RFID is back

RFID is back. To be honest, it never really went away. But that has been the perception the last few years, once the hoopla over Wal-Mart’s plans to tag all it’s cases and pallets by 2006 died away. “At the top of the hype cycle, you would have thought RFID could solve world peace,” says Chris Schaefer, director of global market development for RFID at Motorola. “There were expectations that were difficult to deliver on, and I think there’s a perception that those initiatives were failures and didn’t work.”     
 
In reality, a lot has been going on with RFID behind the scenes over the last few years, which is one of the reasons the RFID market is expected to grow at a compound annual growth rate of nearly 20% over the next five years, according to VDC Research Group, the Boston-based organization that pulls together the numbers for Modern’s annual Top 20 automatic data capture suppliers.

“After several painful years, the RFID market is really starting to gel,” says Drew Nathanson, VDC’s director of research operations. “We have an end user that wants to benefit from RFID and we have a knowledgeable supply community that is listening to its customers and meeting their demands with solutions.”

Taking a cue from VDC, I spent last week talking to RFID hardware, software and solution providers to find out what’s going on in the RFID market today and how end users are applying the technology to their supply chains. I came away with several important takeaways and best practices.

RFID works: That sounds like a no brainer, but just getting a tag to blink in an industrial environment was a formidable challenge back in 2003. Today, the consensus is that today’s readers and chips deliver the goods. “You will always have some conversations about whether the technology will work in a specific environment because RFID is tied to physics,” says Mike Liard, RFID practice director for ABI Research. “But RFID is real. It’s here. It’s now. And people are using it.”

Beyond cases and pallets: While Wal-Mart and the retail supply chain hogged the spotlight, Nathanson says that tagging cases and pallets was actually a miniscule segment of the RFID market. Instead, the early adopters that are now reaping the rewards of RFID focused on managing assets like work-in-process in a manufacturing plant, returnable containers that were too often lost in transit or parts and components in the MRO supply chain. “The shift is that we’re monitoring assets throughout their life cycle in a closed loop supply chain,” says - David Shannon, senior vice president of strategy and corporate development for Savi Technology. “We’re no longer just tracking where things are. We’re answering questions about the condition of an asset, its availability and its readiness for use.”

Retail is ready to party like it’s 2003: In some respects, retail is back in the news again, as a number of apparel makers and retailers, including Wal-Mart, are talking about RFID again. Only this time, instead of tagging cartons and pallets in the warehouse, they’re tagging individual items before they go out on the shelf and installing a reader between the stock room and the selling floor. The goal: Better inventory management and reducing out of stocks. Using RFID, a retailer knows when inventory moves from the stock room to the floor; with a handheld reader, an employee can easily get an up-to-date and accurate count of what’s been sold and what needs restocked. “Retail inventory is only about 60% accurate,” says Carolyn Ricci, senior product manager, RFID, for Zebra Technologies’ specialty printing group. “RFID is a means to better manage that inventory, and it’s cheaper than sending an associate out to take a manual count.” By all counts, item-level tagging in the retail supply chain is the fastest-growing segment of the RFID tag market.

The bottom line: RFID in the supply chain is still in its infancy, but early adopters are now seeing a return on their investment.