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The Prospects for 2003

Many companies will begin RFID pilots in 2003, says AMR's Peter Abell, but getting tags could be a problem.
Jan 05, 2003Jan. 6, 2003 - Last year, most companies adopted a wait-and-see approach toward RFID technology. That's going to change this year, says Peter Abell, director of research for AMR Research's retail practice. But companies may have a hard time getting their hands on RFID tags.
AMR's Abell

"You are going to see a lot of companies piloting this year," says Abell. "Most companies will pick a small application to start with, so they can get their feet wet. In Europe, we'll see some significant deployments, similar to Marks & Spencer."

Abell expects several companies to announce major purchases of RFID tags, similar to the Gillette purchase reported by RFID Journal on Nov. 15 (see Gillette to But 500 Million EPC Tags). Most companies will want tags that are compliant with the Auto-ID Center's Electronic Product Code (EPC), but that will strain capacity.

"The limited production capacity is a serious problem," says Abell. "Alien Technology is currently making 40,000 chips a month. Gillette purchased 500 million. Do you know how long it would take to fill that order? You are going to see a lot of chip makers jumping in to fill the void."

Abell expects Japanese chipmakers to enter the market for EPC-compliant tags. He also sees end users turning to Philips Semiconductor, STMicroelectronics and other chipmakers. Some will begin pilots with tags that aren't EPC-compliant just to begin learning about how to implement an RFID system.

Readers may also be hard to come by. ThingMagic has teamed with Markem to produce readers, and Alien is working with original equipment manufacturers. But it will take time for these companies to ramp up production, if large orders come in.

The main focus of the pilots will be in warehouse and distribution management. CHEP and Georgia-Pacific are beginning to put RFID tags on wooden pallets and reusable plastic containers, which can be used by companies to track shipments into and out of their facilities. Some companies may begin to track cases from key suppliers, if the chips are available.

Another key area where Abell expects to see RFID implementations in 2003 is in tracking ocean cargo. As of Feb. 1, the US Customs will require shippers to provide detailed electronic information on the consignee, cargo, and container seal 24 hours before a container is loaded at a foreign port. RFID tags will make it easier to match the container to the manifest.

How many companies launch pilots or actual deployments may depend on the state of the global economy. Most economists are forecasting a slow, steady recovery in the U.S., but there is also concern that the economy could lapse into another recession. That would cause some companies to cut back on capital investments. But Abell believes others will continue with RFID pilots or deployments.

"If you can get a return on your investment in a warehouse system within a year, are you going to wait, when it's labor that you are displacing? I don't think so," he says. "People will be looking at the business cases that give them the most bang for my buck. This looks like one of the key areas. You will definitely see early adopters come out towards the end of 2003."

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