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Analyst: RFID Adoption Still Lacks Business Case

Mike Witty, analyst with research firm Manufacturing Insights, argues in this guest contribution that despite the price improvements and standards developments of 2005, the leading impediment to accelerated RFID adoption still exists: lacking business case.
Dec 05, 2005This article was originally published by RFID Update.

December 5, 2005—While RFID did not live up to the hype in 2005, there were many positive steps taken and the barriers to adoption are slowly being broken down. Earlier this year, vendor announcements on the availability of Gen2 product created a buzz in the market and raised expectations for an increase in adoption. Over the past couple of months, vendor announcements on reduced pricing for RFID tags created a new buzz in the market and again raised expectations that adoption would accelerate.

Looking ahead however, Manufacturing Insights believes that adoption will not accelerate in the short term. The market will continue to grow as a new wave of manufacturers comply with existing retailer mandates, but because of the pilot environment that persists in the market, adoption will continue at a slower pace than many RFID advocates hope. The simple fact is that most manufacturers are continuing to take a slap-and-ship approach to meeting RFID tagging mandates.

With the current pilot environment, most manufacturers don't have plans to either increase the number of items they are tagging or install new interrogators at additional facilities. Gen2 product still requires a great deal of testing and even if tag prices dropped to the often discussed five-cent mark, RFID would still represent a cost as opposed to a benefit for most companies. Additionally, most companies don't have plans to integrate their software applications in order to process RFID data.

Manufacturing Insights believes that for adoption to accelerate, additional retailers must introduce RFID initiatives and that both retailers and manufacturing companies alike must look beyond the cost of compliance. Rather than focus on pilot projects to meet mandates, both parties must refocus on the value of end-to-end supply chain visibility and on turning RFID data into actionable information. During the coming year, standards will continue to evolve, technologies will continue to mature, and costs will continue to come down. Toward the end of the year, some early adopters may even start placing large orders for tags, which will again create a buzz in the market. But until retailers and manufacturers figure out how to use RFID to change their collaborative business practices and also figure out how to align the risks and rewards of an RFID initiative across the entire value chain, adoption won't take off.
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