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Forecast Indicates Strong RFID Demand by Heavy Manufacturing

Frost & Sullivan expects the market for RFID applications for automotive, aerospace and industrial products manufacturers to grow to $225.7 million in 2012.
By Beth Bacheldor
Sep 15, 2006Although the retail sector continues to be one of the sweet spots for RFID in terms of both market size and growth, other sectors are gaining traction. In particular, the combined market for production and logistics RFID applications in automotive, aerospace and industrial products industries is expected to grow from $71.3 million in 2005 to $225.7 million in 2012, according to a new study released this week.

Research and consulting company Frost & Sullivan estimates the sizes of the individual markets (which equal the RFID revenues generated within each sector) in 2005 to be as follows: $29.2 million for automotive, $14.5 million for aerospace and $27.7 million for industrial products. During the next six years, the expected annual compound growth rate (CAGR) is 18.8 percent for the automotive market, 23.1 percent for aerospace and 13.3 percent for industrial manufacturing.

The study, entitled "North American RFID Markets for Automotive, Aerospace and Industrial Manufacturing," considers manufacturing and logistics applications within each vertical segment and includes revenues from RFID hardware, middleware and software licensing fees, integration and installation charges, service agreement costs and maintenance fees. The study was conducted between January and April 2006.

In comparison, a 2005 report by Frost & Sullivan determined revenue in the RFID retail market to be $400.2 million in 2004, a figure expected to grow to $4,169 million by 2011 (see Report Says Retailer RFID Spending Passed $400 Million). The firm estimates the CAGR for the retail supply chain to be 39.8 percent between 2004 and 2011.

There are a number of events driving growth among the automotive, aerospace and industrial manufacturing sectors. Topping the list is the trend toward lean manufacturing, a methodology that attempts to drive all waste out of manufacturing processes by employing such tactics as just-in-time inventory to ensure goods arrive for production when needed rather than ending up as inventory. Other tactics used include kaizen, a Japanese term that refers to continuous improvement, and kanban, the Japanese term for signal, which establishes a "pull" instead of "push" system of moving goods through the factory.

As part of their lean-manufacturing initiatives, many manufacturing companies outsource various operations within their supply chains. "RFID enables real-time visibility of inventory, thereby ensuring integration of operational control across diverse manufacturing and logistics points," says Frost & Sullivan research analyst Priyanka Gouthaman. "Real-time tracking of assets across different locations and production sites also ensures increased productivity and cost-effective allocation of resources."

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