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Taking a Pragmatic Approach to RFID Deployments

According to AMR Research's Dennis Gaughan, many companies are starting to develop a more pragmatic, targeted roadmap for how to implement RFID.
Jun 13, 2005This article was originally published by RFID Update.

June 13, 2005—Anyone who has followed the market for RFID technology over the last few years has seen some pretty dramatic highs and lows. This is to be expected with any emerging technology; it happened with wireless and the internet before that. The mandates from large retailers and the US Department of Defense have altered the market maturation for RFID when compared to other emerging markets, effectively accelerating the natural evolution of technologies and standards.

A lot of the early approaches to RFID deployments and certainly all the initial hype surrounding the technology were about the transformational nature of RFID technology. The application of RFID tags to goods as they moved through the supply chain would bring unprecedented visibility and allow companies to respond in real time. This broad, transformational application of RFID may ultimately be the deployment model but it will likely be 8-10 years before the majority of companies have reached this scale of implementation.

The current state of technology has made this grand vision for RFID unrealistic today and companies across all industries are looking at taking a more targeted, pragmatic approach to identifying potential RFID uses and limiting the scope of deployment. Feedback from many consumer goods companies is that retailers are becoming much more open to discussing the right application of the technology for both parties; a very encouraging sign. So where do we see this new pragmatic approach being applied?

Item Level Tagging
In a somewhat ironic turn of events, AMR Research has seen more companies exploring item level RFID even though we are still light years away from the mythical five cent tag. While case and pallet tagging is still not delivering ROI, companies have identified certain SKU’s where the value of visibility at the item level makes even more sense. This is especially true for seasonal items, high value accessories and sporting goods, and entertainment items like DVDs and video games. We have seen some very promising results specifically for the last category.

Short Term Tagging
Companies are working with their retailers to focus RFID work around specific promotional items or tagging display units so the manufacturers have visibility that their promotions (which constitute as significant spend for consumer goods companies) are being carried out appropriately. This approach is also being used for rolling out new products to help suppliers understand the impact of new products by retailer and geography.

Closed Loop
Lost in all the noise regarding cross supply chain initiatives is the use of RFID to improve internal operations. Applying RFID tags to track assets, even more robust passive tags that can monitor environmental conditions, are starting to deliver very positive results. Applying tags to re-usable containers to track work in process (WIP) during manufacturing is also yielding returns. In fact, one customer reported that their RFID project to track WIP will not only pay for itself but for the cost of customer compliance.

Conclusion
The grand vision for supply chain transformation through RFID is not gone forever, for many it will be an important element in any company’s journey to implementing a demand-driven supply network. However, companies are starting to develop a more pragmatic roadmap for how to get there.
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