SCDigest Editorial Staff

The News: In its excellent monthly RFID report, investment company RW Baird confirms what Supply Chain Digest and many other observers have noted, that RFID/EPC activity in the consumer goods manufacturer to retail/Wal-Mart is moving very slowly, while there is more robust activity in active tag applications and other closed loop systems.

The Impact: While the report notes that ROI  for consumer goods companies has been tough to find, contributing to foot dragging in roll-outs, Baird believes infrastructure enhancements at Wal-Mart will drive increased pressure on suppliers to get moving, and that lower hardware prices in 2007 will improve the economics.

The Story: RW Baird notes that it “continues to see the majority of activity in non-retail supply chain applications, including rollouts in contact-less payment and build- outs in fleet management applications.”

It also sees “semi-active and active technology as having the best opportunity in the near term given the more proven nature of the technology and more well-developed business cases.”

It also says it is seeing increased use of Electronic Product Code (EPC) “Gen 2” technology in closed-loop applications that are not directly related to consumer goods to retail flows.

It expects consumer goods to retail activity to pick up in 2007 – though we’ve heard the same thing in 2006 from many quarters.

But Baird notes that “some consumer product companies are receiving more useful data and some are actually suggesting that sales uplift [from RFID data] may be occurring. We expect 2007 will remain a pilot year, but expect two events to increase participation. First, we expect Wal-Mart will have its 1,000 store Gen 2 rollout completed by April. At that point, we expect the retailer will increase its mandate pressure. Second, many industry contacts suggest reader prices are likely to fall substantially by the end of the year. We believe this will help materially with end users ability to generate a positive ROI.”

As we noted and predicted a long time ago, the “gold rush” expected by RFID vendors from Wal-Mart compliance was never likely to materialize in the short term (see RFID Compliance - Deju Vu All Over Again?), and the pace is very reminiscent of bar code compliance initiatives more than a decade ago.

Do you believe 2007 will finally be the “big year” in EPC activity? Are you surprised non-EPC applications seem to have more actual adoption right now? Let us know your thoughts.