RFID: A New Hope in a New Decade

For all the hype and some pockets of success, RFID's time in the mainstream sun remains five to 10 years off, analysts say. CIO.com's Thomas Wailgum uncovers a few bright spots--and examines what's stopping some businesses from making the most of RFID.

For the past 10 years, radio-frequency identification (RFID) has followed the classic buzzword trajectory that is typically a blessing and a curse for new technologies: Next-generation appeal, bursting hype, rampant confusion and fragmented success.

The peak of the hype for RFID and the start of the turmoil commenced unofficially in 2003, when retailing juggernaut Wal-Mart announced its intention to have its suppliers affix RFID tags to a percentage of the products they shipped to Wal-Mart's distribution centers. The idea, as examined in CIO.com's Tag You're Late: Streamline the supplier-Wal-Mart pipeline and solve the age-old out-of-stock problem.

Unlike bar codes, which today remain the workhorse in most industries, RFID tags don't need to be "seen" to be tracked, and wireless technologies monitoring RFID-tagged stock can provide unprecedented visibility into warehouse and store-shelf inventories. The "RFID Experiment" has been both visionary and a bit of a corporate distraction for Wal-Mart. For its suppliers, it's been an expensive and complex slog, since many hadn't a clue what RFID stood for before '03. (See CIO.com's articles from 2004, 2005, 2006, 2007 and 2008 for more on Wal-Mart's efforts.)

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Despite the Wal-Mart boom and bust, companies outside of retail have employed RFID technologies in strategic and cost-effective ways to track data center assets and expensive laptops, for instance. And consumer-product goods manufacturers, such as Kimberly-Clark, have had varying levels of success with their own RFID programs.

RFID Eating at the 'Trough of Disillusionment'

So, where are we now? According to Gartner's 2009 "Hype Cycle for Emerging Technologies," RFID is at the bottom of the "Trough of Disillusionment." (Next up, if all goes well, is the "Slope of Enlightenment.") Gartner claims mainstream adoption won't occur for another five to 10 years.

No doubt, RFID applications have enjoyed pockets of success this decade in both consumer markets (such as Mobil's Speedpass and E-ZPass tollbooth transponders in the Northeast U.S.) and in business-to-business environments, as companies have become more comfortable with the technology's unique demands and more realistic about the exact types of business problems RFID can help solve and processes it can make more efficient.

A November 2009 report from ABI Research notes that while the RFID market still has its share of challenges (and the global economic recession certainly didn't help matters), three RFID "bright spots" will outpace the overall growth of the RFID market during the next five years.

Those three areas, as detailed in the ABI report are: fashion apparel, being lead by RFID programs at Marks and Spencer in the United Kingdom and American Apparel in the United States; asset tracking and management, such as for spare parts and tools, IT and medical assets, and rental-item management; and active RFID tags, such as for real-time location systems in health care, manufacturing, aerospace and defense, transportation and commercial services.

"All three of these RFID application and technology areas have shown strong growth, and today account for 9.3 percent of the total RFID market, with combined revenues of more than half a billion dollars," notes ABI's RFID practice director Michael Liard. "We expect the trend to continue in 2010 and beyond: apparel, asset management and active RFID should show a 12.7 percent combined compound annual growth rate through 2014, outpacing the overall RFID market growth."

"This is considered strong growth," he adds, "given the level of maturity of many RFID-based asset management applications."

What RFID Needs Right Now

As the new decade dawns, what RFID needs most now, say supply chain experts and industry watchers, is for the vendors at play to share best practices and lessons learned, and in some cases consolidate their companies' efforts.

"Ultimately, this market is in desperate need of consolidation," writes Dennis Gaughan, a VP at AMR Research, in a 2009 RFID report. "Some bigger vendors could step in and roll up a lot of the key enabling technologies, as well as some of the key service providers. But because most companies that have invested in RFID are still on the 'pilot treadmill,' there isn't enough revenue opportunity to create a compelling business case for the big vendors to invest."

A final bright spot for RFID deployments, which could aid RFID's growth during the next decade, is that the business discourse surrounding the topic has changed—from a "technology that's looking for a problem" conversation to a more strategic and ROI-focused exercise, say RFID experts.

"The discussion has shifted away from a focus on the technology itself and more to how it solves business problems in specific industry," writes AMR's Gaughan. "They're now targeted at solving replenishment problems in retail stores or better asset inventory in IT or manufacturing. This is true across all layers of the market: hardware, software, and application providers."

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