|Home||Internet of Things||Aerospace||Apparel||Energy||Defense||Health Care||Logistics||Manufacturing||Retail|
2006: The Year RFID Vanished, Part 4
This is the fourth and final article in a series from Dennis Báthory-Kitsz, who predicts that this year will be the one RFID vanishes. This article considers pricing, transport, consolidation, niche applications, and the welcome end of hype.
Feb 13, 2006—This article was originally published by RFID Update.
February 13, 2006—In this fourth and final installment of our series on 2006 predictions, we wrap up with contentious issues, starting with pricing. For background, see Part 1, Part 2, and Part 3.
Volume prices will move toward 10 cents for fully converted tags, says Bret Kinsella, vice president of operations and marketing at RFID solutions provider ODIN technologies. Carl Brown, president of RFID services firm SimplyRFID, sees tags hovering at 12 cents. Dean Frew, CEO of RFID solutions provider Xterprise, agrees that we won't see sub-10-cent labels, but points out that a value proposition nonetheless exists "if you can sell more cases by putting 15 cents on every case."
Tom Hartmann, RFID manager at label converter Topflight Corporation, says, "A lot of people are very confused." There will be no eight-cent label because "everybody is forward-priced right now," meaning manufacturers have committed to a future price in the expectation, based only on projections, that they can meet it. The industry will have to wait another year for eight-cent labels. But Hartmann adds, "I'd love to be wrong."
Jeff Jacobsen, president of RFID reader manufacturer AWID, says they're all wrong: "Large companies will be buying fully finished labels for eight to nine cents this year."
Costs? Bah!, says Cliff Horwitz, chairman of reader manufacturer SAMSys. "The cost of tags is a fatuous issue. You're not going to buy a one-cent tag just because it's one cent. Herd trends continue," he explains. "This one-dimensionalizing of the technology is a terrible impediment to compelling deployment." Until a study shows that "six cents equals no ROI, but five cents does provide ROI, then [the fabled five-cent tag] is an arbitrary milestone."
Vendors are pushing for demand, and they'll get it in 2006 -- lots of it. With all-digital technologies replacing the hybrid analog-digital components in many of today's tags, and with yield rates in the 90s (up from as little as 40%), there are new applications sprouting up all the time. Supply will meet demand, but then demand will pressure supplies.
So unless you've already signed with an optimistic company forward-pricing hard 'n' low, it won't matter what kind of label you want. You'll pay a dime or more for it.
The Boxes Told Me
You've seen the ad. The truck going to Fresno is lost. "You're heading for Albuquerque," the surreal 'helpdesk' agent tells the drivers as she sits at her desk in the middle of a desert highway. How does she know? "The boxes told me." And so RFID hits consumer television.
None of the experts we asked could decipher the ad's audience, but most agreed that transport and logistics companies will touch the RFID space in 2006. The broad market includes parcel and freight, postal services, warehousing and distribution, and vehicle and asset tracking.
Parcel companies, after all, pushed tracking systems into maturity once upon a time. Yet Bill Hardgrave, director of the RFID Research Center at the University of Arkansas, identifies parcel companies and the US Postal Service as having been "overlooked so far. You can see it at supplier, distribution center, and retailer, but the black hole is the transportation companies." 2006 is when transport companies move into RFID pilots, he believes.
RFID-managed 'smart transport' was predicted four years ago; will it finally arrive this year? International transport will drive RFID into integration, with active RFID for tracking, electronic seals, and port security. The roadblock may be supply chain integration of active and passive components. But eventually, there will come "an interaction of wireless and active, a total wireless sensor network." Just not in 2006.
On the other hand, Hurricane Katrina showed that Wal-Mart's supply chain is already far more successful in relief efforts than the US Federal Emergency Management Agency's. That will continue because, says Brown, "a 12-cent tag starts to become viable. Logistics providers will incorporate drivers into their existing systems."
Then along comes asset tracking, one of RFID's open secrets. Kinsella believes it increases asset utilization, personnel and labor efficiency, and drives down losses. This is especially true for international logistics companies with many assets, and for aerospace and defense, whose small volumes belie the vast amount of assets used in their production.
Brown looks past 2006, saying that in three to five years, FedEx will use system-wide smart RFID tagging with near real-time tracking, and the US Postal Service will offer a first-class mail RFID tracking "Smarterstamp". And don't forget that DHL has already committed to tagging every shipment it handles by 2015.
The RFID industry will feel like Project Runway in 2006, with "you're out" heard weekly.
We've said that middleware companies will feel the pinch as total-enterprise integrators take on their applications. And Chantal Polsonetti, vice president of manufacturing advisory services at ARC Advisory Group, pointed out that flagging vendor allegiance will encourage further collapses and acquisitions.
Jacobsen says financing will evaporate, with "investors impatient after five to six years without filling goals, obligations, and expectations to investors and the marketplace." Big companies will stop building hardware. Corporate consolidation will follow the commoditization of devices and the introduction of plug-and-play RFID.
Consolidation indeed, says Dennis Gaughan, research director with AMR Research: "Enterprise customers would rather work with existing strategic vendors who can support them on a global basis." He believes RFID middleware appeared because big vendors couldn't help. Now they're starting to. Consolidation will also happen in analytics. In fact, "the whole market for performance management and analytics is ripe for consolidation," he says.
Kevin Ashton, vice president of marketing at reader manufacturer ThingMagic, agrees that private companies will falter, with "some spectacular collapse or impressive-sounding buyout." But, he continues, "it shouldn't be interpreted as weakness. Some will claim it's proof that RFID is overblown, but that's the way markets work. Some companies will crash in flames, but that tells more about the company than the market."
Vertical and niche markets will increase dramatically this year. Custom tags and encasements will become widespread. Active/passive integration will begin, taking baby steps toward Hardgrave's total wireless sensor network. But consumer uses and even sensational uses (such as the tagging of bodies in New Orleans) won't be the vertical market news of 2006.
RFID is just a conduit for the collection of raw data. Make it work, and markets grow. Some uses grow parallel to the supply chain. Polsonetti talks about promotional compliance: Is there enough product when an ad campaign hits, and how is that product moving as a result of the ads? At the granular level, it answers questions such as, "does the end cap do better at the end of aisle 7 or aisle 12?" Gaining visibility into in-store performance with previously unavailable data is nothing short of a "new frontier" says Polsonetti.
Apparel will become an important segment this year after garment sorting time dropped from hours to minutes in European tests. Similar niche implementations will sort incoming raw materials, parts, and work-in-process. Gaughan cautions against applying RFID to everything, which will become "a source of frustration. What's the product mix that we should zero in on?" he asks.
Unique applications aside, RFID hype will vanish as companies get down to work.
That's because this year RFID will scale, even if it's tough in large, complex installations. Whereas "brute force works in small installations," Kinsella says additional layers will stress planning capabilities and demand more complex physics, as well as invite "more complex objectives, more business process flows."
In retail, item-level tagging won't happen. Besides cost and privacy, says Hardgrave, you have to saturate a retail environment with RF. "How? What are the costs? The health implications?"
Brown expects a five-fold increase in RFID use in 2006 as companies continue to incorporate it into their process chains. But they'll move slowly, waiting for commercial, off-the-shelf chips and commoditized readers.
So 2006 isn't going to be The Year of RFID. Frew agrees, but says it's never been the year. "It's gradual, methodical, significant growth," which he sees doubling Brown's estimate for 2006 to as high as 1000 percent.
Ashton sighs relief: "The days of mandates are behind us. Mandates will just get forgotten as more adopters just adopt." Jacobsen joins in that sigh. He says, "It's the end of the Wild West."
So how wrong are we? See us in 2007.
Login and post your comment!
Not a member?
Signup for an account now to access all of the features of RFIDJournal.com!
SEND IT YOUR WAY
RFID JOURNAL EVENTS
ASK THE EXPERTS
Simply enter a question for our experts.
|RFID Journal LIVE!||RFID in Health Care||LIVE! LatAm||LIVE! Brasil||LIVE! Europe||RFID Connect||Virtual Events||RFID Journal Awards||Webinars||Presentations|