Jun 21, 2010Last week, I made the point that radio frequency identification is emerging now as an important technology, because the natural evolution of IT systems is shaped by the need for companies to get ever more efficient in order to survive (see Why RFID—and Why Now?). That raises an interesting question: What comes after RFID? I don't own a crystal ball, but I'd like to take a shot at answering it.
Let's say that in 20 years, all inventory, tools, laptops, spare parts, returnable transport items, files, rental equipment and other mobile objects used by businesses will have an RFID tag on them of some sort (or an ultrasound or infrared tag). All companies would then have virtually perfect information about where goods are in manufacturing facilities, warehouses, distribution centers and stores.
The next evolutionary stage is business intelligence (BI), as firms seek new was to become more efficient. At present, BI tools are used primarily to monitor the profitability of a company, or the performance of specific business units, in order to track key performance indicators. Using BI tools to analyze other performance metrics is nearly impossible, since data quality is so poor.
What do I mean? Let's say you're an apparel retailer, and you are looking at how well certain items are selling. If store inventory is only 65 percent accurate, as studies by the University of Arkansas' RFID Research Center suggest is the case, and items are not replenished in a timely manner, how can you accurately gauge the popularity of those goods? Making decisions about which products are in demand today is a bit like betting on games when you only have 65 percent of the information regarding team records. Once RFID is used to achieve accuracy up to 99 percent and improve replenishment processes, the data will be more accurate and the ability to analyze it will become more valuable.
Companies that use BI tools to analyze the performance of their supply chains will be able to fix problems and eventually achieve near-Six-Sigma performance levels. This will reduce costs and boost margins, and possibly enable them to gain market share on competitors by allowing them to offer the same products at a lower cost.
In a world in which all companies have perfect visibility into every aspect of their operations, the winners might be those most nimble. For instance, retailers that analyze data and quickly respond to an increased demand for products driven by an unusually warm summer might win out over those slow to respond. Those that can pick up on shifts in consumer tastes will beat those that fail to respond using the data they have available to them.
I also believe that BI tools will have to pull in more disparate forms of information. News such as the oil spill in the Gulf of Mexico, or the euro crisis in Greece, has an impact on consumer behavior. Today, it might be difficult to determine what that effect is, given that the information is so fuzzy. But in a world in which data quality is high, companies might be able to map what has happened historically in a similar situation, and use it to respond to what is happening now. Businesses might even be able to monitor social networking sites and respond to posts by increasing production of an item that is getting talked about a lot online.
I have no doubt that the best-run companies will find new and innovative ways to take advantage of the wealth of data RFID provides. In fact, I bet there are already folks cooking up some interesting concepts that won't be possible until everything is tagged.
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 or the Editor's Note archive.