End Users Must Balance Interests

By Mark Roberti

Companies that want the short-term benefits of using RFID before their competitors should also consider the longer-term goal of promoting adoption within their industry.

Last week, I wrote about the need for solution providers to balance their short-term need to boost sales with their long-term goal of growing the market for radio frequency identification products and services (see Balancing Your Interests). Users of the technology also have short- and long-term needs that must be balanced. Companies must balance the short-term benefits of using RFID before competitors with a longer-term goal of promoting widespread adoption within their industry, which will create the opportunity for real innovation and competitive advantage.

In the short-term, companies would like to gain a competitive edge over their rivals. Using RFID to cut costs, boost efficiencies and enhance their service to customers can provide a short-term edge. A large retailer could gain some business because it has items on the shelf more consistently than a rival, for example. And an airplane manufacturer that uses RFID to track parts delivered to its factory could improve customer loyalty by delivering planes on time.

But these gains are likely to be limited if competitors do not embrace RFID. Look at Walmart. Its early RFID efforts foundered not because they weren't benefiting Walmart, but because no other retailers required suppliers to tag pallets and cases. Suppliers didn't benefit and pushed back against the tagging requirements, forcing Walmart to abandon its pallet- and case-tagging initiative in favor of item-level apparel tagging.

The benefits that any company can achieve with a new technology are exponentially greater if its industry adopts the technology than if competitors don't adopt. That's particularly true of networking technologies (RFID is essentially a technology that links things to the Internet so they can be tracked and managed). Consider what the world would be like if your firm were the only one using PCs, the Internet or bar codes.

The real value from RFID will come when entire industries are utilizing the technology. Then suppliers will put tags on or in items as they are manufactured. Retailers, logistics providers, manufacturers and others will all benefit from using the transponders. The proliferation of tags to all things that companies handle means RFID systems will be cheaper and better. But it means much more than that.

When all of the parts that a company uses, all of the products it produces, all of the materials it handles or all of the products it sells use RFID, the company can employ the technology to optimize its processes. RFID becomes a way of doing business. Moreover, it becomes a platform for innovation.

When everything is tagged, companies can differentiate in how they use RFID. Retailers, for example, can mine big data provided by the technology to ensure that they have the right product mix, or they can use it to improve the in-store customer experience by creating in-store kiosks, checkout systems and interactive displays that leverage RFID. It's hard to do that if only 20 percent of your inventory is tagged.

Manufacturers can find new ways to optimize product processes, improve shipping and provide visibility to customers, so they know what's in the pipeline and what will be shipped. They will then be better able to use data to improve forecasting and automate replenishment.

Some businesses will be aggressive in exploiting RFID's potential, while others will not. But the leaders in using RFID now will likely be the innovators down the road—they will squeeze more benefits out of RFID systems than anyone else. But there won't be nearly as much opportunity if we never achieve mass adoption.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog, the Editor's Note archive or RFID Connect.