RFID Interest High, Deployment Levels Increasing  Survey

Mandates driving adoption, but companies still looking for industry standards, Larstan reports

Mandates driving adoption, but companies still looking for industry standards, Larstan reports

Washington — January 14, 2005 — With mandates going into effect this month for suppliers to Wal-Mart and the U.S. Department of Defense (DoD), interest in the deployment of radio frequency identification (RFID) technologies is relatively high, according to a recent survey by Larstan Business Reports.

About three-quarters of the 669 supply chain and information technology executives responding to the Larstan survey said they believe that having an effective advanced infrastructure in place to support RFID mandates, such as those from Wal-Mart and DoD, is "very important" or "important."

In its report on the survey, "Preparing for RFID Compliance," Larstan writes that the mandates clearly are the key driver behind deployments. About two-thirds of respondents to the survey agreed that customer mandates are the reason they are installing RFID today. Nonetheless, the pace of RFID deployment is striking, given the newness of the technology and the fact that multi-vendor industry standards are still being developed for key aspects of the technology.

Identifying ROI

Indeed, more than 50 percent of respondents indicated that it was "very important" for RFID infrastructure to be based on industry standards and to support multi-vendor and multi-system interoperability. For responding executives in the transportation/logistics sector, this was even more critical, with 69 percent of those responding citing it as "very important."

While the mandates from large retailing and government procurement organizations clearly are accelerating the rate of adoption of RFID technology, Larstan's research confirms that organizations have been keeping up. They have evaluated RFID technology and also identified clear benefits. Specifically, about 60 percent of the respondents believe that RFID system deployment will reduce labor costs and boost process efficiency in their organizations — ultimately making their organizations more competitive. To date, about one-third of the organizations responding to the Larstan survey said they have implemented effective advanced infrastructures to support RFID.

In addition, about 50 percent of organizations believe that their current infrastructure can accommodate anticipated RFID data volumes. RFID tags and reader systems deployed at various points in the supply chain generate orders of magnitude more data than companies currently extract from more widely deployed tracking systems, such as bar coding.

A Flood of Data

In fact, early RFID technology trials and deployments have confirmed that the amount of data generated by pallet, case and item tracking via RFID tags will be 100 to 1,000 times the volume that companies are faced with when using traditional bar coding systems, according to Mark Palmer, vice president for the complex event line of business at software firm ObjectStore.

This volume of data, and the need for precise control and monitoring of RFID readers, requires deploying customized middleware that links readers with corporate ERP systems and other supply chain infrastructure.

While mindful of customer mandates, companies also are focusing on their return on investment (ROI) in RFID. About 90 percent of respondents said that "a timely and substantial ROI" is a prerequisite for launching any major RFID initiative in their organizations.

Companies that are not well-automated may reap the most dramatic gains by deploying RFID, because they will realize process efficiency, labor savings and accuracy gains that currently are enjoyed by more automated companies already using tracking technologies such as bar coding. Nonetheless, even highly automated companies stand to gain in efficiency, labor savings and accuracy from RFID deployment. That's especially true when RFID encoding reaches beyond the pallet and case level and reaches the item level, according to Lori Porter, product line manager for RFID programs at Paxar, a retail merchandising and supply chain labeling and tagging system provider.

The report on the Larstan survey is available at http://www.larstan.net/RFID.htm.

For a contrary view of the future of the RFID market, see the article "The O'RFID Factor: A 'No Spin' Look at Where Radio Frequency Identification Is Headed," in the October/November 2004 issue of Supply & Demand Chain Executive.

For more information on trends relating to radio frequency identification, follow this link for an extensive listing of SDCExec.com articles, featuring the latest research findings on the RFID, including adoption, return on investment and barriers to implementation.