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Renewed Buzz around RFID

Mike Witty, analyst with research firm Manufacturing Insights, notes in this guest contribution that despite predictions of stalled RFID adoption as recently as a few months ago, the first quarter of 2006 has seen great strides, and it appears that industry may be coming out of its funk.
Mar 31, 2006This article was originally published by RFID Update.

March 31, 2006—In January, Manufacturing Insights published its 10 predictions for manufacturing in 2006. Prediction number five: RFID costs continue to fall while adoption continues to stall. This prediction was based on two key business factors. First, in the retail value chain, most manufacturers were struggling to find the benefits of mandate compliance and, as a result, the overriding implementation mentality was to take a slap-and-ship approach. Second, other industry segments also appeared to be investing in RFID with a pilot project-based mentality, even though the value proposition for closed-loop, high-value product and asset track and trace initiatives had a tangible business case.

As we enter the second quarter of the year, there is clearly a renewed buzz surrounding RFID, and the pace of adoption is indeed quickening. The factors that Manufacturing Insights sees driving this new trend are:
  • While mandate compliance is still considered a key driver of adoption, as an industry RFID has lost its unhealthy obsession with compliance projects. More companies, including CPG manufacturers and retailers, are aggressively rolling out systems to enable the tracking and monitoring of higher valued products in closed loop systems.
     
  • A number of the early participants in mandate programs are less concerned with the physics or cost of RFID readers and tags. They are actively addressing data integration and process issues as they prepare to move from the pilot to the production phase of their RFID initiatives. These companies are looking for scalable solutions that provide them with the capability to turn the data that is now available using RFID technology into information that improves their supply chain business decisions.
     
  • Item-level tagging is gaining momentum. In addition to the successful pilots that have been run in the pharmaceutical industry to address e-Pedigree and product counterfeiting issues, a number of successful pilots have been run in high value consumer goods industries to address inventory and replenishment issues. The results of these pilots clearly indicate a significant benefit for RFID item-level tagging, especially at the store level, in categories like apparel, consumer electronics, and jewelry.
This upbeat tenor does not mean that there are no challenges ahead. There are a number of issues that we will be watching closely over the next few months including how quickly companies choose to transition to Gen 2 (Wal-Mart is pushing for the transition to be completed by all of its suppliers by mid-year) and which way the pendulum swings in the HF versus UHF debate for item-level tagging.

The fact that Manufacturing Insights will be watching these issues should not to be interpreted negatively, but as an indication that the industry is maturing. In actuality, the industry has made great progress over the first quarter of the year and, as a result, activity is increasing and adoption has not stalled.
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