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Forecasts for RFID in 2006

Will RFID reach the tipping point this year? It might, but one thing is for sure—this will be the year when people realize RFID can do more than track boxes in the supply chain.
By Mark Roberti
Jan 02, 2006Each year for the past three years, I have written editorials suggesting it would not be the year radio frequency identification took off. This year, I'm not so sure. I think companies still have a lot of work to do to RFID-enable their supply chains. The manufacturers that are among the leading early adopters have begun to quantify the costs and benefits. Much of this year will be spent getting back-end systems in place and learning how to use the data to support business process change that will lead to a return on investment.

Providers of RFID inlays and labels also have a lot of work to do. Makers of RFID labels tell me as much as 20 percent of the Gen 2 EPC inlays they are receiving don't function. They have to test the inlays, remove the bad ones and test the finished labels to make sure they can deliver functioning labels to their customers. That drives up the price of labels considerably.

Another question that arises is how well Gen 2 labels will interoperate. Will all Gen 2 interrogators be able to read tags with Gen 2 chips from Impinj, Philips Semiconductors, Texas Instruments and other chipmakers? Theoretically, all EPC Gen 2-compliant interrogators should be able to read all the chips, but slight differences in the implementation of the standard in the chips can lead to interoperability problems.

Because end users have so much work to do to get systems in place that will drive benefits, I don't see the volumes of tags consumed in the open supply chain ramping up until late in the year, at the earliest. We may reach the tipping point in late 2006, but volumes won't start to rise significantly until 2007. My best guess, then, is that 2007 will be the year RFID takes off.

That said, I think 2006 will be the year—and please excuse the cliché—that people start thinking outside the box. For too long, RFID has been seen simply as a technology for tracking goods in the supply chain. I think it's fitting that our first magazine cover story for 2006 will be about embedding RFID in products to make them smart, more useful or easier to maintain and recycle. For that article, I interviewed Hagen Wenzek, leader of the global electronics team at the IBM Institute for Business Value, a unit of IBM Business Consulting Services.

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