Magazine Article | August 24, 2006

RFID Power Play

Source: Field Technologies Magazine

Suppliers will ultimately make the bulk of RFID (radio frequency identification) technology purchases. But, it’s really other organizations that will dictate how fast that adoption occurs.

Integrated Solutions, September 2006

If you talk to end user companies that have to deploy RFID, most believe the technology is rolling out too fast. RFID solution providers, however, have a different take on the subject altogether. Most will tell you the RFID market hasn’t ramped up as quickly as they

had hoped. Obviously, the interests of the end user community and the technology suppliers aren’t identical. For widespread RFID adoption to take place, vendor and end user interests need to be more closely aligned. Vendors have to offer products and services that end users actually want to purchase, not ones they feel compelled to purchase.

According to a recent report by Venture Development Corp. (VDC), this alignment — of vendor products and end user needs — will happen over the next five years in the RFID printer market. VDC’s research finds that RFID printer shipments approached 4,000 units in 2005 for an estimated total revenue of $11 million. Fast-forward to 2010. By that time, the research firm predicts 90,000 RFID printers will be sold, and revenue will exceed       $200 million. That’s a compound annual growth rate (CAGR) of close to 80% during that five-year span.

Those numbers indicate significant growth — at least for the RFID printer market. This type of growth, however, won’t happen unless the end user community softens its stance on purchasing RFID products and services. This will not happen on its own. The pervasive adoption of RFID technology will really depend on the organizations that originally launched compliance initiatives — Wal-Mart and the DoD.

First, Wal-Mart and the DoD need to continue to invest in RFID technology and infrastructure within their own enterprises. Further investments send a strong signal to suppliers that RFID is not just here to stay, but that it’s an increasingly important technology in the supply chain. Additional investments in readers and infrastructure also give Wal-Mart and the DoD access to more data and methods to handle it more effectively. This leads to new business cases for RFID investments, which is really what end users are requesting.

Wal-Mart and the DoD should also continue to expand the scope of their RFID initiatives. Distribution centers (DCs) and retail outlets that are RFID-enabled need to continually come online. And, there should be a road map and timeline for more facilities to become RFID-enabled. Ideally, this guide would be shared with all interested parties. If an ever-increasing percentage of supplier products require RFID labels, that will certainly drive adoption of the technology. After all, it’s easier to justify a slap-and-ship operation for 3% or 6% of your products, but it’s far less palatable when you’re talking about 50% of your shipments.

When people speak of widespread RFID adoption in the supply chain, they typically focus on suppliers and their suppliers. This is certainly apt. There are certainly more suppliers, for instance, than there are retailers. While suppliers will be the bulk of the adopters, retailers (and the DoD) still control the rate of that adoption. By further investing in RFID technology and putting teeth in their mandates, these organizations truly control the intensity with which RFID will be deployed.