RFID Strategy -- The RFID Revolution Starts... Soon?

Stop me if you've heard this one before. Deployment of radio frequency identification (RFID) technology by manufacturers, retailers and trading partners is scheduled by for wide-spread deployment, and soon. Thousands of companies will spend millions of dollars to RFID-tag billions of products; revolutionizing their manufacturing, distribution and supply chain processes.

If this refrain sounds familiar, it may be because it's been sounded for the past five or six years. In that time, numerous surveys, studies and reports suggested that massive adoption of RFID solutions was on the cusp of occurring. Yet a March 2007 survey by the Computing Technology Industry Association (CompTIA) survey of technology resellers and solution providers found that two-thirds of their customers have yet to implement RFID solutions.

So what's happened?

RFID remains a niche technology, whose broader deployment has been stymied by the usual suspects: high equipment costs, low return-on-investment and a workforce skills shortage.

Despite these challenges, the trend arrow for RFID usage is pointing upward. While growth is not occurring at the rates many have predicted, it is growing at a modest, steady pace. Companies may not be deploying RFID throughout their supply chain, where a high level of cooperation among partners is required for success. But the number of RFID pilot programs, tests and "closed-loop" deployments designed to address specific business problems continues to grow.

Successful Implementations

One success story is at Best Buy, which implemented an RFID test project aimed at reducing the number of movies and game DVDs that were out of stock. Best Buy has reported 18% higher sales in departments with RFID-tagged DVDs.

In another test case, Procter and Gamble found that tagging display cases for Wal-Mart with shared information led to a sales increase 19% of Fusion razor blades, the result of timelier arrival of product to restock empty shelves.

Advantages Beyond Tracking

Beyond better inventory visibility, RFID is a technology that is well suited to address other business problems, such as fraud reduction, faster business processes, brand protection and lower labor costs or cost of sales. Among areas where RFID usage is taking hold are:

Industrial automation and maintenance in industries with heavy capital equipment costs, such as energy companies.
Automotive, where active RFID tags are used in line management and quality check applications.
Health care providers who use RFID tags to track assets used in in-patient and home health care monitoring.
Physical security and control applications.
The aerospace industry, which is actively pursuing asset-based RFID applications, including solutions for asset management and spare parts tracking and authentication.

So where is the tipping point for RFID adoption? It's a combination of having the hardware price points come down a little bit; and software that's more plug-and-play for that the entire installation becomes easier to perform and everything doesn't have to be customized for each installation.

Today's RFID Landscape

Several factors are altering today's RFID market. These changes include the adoption of technology standards; consolidation among product vendors and solution providers; greater availability of collaborative solutions and "off-the-shelf" commercial RFID packages; and improvement in RFID planning and implementation skills. Each of these factors should be welcomed by current and prospective users of RFID.

RFID standards have coalesced around the second-generation Electronic Product Code (EOC Gen 2.) This has allowed product manufacturers to develop hardware that is more interoperable, making it easier for users to mix-and-match equipment.

Prices of RFID tags are coming down, though not as fast as some industry observers anticipated -- or hoped. Generic RFID tags cost between eight and ten cents each today. That's less than half the price of five years ago, but nowhere near the one- to five-cent per tag level that many say is necessary for RFID deployment on a broad scale.

RFID is a complex and still evolving technology. Expertise is absolutely required for its usage to be a success. The skill sets and "need-to-knows" related to RFID are many and varied. Consider the route a single piece of RFID-tagged merchandise travels in its lifetime:

Tagged as it leaves as a finished good from its point of origin.
Transported via road, rail, sea, or air to its destination.
Arrives at a dock door.
Travels through a warehouse.
Arrives in a stockroom.
Moves to a retail shelf.
Purchased by a customer.

At each stop on this journey RFID readers can conceivably register the presence of the tagged product and report on its whereabouts in real time. Conversely, something can go wrong at any of these points to compromise or render useless the RFID-transmitted data.

RFID remains a finicky technology that can behave differently based on any number of factors, such as the orientation of the RFID tag on the box, carton or pallet; the type of products being tagged; and the environment in which the tagged product is stored. All of these factors can be overcome, but it takes knowledge and experience with radio frequency engineering and design; supply chain management; logistics; warehouse management; and familiarity with RFID products and standards, among other skills.

RFID Talent Shortage

In the March 2007 survey by CompTIA, 6% of the technology solution providers queried said there is not a sufficient "pool of talent" from which to draw RFID-skilled workers. That's down slightly from the past two years (75% in 2006, and 80% in 2005.) But the lack of RFID-skilled workers continues to hold back deployment of the technology: 68% of the organizations surveyed by CompTIA said the lack of RFID talent will impact the adoption of the technology.

The skills shortage is not the most significant factor, but it is a contributing factor. Had RFID adoption taken hold at a higher level, the skills shortage would be even more pronounced.

The bottom line for RFID is that it's all about process change and the business case. In the end, business owners, and not the IT department, will be the decision-makers when it comes to adopting RFID.

David Sommer is vice president of electronic commerce for the Computing Technology Industry Association (www.comptia.org), the leading trade association representing the business interests of the global information technology (IT) industry. He is responsible for developing and implementing worldwide initiatives by working with IT leaders to develop and promote collaboratively-defined business and technology standards for business-to-business transactions in the computing and electronics industries.

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