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Taking a Bigger Picture Look at RFID
Many RFID Update readers responded with an unshaken confidence in RFID's potential to yesterday's coverage of VDC's bearish article on the short-term RFID market.
Jul 06, 2005—This article was originally published by RFID Update.
July 6, 2005—Yesterday's top story covered a recent article by Venture Development Corporation that was quite bearish on the near-term market for RFID products and services, asserting that for the next three years RFID suppliers should be "prepared to support break-even work, or business that is 10 basis points red." Many RFID Update readers responded to the pessimism with an unshaken confidence in RFID's potential. While there was general acknowledgement that the short-term outlook might not end up as rosily as the hype had led everyone to believe, the long-term growth is undeniable and exciting indeed.
The ROI is simply there for many applications, said many. Wrote one reader, "Several years ago I worked for a contract manufacturer that the cost of goods sold was 80% materials. Year after year their profit was 1.5%, however their "variances" were 1.5% as well. Having an accurate inventory status as well as WIP (Work In Process) costs would have reduced their loss by 1%, and for a $6 Billion company that was significant." This example is reminiscent of Wal-Mart's own calculations (familiar to anyone who has heard Linda Dillman or Simon Langford speak at a conference), wherein even the slightest cost and process reduction results in huge aggregate savings. It was upon this premise that the mandate was launched.
Others wrote in to point out that Wal-Mart, DoD, EPCglobal and all other supply chain-oriented RFID developments have stolen the thunder from other RFID stories that are just as compelling. As the industry at large is myopically watching and waiting for the explosion of passive tag sales, RFID is popping up in all sorts of innovative and ROI-generating applications. A recent InformationWeek article made exactly the same point, leading with "Supply-chain projects spurred development. Now [RFID] chips are turning up in ever-more-innovative uses." The litany is impressive: tagging marathon and triathlon competitors, embedding FIFA-certified soccer balls with tags, wristbands at sporting events, the Big Three credit card companies putting RFID in their cards, tagging casino chips, prisoner tracking, aids for the handicapped, and myriad error- and cost-reducing healthcare applications. A quote from Gartner analyst Jeff Woods sums it up well: "Most business cases for RFID that work well are 100 times simpler than the problems the consumer-goods and retail industry are trying to solve."
There were also responses that squared with the trend in thinking about passive RFID as just another sensor to be used alongside others to gather data at the enterprise edge. (The RFID strategies for both Sun and IBM are predicated on this concept.) "Technologies which encompass sensor data along with GPS and other technologies provide a wealth of functions that have long been anticipated in the business community... Knowing not only where but in what condition product is in, knowing the integrity of a shipment for security purposes, or just maintaining inventories of capital assets will drive business adoption of RFID beyond the mandates making RFID as widely accepted as barcodes are today."
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