A Better Year Ahead

By Mark Roberti

Demand for RFID hardware, software and services will be stronger in 2008, but don't expect the volume of products purchased to soar.


Last week, I explained why 2007 was a year of retrenchment for providers of RFID hardware, software and services (see Good Riddance to 2007). This time, I will lay out the trends I see for 2008 and explain why I think next year will be a better one for technology providers, making them better able to meet the needs of end users.

1. Demand for passive UHF tags based on EPCglobal standards will rise, but not soar. There are many suppliers to Wal-Mart, Target, Metro, Tesco and the U.S. Department of Defense that are just doing the minimum—slapping tags on cases and pallets, then washing their hands of RFID. But a small group of forward-thinking suppliers, such as Kimberly-Clark and Procter & Gamble, continue to explore how they can use the visibility EPC data provides to improve how they do business. These companies will continue to consume more tags for tracking promotions and items that are often out of stock.

As these companies speak about the benefits, more suppliers will realize they are missing a huge opportunity by not tracking promotions and high-value or fast-moving products. But it takes time to get the systems in place to turn the data into actionable information, then change business processes to act on the data. So while I expect tag and reader purchases to increase, I don’t think we’re going to see enormous growth.

The one wild card here is the study Wal-Mart is undertaking with help from the University of Arkansas’s RFID Research Center to determine whether it can improve sales across an entire product category. Wal-Mart is asking all suppliers in the test category—air fresheners—to tag cases and pallets of products sent to the pilot locations (see Wal-Mart, Sam’s Club Push RFID Further Along). If the results show significant benefits for Wal-Mart and its suppliers, the retailer could encourage more suppliers to tag more cases.

2. End users will continue to find internal applications attractive. I conducted a question-and-answer session with Mike O’Shea, director of auto-ID sensing technologies for Kimberly-Clark, at our recent RFID Journal LIVE! Canada 2007 event. He mentioned that KC had launched a passive ultrahigh-frequency (UHF) asset-management system for tracking containers in its distribution yard. Even as companies like Kimberly-Clark aggressively pursue the benefits of Electronic Product Code (EPC) technology with Wal-Mart and other supply-chain partners, they are also seeking to employ the technology internally to solve business problems, improve efficiencies and enhance their operations.

This year, many companies launched “four-wall” applications—that is, projects involving processes within a company’s own operations—and you will see plenty more in 2008. The word is out that RFID is not just about tracking boxes in the supply chain.

3. Demand for active RFID technology will remain strong. Many internal applications involve tracking assets within large warehouses or factories. The longer read ranges and challenging environments often require active RFID systems. I expect active technology providers will continue to do well in 2008, as more health-care providers and manufacturers adopt the technology.

4. RFID hardware will continue to improve. Despite some cutbacks in spending by vendors in 2007, there was plenty of investment in product development. Hardware systems will continue to improve as vendors address end-user concerns, such as how to determine the location of a tagged item in a three-dimensional space, or the direction in which a tagged object is moving, or how to avoid reading tags you don’t want to read (companies have had issues with forklift truck readers picking up tags on shelved cases or on cases still on the forklift, as well as with portal readers picking up cases at adjacent dock doors). I know of several companies that plan to reveal some exciting new products at next year’s RFID Journal LIVE! event.

5. New software will emerge to address business problems. Now that EPCglobal has published its EPC Information Services standard, software companies can develop applications that leverage these standards to solve business problems. So far, only a handful of companies, such as OATSystems and T3Ci, have fully understood the value of these standards and created applications able to take advantage of them. But it is likely that people with expertise in a particular industry—chemicals, automotive, transportation, you name it—will realize these standards can be utilized to create visibility and solve previously intractable problems. Don’t expect to see a rush of off-the-shelf solutions right away—it takes time to develop robust software, after all—but I do expect to see a wave of software innovation begin in 2008.

Another wild card is the economy. The United States is dealing with the bursting of the housing bubble. The resulting liquidity crisis and a lack of consumer confidence has some economists predicting a 50 percent chance of recession. Certainly, an economic slowdown could cause some companies to cut back on technology investments. But assuming any recession is mild, I think vendors can look forward to a moderately good year in 2008, followed by a strong one in 2009.

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