Out of the Trough

May 08, 2006Each year after RFID Journal LIVE!, our annual conference and exhibition, I have written about what the event has revealed about the state of the RFID industry and RFID adoption. Last year, I wrote that end users were more knowledgeable about the technology and more realistic about the barriers to implementation. At the time, there were doubts about whether RFID would truly transform the supply chain (see Reality Sets In). We were in what Gartner calls the "trough of disillusionment," in which the initial hype about a technology gives way to the realization that it can't do everything promised. However, we have clearly emerged out of the trough and are now climbing the "slope of enlightenment," the next stage in Gartner's hype cycle.

This year's event, held this past week in Las Vegas, was our largest yet—attendance grew from 1,600 people last year to more than 2,500 (2,522 to be exact), an increase of more than 50 percent. What's more, 56 percent of registered attendees were from end user companies, and nearly 60 percent had never attended RFID Journal LIVE! before. These statistics indicate RFID is moving well beyond a core group of early adopters.

We asked attendees to answer questions when they registered. A surprising 73 percent of end user companies said they plan to purchase RFID hardware, software or services within the next 12 months. Nearly 30 percent said they plan to spend more than $1 million within the next 12 months. Of that, 9 percent plan to spend $10 million or more, which indicates some companies are ready to begin major rollouts. Another 40 percent expect to spend between $100,000 and $1 million, showing that there's a sizeable group still in or about to begin pilot programs. Several vendors exhibiting at the event told me they had visits from end users who appeared ready to commit to making significant purchases for rollouts.

Adoption is still being driven, primarily, by large companies. About 55 percent of registered attendees were from companies with more than 1,000 employees. But there was also a mix of medium- and small-sized companies (21 percent of attendees were from companies with 100 to 1,000 employees, while 24 percent reported fewer than 100 employees). And more than 130 end user companies sent teams to the event.

Many attendees were high up on the learning curve, and early adopters expressed some frustration that there aren't more companies adopting the technology and engaged in the process of creating standards. "My point of view is that we're already way behind in the implementation [of RFID], and we need to pick up the pace dramatically," said Jim Noble, vice president and CIO of Altria Group, the parent company of both Kraft and Philip Morris.

There were also many end users new to the market who attended the conference to learn what they need to do to put RFID to work. The story newcomers heard this year was far more positive than at last year's event. They heard repeatedly that the technology has matured, that solutions exist and that RFID can deliver real business benefits in specific areas. (No speaker hid the fact that it is difficult to get a return on investment from tagging cases for a customer that has issued mandates.)

This was the first time end users shared specific metrics about the benefits their companies are getting. Dick Cantwell, vice president and head of RFID at Procter & Gamble (P&G), described how P&G tracked Fusion razors during the product's introduction at some 400 RFID-enabled stores. According to Cantwell, P&G enjoyed a 20-percent "sales lift" because the company and its retail partners could use RFID tracking data to make sure the promotional displays were out on the retail floor on time. He said the sales increase more than paid for the tagging of the promotional displays (see P & G Finds RFID 'Sweet Spot').

Alan Estevez, assistant deputy undersecretary of supply chain integration for the U.S. Department of Defense, spoke about the benefits the Marines are getting from using RFID to track material in Iraq. He said RFID has helped the military branch cut the value of inventory in the supply chain from $127 million to $70 million. Average delivery times, meanwhile, have dropped from 28 days to just 16 (see DOD Quantifies Payback From RFID).

It's not just the leading early adopters, though, who are now seeing where the ROI is. Small and midsize manufacturers, hospitals, logistics companies and others presented case studies describing the benefits they've realized from their RFID pilots, as well.

There was a lot of positive energy at this year's event—and with good reason. It's clear to me that the RFID leaders will continue to build on the work they've been doing for the past few years and find more places where they can deploy RFID profitably in their operations. Those just starting to learn about RFID can have a faster road to adoption because the technology is better and the early adopters have shown them where the benefits are. I don't anticipate hockey-stick type growth in the market any time soon, but I do expect to see steady progress.

I'm confident that when we all gather in Orlando from April 30 to May 2, 2007, for our fifth annual RFID Journal LIVE! conference, there will be even more attendees and a lot more companies with positive stories to tell.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below.