Warehouse management systems saw decline in 2003, but radio frequency ID mandates could provide boost, ARC reports
Dedham, MA — April 20, 2004 — The warehouse management systems (WMS) market, hit with declining revenues of late, could see a revival thanks to the widespread and apparently growing interest and hype around radio frequency identification (RFID) technologies, according to a new report from technology consultancy ARC Advisory Group.
In its report titled "Warehouse Management Systems Worldwide Outlook: Market Analysis and Forecast through 2008," ARC noted that the WMS market experienced a 2.7 percent drop in revenues for 2003 compared to 2002.
Even more worrisome, according to Steve Banker, service director for supply chain management at ARC and co-author of the new report, is that software revenues shrank by 6.9 percent, since this figure represents a key future predictor of growth. "In other enterprise software markets we have examined, this has been a precursor to several years of shrinking revenues for a market," Banker said.
According to Banker, many WMS professionals are asking themselves, "Can RFID save the WMS market?" Warehouse management fans may have cause to be optimistic for one simple reason, ARC said: RFID is hot!
A new technology — passive tag RFID — has emerged to offer, in effect, a hands free, remote sensing version of barcode technology. Large companies are now mandating that their suppliers gear up to ship all cases and pallets with RFID tags, as well as to continue using barcodes. Wal-Mart was the first to mandate these changes, and others are already following or are set to pursue similar strategies, including the U.S. Department of Defense, Target, Albertsons, Metro, Tesco and others.
In the short term, ARC reported, WMS suppliers can help suppliers to the retail behemoths become compliant with these mandates by offering a new add-on WMS module that allows RFID tags to be placed on cases in the warehouse. In the longer term, RFID capabilities are apt to become part of most suppliers' base solution. Some manufacturers, not under immediate pressure to become compliant, may also choose to gain RFID capabilities through a WMS upgrade once suppliers have RFID-enabled their base package.
ARC has completed a model of the lift, or boost to the market, that RFID will provide. This model forecasts:
- Global distribution centers (DCs) that will be RFID-enabled using WMS solutions.
- Average selling prices of RFID add-on modules, RFID-enabled WMS, and RFID upgrades. While upgrades are generally "free" for customers paying a software maintenance fee, this is less likely to be true for WMS suppliers "OEMing" an RFID middleware layer from other suppliers, according to ARC.
- The software revenue boost, by type of RFID WMS solution, to the WMS market.
