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Recap of the RFID Investor Conference, Part 2

Last week RFID Update attended the 2006 RFID Conference, hosted by investment firm Robert W. Baird & Co. The one-day event catered to the investor community, which was reflected by presentations that tackled high-level topics like Gen2 performance, return on investment, and the "HF vs. UHF" debate.
Oct 03, 2006This article was originally published by RFID Update.

October 3, 2006—Last week's 2006 RFID Conference, hosted by investment firm Robert W. Baird & Co., was a unique one-day event that offered a timely overview of the RFID industry and its progress. Catering as it did to the investor community, the event was devoted to high-level discussion of pertinent themes in RFID adoption today. (Also see yesterday's Recap of the RFID Investor Conference, Part 1.)

By and large, presenters raved about the performance of Gen2 technology. Wal-Mart had previously spoken publicly about Gen2's "step change" in performance over Gen1, and that endorsement was echoed loudly and consistently at the Baird event. In his opening remarks, Baird analyst and event moderator Reik Read cited Gen2's performance improvements as one of the key trends contributing to adoption. Richard Cantwell, Procter & Gamble vice president and chairman of the EPCglobal Board of Governors, said in his keynote that Gen2 "is significantly better than Gen1" in P&G's experience. Many seem to believe that Gen2 could very well vault RFID adoption out of the "science project" phase. The news is only expected to get better as competition heats up among the RFID chip providers. (Recall that Impinj's year-long reign as sole chip provider recently ended, as Texas Instruments, STMicroelectronics, and Philips rolled out their Gen2 chip offerings.)

RFID return on investment was another theme at the event. It was most directly addressed by Cantwell's keynote speech, in which he discussed the compelling business case for tracking promotional displays. According to Cantwell, at any given point 20% to 40% of retail stores are not complying with the placement of promotional displays, which costs CPG manufacturers like P&G millions annually. By monitoring display placement through RFID tagging, manufacturers can ensure that displays are put up and taken down according to schedule, which generally coincides with a cross-media promotional effort. "It's not rocket science," said Cantwell. "Having the displays on the floor when the product is being advertised [on television, etc.] results in greater sales."

Admittedly, Procter & Gamble's vast product portfolio and advertising efforts are the exception not the rule, so promotions tracking might not be the "killer app" to achieve RFID ROI for the majority of CPG manufacturers. But Cantwell made a larger point: promotions tracking was not even an application the company foresaw until they began piloting. "Two years ago we didn't have a clue that display tracking represented the opportunity it did," he said. P&G discovered the business case through experimentation, and Cantwell emphasized his belief that much of RFID's ROI potential is similarly unforeseen and will be uncovered as adoption spreads.

Others noted that many RFID adopters are already developing business cases, but that they are not shared publicly for fear of forfeiting hard-won competitive advantage. "Most of the success stories have not been told," said Dean Frew of Xterprise during the RFID implementation panel. Hopefully some of these stories will be told before year-end, as Baird's Read predicted in his opening remarks. "The ROI discovery process is well underway," he said. (Look for the EPCglobal US Conference in Los Angeles later this month to be the forum where some exciting new business cases might finally be shared.)

Another topic that received considerable attention was the debate about whether high or ultrahigh frequency RFID is most appropriate for item-level tagging, particularly in the pharmaceutical supply chain. The debate had seemed to subside in recent months, but the amount of discussion it received at Baird's event suggests that it is still a simmering issue. Panelists openly disagreed with each other about which technology offers a better solution, and a handful of vendors used their presentations as a platform to argue for one side or the other.

While taking a neutral stance on the issue, Toby Rush of Rush Tracking Systems noted that the amount of investment devoted to UHF could give it an advantage. "The innovation in UHF over the last few years has been nothing short of amazing," he said. Xterprise's Frew noted that the debate is a focus for RFID vendors more than it is for end users, who ultimately care about the business case, not radio frequency characteristics. Read even cautioned that the debate poses a risk to wider RFID adoption; if the industry can't decide on a unified message, the resulting confusion could put off end users to the technology.

Among other risks Read identified were cost, education, and intellectual property issues. As for cost, he said that prices are coming down, but that they need to continue to do so for further uptake of the technology. On education Read said that end users have found RFID to be more complicated than initially imagined. Educating end users -- as well as simplifying deployment -- will be key to spreading adoption. Lastly, while intellectual property isn't the pressing concern it was before Intermec signed on a slew of vendors to its IP licensing program, the industry is "not out of the woods yet," according to Read. Recall that earlier this year Alien sued Intermec on precisely this issue (see IP in RFID Back at Issue as Alien Sues Intermec and RFID Industry Responds to Alien Vs. Intermec).
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