Let’s take a step back and look at where we are right now with RFID…and where we may be headed.
We are clearly in the “post-Wal-Mart era” – and experiencing something of a hangover.
Before offering my thoughts in more detail, I thought I would share the comments of a few great experts that kindly gave SCDigest their perspectives over the past few weeks on the state of RFID.
Tim Payne, the analyst who follows RFID for Gartner, says that “6 to 18 months ago, it has been very quiet around RFID – the post Wal-Mart effect.”
But, Payne said, there seems to be some renewed RFID energy now.
“The last six months we have seen inquiries really pick up around RFID. Companies are revisiting RFID, but from a different perspective. It is no longer: “Here’s a new technology, now can I find a business problem to throw it at?” Instead, it has changed to: “I have a well understood business issue, is an RFID-enabled solution the right answer for me?”
That of course is the right question. As I’ve said before, we will know RFID has really arrived when it is just an arrow in the automatic identification technology tool bag to solve any particular challenge or need.
Payne adds that he sees some companies in their second or even third iteration of looking at RFID technology for certain applications, as they get better acquainted with it, and the price-performance curve improves.
|"As I’ve said before, we will know RFID has really arrived when it is just arrow in the automatic identification technology tool bag to solve any particular challenge or need."
What do you say?
Similar to the observations of others, Payne sees a lot of activity in so-called “closed-loop” applications.
“Companies like closed-loop opportunities – they can get their arms around them, they can understand the scope, they don’t have to be too concerned about standards, he said. “Most of the projects we see are now closed-loop and many fall into the asset tracking/management category. There are certainly a number of healthy projects out there – just the scope is much tighter, and they are more focused.”
Interestingly, he also says that the business case focus is moving a little away from just cost reduction into support for business process innovation – finding novel ways of doing things in the supply chain and elsewhere.
That's what Dean Frew, CEO of Xterprise is also seeing. He believes companies increasingly understand RFID as a potentially “transformative” technology – but that we needed more and better software to take advantage of that power.
“Getting the XML data out of the reader and sending it somewhere is almost trivial these days,” Frew says.
“You have to build applications that understand, for example, how the data center manager really does his or her job, what kind of information they need to do that job better,” said Frew, referring to asset management applications for corporate computer networks. “We’re just scratching the surface of that at this point in terms of supply chain applications” and how they can really leverage RFID data.
John Fontanella of AMR says that things are “pretty slow in supply chain applications” for RFID right now, but that behind the scenes there finally are some things happening in retail besides Wal-Mart.
“We will see all the action in retail over the next year. There are some very interesting pilots happening there,” he said. Well, that’s intriguing – especially because we know that what happens in retail also then happens in consumer goods.
But Fontanella is for now less concerned with the “transformative” potential of RFID – which in a research note earlier this year is how he said he would classify Wal-Mart’s initial program.
“AMR Research finds that the companies that take a more simplified and focused approach to the use of RFID technology incur much less risk in implementation, receive tangible value, and build capabilities that give them significant differentiation from their competitors,” he said. “Successful RFID projects are inevitably closed-loop in nature and will be for the foreseeable future. This actually works in the favor of creating industry-wide initiatives. As RFID establishes itself as a valuable technology resource internal to a company, it lowers the barriers to justifying its use on a much broader scale.”
Steve Banker of ARC Advisory Group is among those who see strong technology advances and benefits to companies overall from Wal-Mart’s efforts, even if it didn’t work out quite as planned.
“As we predicted, retail compliance-driven RFID is moving slowly because of poor ROI for suppliers,” he said.“The hype around RFID has had positive effects in other application areas, however. Many companies now understand that there can be good ROI around using RFID for asset tracking and maintenance, and in yard applications, for example.”
Frew notes how far the technology advanced because of companies and venture capitalists pouring money into R&D in the hope of a Wal-Mart-driven gold rush. Even though those investments haven’t necessarily paid off in financial terms, nonetheless, for the rest of us, “There was something like a billion dollars of investment into RFID companies since 2003, and much of that would not have happened without the Wal-Mart program. That investment has enabled us to have a 10X improvement in reader performance since that time, and a 90% reduction in tag costs,” he notes.
Interesting comments from all. Here’s my take.
- The news is still primarily filled with “piloting” this and “testing” that. It seems to never end, especially in supply chain applications. Obviously, there is much more action in asset tracking and some closed-loop manufacturing scenarios.
- Frew is right that we need better software understanding and support. This is what an RFID leader from ConAgra predicted several years ago to me as ultimately being the real barrier.
- Wal-Mart and UK’s Tesco, two of the primary potential drivers of adoption, have both retrenched substantially. Only Germany’s Metro stores group seems to be strongly soldiering on, albeit in a somewhat zigzag fashion.
- There is an increasingly growing business case for item-level tagging in retail apparel applications – that may ultimately pop somewhat rapidly. Source tagging in Asia is an issue though.
- We simply need a much better understanding of the real ROI, both generally and especially in comparison to bar code systems. It is amazing how little real information is available in this area. To this end, as you may have seen, SCDigest is partnering with Wright State University and Dr. Vikram Sethi to do RFID ROI analysis in real world applications. (See RFID Versus Bar Codes On the Shop Floor – Who’s Ready for a “Smackdown?”) We are about ready to start this at a couple of companies, but would like more candidates, and are now looking at distribution and manufacturing applications.
Finally – and optimistically – as I said several years ago, the dramatic change that is occurring through myriad paths is that for the first time ever, a growing number of companies are mentally committed to the path of knowing where everything is, all the time, in near real-time. This is a game-changing and far reaching development – and RFID will be at its center. I don’t know whether that will take 5 years or 20, but it’s coming.
We just need to understand what to do with that level of visibility, and as companies, to work to ensure you aren’t one of the last ones to the party.
What’s your take on the current state of RFID in the supply chain? What do you agree with or not in the comments from our experts or Dan Gilmore? Are lack of the right software support and/or lack of clear ROI information two of the biggest barriers? Let us know your thoughts at the Feedback button below.
Let us know your thoughts.