Maybe it’s the summer doldrums, but parts of the RFID movement seems again to me to have slowed. Not that this is a bad thing – more on that in a moment.
On the Electronic Product Code (EPC) front, if vendor activity is any indication, there just isn’t much going on. As just one anecdote, three years ago at the Manhattan Associates (a leading supply chain software vendor) user conference, RFID was the major overall theme, with many presentation sessions covering numerous aspects of the technology and applications. In 2005, the focus was still there, but much muted from the year before. In 2006 – you could find a session or two if you really looked hard. I’ve seen this pattern at several other venues as well. Why? Because vendors promote where they think the near term money is. (Note: a couple do tell me they are busy).
A mystery to many in the vendor community is what all the Wal-Mart 300 are doing. Meaning, if you add up the customers for RFID compliance and beyond of the leading providers of such solutions (Exterprise, HighJump, Manhattan Associates, Oat Systems, RedPrairie, Verisign/R4, etc.) it doesn’t total up anywhere near to 300.
So what is everyone else doing? Some are certainly using 3PLs to get the tagging done. Many others may be just building their own simple solutions. Still others may just be delaying and hoping it just goes away.
Which leads me to conversations I’ve recently had with a couple of Wal-Mart’s next 200 suppliers. I’ll put it bluntly: their approach to compliance is to do the minimal effort required to comply, keeping investment in hardware and software to an absolute minimum. The systems, if they can even really be called that, are built for compliance only, with no care or concern with driving value themselves or moving it back up their own distribution and supply chain processes. Are they short sighted - or not?
Meanwhile, the news around Wal-Mart is all about their “Inventory Deload” and “ReMix” programs (See Will Retailer/Wal-Mart Inventory Cut Backs Mean Sales Risk for Consumer Goods Companies? ). These programs have similar end goals to the RFID effort (reduce inventory and out-of-stocks, speed the flow of goods to the floor), and seem to be accomplishing those goals rather quickly, from various news and financial reports. Of course, RFID is completely compatible with these programs – they’ve just moved to the front burner, it seems, it terms of delivering real value now, attention from Wall Street and the business press, etc.
The Inventory Deload program is really interesting in this respect. As we’ve reported on several times, a wide swath of consumer goods suppliers have issued earnings warning or discussed future risks to revenue based on lower orders from Wal-Mart as it slows its growth of inventory. In most cases, this will be a short term impact, but for some, as shelf space and SKU counts are revamped, it may be more permanent.
But in either case, do you think consumer goods companies will be thrilled to bear the cost of putting RFID tags on cases while their order numbers from Wal-Mart are declining at the same time? A double whammy on profitability.
Alien Technology indefinitely postponed its Initial Public Offering (IPO) this week (see story nearby in News and Views). There were a variety of factors, but one thing that emerged was that in an effort to drive volumes and market share, amidst a growing level of chip capacity in the industry, the company has been pricing tags at a point that could not lead to profitability in the short term. Alien is a fine company, and many companies across industries have been postponing IPOs given these stock market conditions, but Alien’s move and filing data do say something about the overall state of the RFID market right now.
On the other hand, a few companies are really touting the benefits of EPC. CPG giant Unilever, for example, is apparently very bullish on the results of some pilots it has been conducting on gathering, analyzing and sharing EPC-based data, such as in the area of executing in-store promotions. This is an area in which Gillette (now part of Procter & Gamble) has also found strong initial results.
All of which is to say that RFID is now clearly taking on a sort of normal market adoption curve. In fact, as we wrote about a long time ago, as we predicted it is very reminiscent (for those that were around in the first half of the 1990s) to the path of the original bar code labeling and advanced ship notice requirements (see RFID Compliance – Deju Vu All Over Again?) – which took a long time.
What’s also happening is that the Wal-Mart/EPC focus has somewhat given way to a more broad based interest in RFID technology generally, across many applications. I recently spoke with one RFID-focused integrator that had been almost totally focused on Wal-Mart vendors, but which now is busy mostly with projects in manufacturing, asset tracking, etc. There’s no question, for example, that the interest in RFID-based solutions for in pharmaceuticals to combat counterfeiting and diversion is quite high.
As I noted a few weeks ago in my Random Musings column, this more normal – and prolonged – adoption curve is actually a good thing for many people and businesses associated with RFID. As soon as RFID becomes just another data collection technology like bar code, the need for experts internally, and RFID specific publications and events, just goes away. So frankly from an SCDigest perspective, I hope it progresses, but not too fast. I’d like this to be a 10-year ride.
It’s also good because it means that we’re getting more real about the costs and benefits of RFID – moving away from the unfortunate tendency of many to view RFID as an end in itself.
We’re now just about where we should be.
What are your thoughts on the RFID market/adoption landscape right now? Do you think Wal-Mart vendors should just do the minimum to comply, or more? Why? When do you think RFID will become just another standard data collection technology? Let us know your thoughts.