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Will RFID Remain a Niche Technology?

I doubt it—and here's why I believe adoption will eventually become widespread.
Posted By Mark Roberti, 11.04.2009
I commented recently on the article "RFID's Uncertain Future," published by IT World Canada (see IT World Canada Gets it Wrong). One thing I didn't discuss was the claim that "the jury is out on whether radio frequency identification will remain a niche technology or have a role to play in data-gathering and decision-making processes."

I'm not sure who's on that jury, but I don't see how one could say that RFID remains a niche technology. In the worst-case scenario I can imagine, technology vendors might stop investing in RFID to improve its reliability. Companies then would not use the technology en masse, so costs would not come down.

That might slow adoption, but it certainly wouldn't stop it. That's because companies have business problems that need to be solved. Way too many assets go missing. Too many tools are underutilized. Inventory accuracy is poor. Products are counterfeited. And promotional displays are not put out when advertising hits. RFID can address these issues—and many more.

It's possible that some other technology will come along to solve these problems, but I don't see anything on the horizon. If you're sending information to and receiving data from an object remotely, you have to use the electromagnetic spectrum—which means ultrasound, radio or infrared. I don't know what research is going on that might lead to a breakthrough in infrared or ultrasound, but it appears to me that the market has already decided radio waves have the most utility for the applications I mentioned above. All of the money and product development is being poured into RFID systems.

Sonitor sells a great ultrasound system that has advantages over RFID for some applications (where room-level visibility is required), but there aren't a ton of companies jumping on that bandwagon. And Scirocco sells an infrared system for remote identification, but again, I don't see other firms moving into the infrared space—and Scirocco is now selling ultrahigh-frequency (UHF) RFID systems.

Technology vendors such as Avery Dennison and Motorola remain committed to RFID. They're investing in creating better tags and interrogators, because they know companies need to eliminate inefficiencies and waste. They know, for instance, that most apparel retailers can only achieve 60 percent to 65 percent inventory accuracy with their current systems. RFID vendors have thus created systems that can increase inventory accuracy to 99 percent—and that, in turn, can increase sales.

So the question becomes: Why aren't more companies investing in RFID if it can reduce inefficiencies? That's a valid question, and there is a wide variety of answers. But consider that RFID is being employed in almost every industry, and in every country. Within each industry, I believe there are forward-thinking companies, such as Airbus, that view RFID as a platform that can be used to manage many aspects of their business that are presently difficult to manage. And there are firms with problems that are urgent enough to push them to adopt a relatively new technology. As these companies prove the benefits, others will quickly follow.

I think RFID adoption is being measured against an artificial bar. The Uniform Code Council adopted a standard for the bar code in 1973. Five years later, fewer than 1 percent of grocery stores were using the technology. In 1981, only about 10 percent were using bar codes, and only a third were doing so in 1984. In fact, almost no industrial companies were utilizing bar codes before the U.S. military began requiring the technology, in 1981.

I've always said adoption will be slow at first, and then ramp up quickly—slow because there are physics, data and business-process issues to address before RFID can work well, and quick because once one well-known company proves the technology delivers big benefits, others will follow suit.

Some might claim Wal-Mart proved there are no benefits to using RFID in mass merchandise retail, citing the fact that the retailer has not yet forced its suppliers to tag all cases and pallets. I can't say exactly what's going on at Wal-Mart, but I do think that's a misreading of the situation.

There are big benefits for Wal-Mart, and the people who work there know that. But the benefits for suppliers aren't there for tracking slow-moving, low-value goods. The retailer has thus been reluctant to force its suppliers to tag, and has been trying to quantify the benefits for those suppliers so it can adopt Electronic Product Code (EPC) technologies in concert with them (see Wal-Mart-Commissioned Study Shows RFID Improves Store Inventory Accuracy).

The vendor community continues to invest in producing RFID systems that are better, less expensive and easier to deploy, which makes adopting the technology less risky for end users. It's only a matter of time before active and passive RFID systems catch on, and fast followers adopt.

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 click here.

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