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Manufacturing Insights on RFID Adoption

Kim Knickle, analyst with research firm Manufacturing Insights, takes a high-level look at RFID adoption in industries across the board and asserts that industry-specific expertise is a key competitive advantage RFID vendors should offer to win business.
Jan 25, 2007This article was originally published by RFID Update.

January 25, 2007—Results from Manufacturing Insights' 2nd annual global RFID report reveal most companies are cautiously spending on RFID, but the prospects are encouraging. Despite both the hype and the valleys that have been reported, RFID continues to grow overall as end user companies use the technology to solve real business problems.

Interpreting the data draws attention to the importance of industry-specific implementations. For example, third party logistics providers (3PLs) in all regions are using RFID to improve their own operations and enhance revenues by offering in-transit tag application to customers. Many of today's full-scale RFID implementations can be found at consumer goods companies using RFID to comply with customer mandates. There are also differences between companies responding to mandates and industries such as automotive, high tech, and consumer electronics who are investing based on traditional ROI evaluations. In consumer goods, companies are tagging to satisfy the supply chain requirements of their trading partners, while other industries look to RFID to manage warranty, quality, or asset management processes within their own four walls. These show up as item-level tagging efforts which are being done on an ad hoc basis, since there is not yet an item-level tagging standard from EPCglobal.

Not surprisingly, companies recognize RFID projects should be tailored to their specific environment and industry. When we asked companies about the criteria they use to select a partner for RFID services, the overwhelming response was: expertise within the customer's industry. For making RFID technology purchasing decisions, companies once again had strong consensus that business fit was the top priority.

Despite a general uptick in RFID spending over the next few years, the aggregate results shine a light on the difficulties in justifying broad deployment of RFID for buyers and the associated disappointing market growth for technology sellers. The starting point for users contemplating RFID investment should be on the high-value areas typically within the company's control, such as asset management. RFID will continue to grow primarily in closed loop supply chain areas centered on tracking physical assets such as containers, dollies, trailers, data center and engineering assets, and other high-value areas. Sensors for high-value items with counterfeit issues, such as pharmaceuticals and consumer electronics, or temperature sensors for perishable foods, are other areas for consideration. Once familiar with the technology and associated costs, efforts can then be applied to the broader supply chain potential.

Over the long run, getting beyond the initial RFID projects that benefit a single company will require supply chain captains to move away from mandates and toward a sharing of risk and reward. RFID volume alone will not bring benefits; RFID adoption will not noticeably accelerate until costs come down, technology performance improves, and a more equitable supply chain business case can be made.

Please send your feedback to me at kknickle@manufacturing-insights.com.
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