Suddenly, RFID Is Hot

Sep 20, 2010I recently wrote about the optimism expressed by some leading radio frequency identification technology providers during a roundtable meeting hosted by Avery Dennison (see Inside an RFID Industry Roundtable). I've spoken to many RFID hardware, software and service providers in the past few weeks, and virtually all have indicated their business is picking up. This is true for providers of both passive and active technologies.

A representative of one tag manufacturer, knowing I subscribe to Geoffrey Moore's theories of technology adoption (see The (RFID) World According to Moore, Moore Has Spoken—Were RFID Vendors Listening and Geoffrey Moore Discusses RFID Adoption Strategies), said, "I don't know if we're in the tornado, but the wind sure is whipping up."

We're getting more questions submitted by end users to our Ask the Experts forum, and a lot of people are calling me directly for advice on a particular application, or about which type of RFID to use or which vendors to engage. Last week, for example, I spoke to a gentleman who works for a U.K. apparel company that is building a new factory in India and wants to RFID-enable the facility from the start. I also spoke with a gentleman selling Oriental carpets who wanted advice on tags, as well as with the VP of operations at a company that manufactures security equipment, who was seeking to understand the business case for using RFID in his operations.

This is not being driven by a rising economic tide, so what's happening? I can't say for sure, but I get the sense that projects put on hold in late 2008 and 2009 are now getting the go-ahead, and new projects are being approved because companies understand that revenue is likely to be flat this year and next year, and possibly in 2012 as well. The blow to the economy in 2008 was huge. Trillions of dollars of wealth were wiped out, and millions of people became unemployed. Even those with jobs are spending less to pay down debt, so there is little consumer demand to drive the economy.

With revenue flat, the best way to increase profits is to cut costs. And that's where RFID comes in. Companies are considering the money they waste replacing lost containers, tools and other assets, and want to do a better job of tracking them. They look at the labor that goes into managing their inventory and believe (rightly so) that RFID can help them reduce it. They know how much inventory is being stolen in the supply chain, and they want to stop that theft.

There is another thing I notice about the current interest in RFID: Almost no one asks me about performance issues. They assume RFID works, and that it works well. In fact, they assume the solutions are more developed than they actually are. I often have to explain to end users who call me that there isn't an off-the-shelf product available that will do what they want to do, and so they need to work with a good systems integrator to create it.

I don't think we are in a tornado—Moore's term for a period of rapid growth in which every company adopts a technology—yet. For a tornado to occur, you need a global standard, a compelling business problem that the new technology can solve, a dominant technology provider (a "gorilla," in Moore's terminology), and a certain level of critical mass.

I don't think we are there yet in any one sector, but retail apparel could be the first to go. Almost all retailers employ ultrahigh-frequency (UHF) EPC Gen 2 RFID technology—it is essentially the global standard. And most retailers are looking to use RFID to solve the same business problem (poor inventory visibility and replenishment), and a group of major retailers are all close to deploying solutions. But no market leader yet exists, though Avery Dennison and Motorola both appear to be emerging as the hardware "gorillas."

In most other industries, companies are utilizing RFID for a wide variety of internal applications that will help them reduce costs and become more efficient. That means everyone in an industry will not suddenly adopt the technology to solve a problem they all share. But those that have already deployed a solution to solve one internal problem will likely add to their RFID infrastructure over time in order to track and manage other things, and they will prove the benefits—which will then encourage others to deploy similar solutions. So I would expect the RFID industry to enjoy impressive growth rates over the next five years. And that means there is good reason for technology suppliers to be upbeat.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog or the Editor's Note archive.