Is RFID Losing Momentum?

By Mark Roberti

No new RFID mandates have been issued and at least one company has pulled out of the market.

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It’s been nearly seven months since Best Buy announced plans to require the use of RFID tags on shipments from its suppliers, starting in January 2006 (see Best Buy to Deploy RFID). In that time, not a single retailer, manufacturer or government entity has announced an RFID mandate. And at least one RFID software provider, GenuOne, is withdrawing from the RFID market (see GenuOne Pulls Out of RFID Market). So the question has to be asked: Is RFID losing momentum?

I don’t think it is, though it might appear to be. That’s because the excitement about RFID’s potential is being superseded by the hard work involved with deploying the technology in a way that delivers measurable business value. We are entering what Gartner calls the “trough of disillusionment”—the period in the evolution of a new technology when hype gives way to reality. I sensed this at our executive conference last month (see Reality Sets In).

But a little reality is not a bad thing. In fact, it’s a sign of progress that companies are coming to grips with many of the issues that have to be overcome before RFID can deliver a return on investment. At our event, there was less discussion about the physics of RFID than about data integration and changing business processes. These are much tougher nuts to crack than simply getting a tag to read. But leading early adopters seem no less determined to take on these issues. They are developing new systems and evolving new business practices. Progress is slow, but steady.

I also sense that most large companies now feel that RFID is not something that’s going to go away. A year ago, large suppliers were suggesting that Wal-Mart would eventually back off its RFID requirements. I don’t hear that any more. There is still a sizeable group of manufacturers that simply want to meet tagging requirements and are not looking at the potential internal benefits, but that will change. Once the infrastructure is in place, companies will find ways to use it to their advantage.

Even companies that are not facing mandates are now taking a serious look at RFID. I’ve spoken with several manufacturers of high-end products over the past couple of months who are aggressively learning about RFID and its potential benefits. And many hospitals are now launching pilots and looking for ways to improve their operations and enhance patient safety.

In some cases, the RFID vendors are not able to keep up with the end users. I was on a panel at the Interphex conference in New York City in late April. During the discussion, Diane Arico, project manager for supply chain management at Novartis Pharmaceuticals, said her company would like to move more quickly, but it simply can’t get the small UHF EPC tags it needs.

Some companies are putting off pilots until tags and readers based on the second generation Electronic Product Code hit the market later this year. They think it makes more sense to wait a few months than to purchase products that will be obsolete. I don’t agree with that strategy, since you can buy UHF readers today that can be upgraded to read Gen 2 tags. But I understand why companies are taking this tack.

There’s a chance that the challenges of integrating RFID data into existing systems and changing business processes take too long to solve and companies put off investing in RFID-enabled applications for so long that more software vendors follow GenuOne and give up on the market. And some major companies might decide the prices of hardware aren’t falling quickly enough or that the middleware and applications aren’t developing quickly enough and that it’s better to move on to other major projects and revisit RFID when the technology is more mature.

That would slow progress, but not stop it. I don’t see Metro, Target, Tesco, Wal-Mart and the U.S. Department of Defense giving up on RFID, because they understand that this is the only technology currently available that can deliver the accurate, real-time information they need to improve efficiencies.

That said, RFID is not going to take off until these early adopters can show that the technology is delivering tangible benefits. Given that we are in the very early stages of deployment, that’s going to take some time. So expect the momentum to be slow and perhaps uneven through this year and maybe into next year. My advice: Don’t wait for things to pick up and then throw money at RFID projects. Use this period to learn about the technology and to identify applications where it makes sense today and in the near future, when hardware prices are lower and the technology is more mature.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below.