Emerging Economies Hold Promise for Mass RFID Tagging Opportunities

Asia Pacific region is gaining significant importance as the manufacturing hub of the world

Asia Pacific region is gaining significant importance as the manufacturing hub of the world

Palo Alto, CA — June 30, 2006 — The radio frequency identification (RFID) market has witnessed higher interest levels as compared to similar technologies such as barcodes and wireless networks. The initial hype surrounding the technology is on the decline since 2005 with industry participants adopting a more realistic perspective on the potential benefits of RFID. There is an increased focus on integrating RFID technology to work with existing business process and applications.

New analysis from Frost & Sullivan, WorldRFID in Retail and Supply Chain Applications — A Supplier Perspective, estimates market revenues to reach $2,893.8 (million) in 2012.

"The true benefits of RFID technology in the retail supply chain are likely to materialize only in the face of collaborative efforts by all the trading partners. Isolation of RFID projects along the retail value chain would result in information being owned separately by manufacturers, suppliers and retailers with little or no value proposition in sight," said Frost & Sullivan Research Analyst Priyanka Gouthaman. "Potential benefits to suppliers, including accurate demand forecasts and capacity planning strategies are directly dependant on information received from the retailer's end. An information gap at any point of the supply chain would minimize the optimal gains from RFID adoption."

The technology presents immediately visible returns to retailers in terms of improved inventory management and demand planning that would result in higher turnover. The value proposition from RFID still remains unclear among most suppliers who are therefore hesitant to invest in full deployments.

"Large retailers such as Wal-Mart enjoy considerable clout over their suppliers on account of their trading volumes," said Gouthaman. "Most suppliers are therefore adopting RFID technology with a narrow focus of maintaining retailer relations. The 'slap and ship' approach being considered by most suppliers is impeding market growth within the RFID industry."

RFID vendors need to establish the potential benefits of the technology and the positive return on investment (ROI) that would accrue to retail suppliers. Industry participants would therefore need to collaborate among themselves to offer integrated solutions that have had a proven rate of success among the early adopters. Overcoming market apprehensions would prove easier in the face of existing case studies of suppliers who have deployed the technology.

The retail supply chain is increasingly becoming global in nature. Manufacturing, assembling, distribution and the ultimate point of sale are no longer confined within a single country or region. The Asia Pacific (APAC) region is gaining significant importance as the manufacturing hub of the world. While most retail mandates are currently confined to specific geographic regions, it is expected that the technology would be employed across global supply chains in the long term.