it look like? Wal-Mart wants me to tag, so I have to manually slap a label on a case and a palette and have a printer at the end of the line," says Michael Laird, an analyst at ABI Research.

Gartner analyst Charles Eschinger adds that the transition to RFID technology has been "a forced march" for most of Wal-Mart's suppliers. "They wouldn't have done it on their own and some have only a bare-bones system."

The money required to implement an RFID infrastructure is one key barrier. Eschinger estimates that smaller companies have to invest $100,000 to $300,000, while the price tag for a large manufacturer could hit $20 million.

And in 2003, when Wal-Mart CIO Linda Dillman shocked the retail world by announcing that Wal-Mart was going to require all of its suppliers (beginning with the top 100) to tag pallets and cases of merchandise with RFID chips, the technology was immature and untested.