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Company Execs Foresee RFID's Potential

Although the technology has yet to deliver benefits to many companies' internal operations, a majority of executives believe RFID deployments will eventually pay off, the Aberdeen Group reports.
By Beth Bacheldor
Jan 12, 2006Radio frequency identification may have its share of skeptics, but a majority of executives in a range of industries believe in the technology's potential value, according to a study by consulting and research firm Aberdeen Group, located in Boston.

The firm interviewed senior managers at nearly 250 companies from around the world. Reportedly almost 60 percent of them said RFID has great potential for their companies, while two-thirds indicated the technology would help differentiate their business processes. More specifically, 44 percent said they felt RFID would make their companies more attractive to do business with. However, 52 percent of executives said the technology has yet to deliver real benefits to their company's internal operations.

The study breaks down the companies into three categories: market makers (20 percent of total surveyed), willing to invest in the technology and new processes without an immediate promise of ROI; market opportunists (50 percent), which require a clear understanding of ROI; and market laggards (30 percent), indifferent to RFID advances in the near term. The study found that 53 percent of market makers and 31 percent of market opportunists have had RFID pilots in place for more than 12 months. Eventually, all three groups plan to increase spending on RFID hardware and software and services provided by outside companies.

Many of the companies with high hopes for the technology are still struggling to understand the technology and exactly how it will impact their applications and business processes. In fact, more than half of the respondents said RFID's biggest obstacle today is the inability to get a return on investment. Companies are also waiting for RFID products, particularly middleware, to evolve and improve. Because of that, 48 percent of the executives surveyed replied that their companies are holding RFID projects to pilot phases.

"Everyone thinks RFID is going to be the answer in the future, but no one is quite sure how to extract value from it now," says John Fontanella, senior VP and research director of Aberdeen's supply chain consulting practice. "Much more activity has to happen before we hit RFID's tipping point."

Companies need to rebuild business processes and practices, or create new ones that can take advantage of the information RFID delivers, Fontanella maintains. For example, using RFID tags on product displays can help consumer goods companies derive more value out of their promotions (see Walgreen to Use Tagged Displays). "If you leave it up to the person stocking the shelves at 2 a.m., at some point these stockers just give up and say they can't find the promotional displays," Fontanella explains. "RFID can tell me where a display is, and whether a display has been put on the floor at all."

In addition, companies need applications and analytical tools that can take advantage of the kinds of information RFID delivers: a product's state in terms of assembly, and where it is in the process; a product's condition (such as temperature) and location; and shipping and receipt of goods reconciled with actual orders.

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