More retailers need to adopt radio frequency identification (RFID) tagging in the supply chain if suppliers are also to benefit from the technology.

Consumer goods manufacturers Nestlé and Gillette claim that to benefit from barcode replacement technology, more retailers must introduce RFID so that tagging costs drop.

Speaking at a conference organised by RFID body EPCglobal, Nestlé estimated that it would waste £20m annually by introducing tags across its product lines if only 30 per cent of retailers adopted RFID.

"The manufacturer case in isolation looks weak to say the least," said Chris Tyas, group director of supply chain and IS, Nestlé UK and Ireland.

"The case will be weaker still if RFID is only adopted by one or two retailers."

Nestlé said that the scale of adoption would drive manufacturers' implementation of RFID tagging in the retail supply chain.

Bob Travers, Gillette value chain director for UK, Ireland and Holland, pointed to a "tremendous potential" for RFID, but conceded that it was still an emerging technology.

"The industry needs to drive down costs and bring in common standards for RFID to work," he said.

RFID information must shared by retailers if manufacturers are to benefit from the technology's potential to increase on-shelf availability and slash theft, he added.

Gillette plans to extend its RFID trials this year and introduce RFID tagging for UK retailers wanting to introduce it at pallet level in 2005.

"We will also consider item-level tagging for high-value products," said Travers.

Gillette began pallet-level trials of RFID tagging for razor blades and oral care products with Tesco in February.

Nestlé has been testing RFID tagging at its KitKat manufacturing plant in York, but is still weighing up the viability of the technology, estimating that RFID will cost it twice as much as existing bar code scanning solutions.