RFID: Delivering on the promise of real-time visibility

Every year for the past five years or so has been the year RFID was going to take off in the supply chain. Too often, the reality failed to live up to the hype.

That may be about to change, according to a new survey of RFID users from VDC Research Group (http://www.vdcresearch.com), the Massachusetts based technology research firm.

“The big news is that the spend on RFID technology by end users will be up by over 200% in 2010,” says Drew Nathanson, VDC’s director of research operations.

For the purposes of this survey, Nathanson defines spend as the amount end users have budgeted to spend on RFID in their IT budgets. The average spend on RFID in 2010 will be about $3.5 million, which means that most of these companies are Tier 1 end users. In addition, Nathanson says he’s seeing companies that are currently piloting projects using 200,000 to 300,000 RFID tags a year preparing to scale up and use millions of tags per year in 2010 and 2011.

Looking forward, the outlook remains bright. “We asked the same question about 2011 because most companies do a two to three year budget cycle,” Nathanson says. “We expect 2011 spend to show 96% growth over 2010.”

What’s driving the growth. Nathanson sees a confluence of factors, including:

The technology works: Companies burned by technology hype during the Internet boom took their time piloting RFID. In some cases, says Nathanson, proof of concept pilots have been going on for three years. “A lot of learning went on during those pilots,” he says. The result is that companies have proved the concept and are moving from pilot to large-scale implementation. As a result of that learning, they’re also looking at other applications for RFID. Example: A clothing manufacturer that uses RFID to manage its inventory positions in retail stores is now looking at how to leverage that data to drive it’s warehousing and distribution activities.

It’s all about the software: There have been two important developments around the middleware that drives an RFID solution. First, middleware providers have done a lot of tweaking to their applications. “Middleware is a lot more open and flexible than it used to be,” says Nathanson. Second, as a result of those pilots, more solutions have been developed. Put the two together and what you get “are additional applications that you can add on relatively quickly that will further extend the value of your system,” Nathanson says.

Hardware is a commodity: Both readers and tags have been commoditized, driving down the cost of RFID hardware. “In volume quantities, you can get a fully-converted EPC Gen II tag for about ten cents,” says Nathanson. That’s still twice the price of the 5-cent tag – the cost at which mass adoption of RFID was supposed to be affordable. That is one of the reasons that many of the initiatives still revolve are around tracking high-value assets in a closed loop supply chain – one where the end user has control from end-to-end.

The user profile is changing: Right now, 80% of the market for RFID in the supply chain is being driven by “brownfield” projects – end users that already have some experience with RFID. That is changing. “By 2015, we think brownfield projects will represent just 30% of the market,” says Nathanson. “As RFID becomes commercialized, you’re going to see more new end users adopt the technology and that gap between the two will narrow.” 

Nathanson adds that VDC is looking for more input from end users. If you are involved in the selection of the RFID systems deployed by your company, this is your chance to have your voice heard by the supplier community by participating in an online survey.

Every respondent who completes the survey will receive:
• Instant access to a summary of the 2009 survey findings;
• Entry into a drawing for one of five (5) $100 Amazon.com gift certificates (drawing to be held August 30th, 2010); and
• An executive summary of VDC’s 2010 survey findings once the results have been tabulated

To begin the survey, go to: http://vdcresearch.com/survey/10_rfid_eu.html