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RFID: Maturing at a Natural Pace in the Supply Chain

AMR Research's Greg Aimi argues in this guest contribution that despite recent doubts about RFID in light of its slower-than-predicted uptake throughout the supply chain, the technology is in fact following a very predictable, natural lifecycle of adoption.
Aug 21, 2006This article was originally published by RFID Update.

August 21, 2006—Two years ago, Wal-Mart's RFID mandate sent industry watchers into a frenzy. The buzz surrounding RFID was similar to the enthusiasm elicited by a new fashion trend or a hot holiday toy. Although the excitement for RFID in the supply chain has diminished comparatively, there are significant differences between RFID and these fad items. RFID is a technology of tremendous value. It is working its way through its expected evolution, and won't fully realize its potential until it matures.

RFID evolution: The lifecycle

RFID is already being used in many successful applications today outside the supply chain -- who doesn't have an RFID-enabled card key for entry into corporate offices? But with the supply chain, there's a natural lifecycle that is in progress and that must be followed in order to realize the technology's potential.

AMR Research identifies three primary stages in its progression: the Pioneer Phase, the Growth Phase, and the Broad Adoption Phase. The industry has now entered the growth phase. It's the point when companies are "getting it done." That's not sexy or chic; it's hard work. It is the time of discovery, of finding practical and valuable ways to apply the technology, and then making them industrial strength.

Wal-Mart mandates fast-forwarded RFID usage during the Pioneer Phase. Those that participated are working on industrializing the applications, expanding their rollouts, and leveraging the real-time, detailed data that is available from tracking inventory across the supply chain and out to the stores. These same companies are now the leaders in these early days of the Growth Phase.

Growing pains

During the Growth Phase, several factors must work together simultaneously to ultimately set up the environment for the transition past the inflection point and into the Broad Adoption phase. In order for growth to occur:
  • Standards must stabilize
  • Physical technology has to improve to achieve necessary reliability
  • Processing intelligence needs to be developed (e.g., process path inference engines)
  • Large infrastructure and electronics companies must activate
  • RFID readers and data processing infrastructure must become pervasive
  • Prices must drop -- volume has to increase
Metcalfe's Law states that "the value of a network increases exponentially with the number of nodes." Essentially, a network becomes more useful as more constituents are connected. At Broad Adoption Phase, participating in the network is no longer a choice -- it becomes a necessity.

Patience is a virtue

RFID will transition from optional to necessary technology when the infrastructure to support pervasive readability across everyone's supply chains and at important geographical points exists. That same expansion in pervasive infrastructure will initiate volume-lowering prices. Growth will occur over time and allow the physical technology to advance from its infancy into maturity and reliability. At some point in the next five years, the network effect will take over, the industry will transform through an inflection point, and broad adoption will be the norm.

RFID is growing up along a predictable technology maturity curve. Certain companies -- likely channel masters in many industries -- will play a key role in advancing the technology by imposing its use on suppliers or customers. Anecdotally, in 1975, barcodes were widely ridiculed. Today, locating a product without a barcode is virtually impossible. RFID needs a bit of runway, but eventually the technology -- like barcodes and so many other technologies that preceded it -- will get off the ground.
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