RFID Industry to the Supply Chain: "Tag, You're It!"

VDC study shows RFID targeting the supply chain; growth has some stipulations

Natick, MA — April 22, 2003 — Despite the success of RFID technology within traditional application segments such as security/access control, animal identification, automobile immobilization and toll collection, the RFID industry has been focused on finding another industry on which to capitalize. The emergence of RFID in the supply chain over the last few years has led many to believe that supply chain may just be it.

According to the recently published Global Markets and Applications for RFID Equipment and Contactless Smartcard Systems, 4th Edition by Venture Development Corp. (VDC), the global shipments of RFID hardware to support supply chain management applications reached nearly $89 million in 2002, with compounded annual growth estimated at slightly more than 38 percent through 2007.

However, in order for these numbers to be realized, a number of issues must be addressed. First, according to VDC, RFID in the supply chain has been getting a big push from large end user consortiums. The Chipping of Goods program in the UK and the MIT Auto-ID Center's ePC initiative have garnered much media attention and champion the use of RFID technology in the supply chain for crate, pallet, package and item tracking. While item tracking in the supply chain remains a near-term hypothetical, the increasing number of pilots and end user announcements pertaining to RFID technology serves as an indicator that the RFID market is positioning supply chain management to be the next big thing.

Second, standards are viewed as critical to spurring end user adoption of RFID within the supply chain. A number of technology and application standards aimed at supply chain management are presently under development and nearing ratification. However, there are multiple standards, multiple transponder frequencies, questions about co-existence of some of these initiatives and conflicts over intellectual property rights surrounding the technology involved. With the development of several standards near completion, the use of RFID in the supply chain is expected to become more widespread. Users will now have the reassurance of industry standards covering the range of manufacturers' products.

Third, VDC research revealed that present RFID channels are largely underdeveloped and ill prepared to handle widespread adoption. For larger supply chain management installations, qualified integrators are needed to take RFID system components and securely integrate them into a large-scale enterprise resource planning system or local databases. At present, the RFID market significantly lacks experienced, knowledgeable resellers and integrators. To expand their presence in the supply chain market, many RFID suppliers have been revamping their RFID education programs to include Web-based training, educational and training seminars, and sales coaching. However, further educational improvements are needed to capture opportunities within the supply chain and keep pace with the growing RFID market.

Whenever discussing the future of RFID in the supply chain, there is always a lot of speculation, VDC said. The potential for viable RFID applications appears limitless, however shipments of RFID technology to support supply chain management applications have not reached levels previously anticipated. "Unfortunately, the revenue figures do not accurately reflect the level of interest and activity associated with RFID technology and the supply chain. While pilot activity and interest in supply chain solutions increased steadily, few large-scale implementations were announced in 2002," states VDC project manager, Michael Liard. "The primary challenges facing RFID's expansion in the supply chain include: end-user price expectations, standards and weak channel development. Perhaps 2003 will be the year the RFID market takes these kinks out of the supply chain."