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RFID Update: Back on growth track

Seven years after the Wal-Mart RFID mandate, the technology is alive and growing in logistics and supply chain operations. While most companies are not attempting to track cases and pallets through an open supply chain—which was the idea back in 2003—a new vision for RFID is taking hold and driving real value for early adopters.

WEBCAST: Learn how Sumitomo Electric has implemented RFID technology to help monitor movement and levels of raw materials from designated warehouse areas.

By Bob Trebilcock, Editor at Large
March 01, 2011

“Wal-Mart Radio Tags To Track Clothing.” That was the headline of a story in The Wall Street Journal back in July 2010. For many in the materials handling business, it was a déjà vu moment. After all, seven years earlier Wal-Mart announced what came to be known as “the mandate,” the goal to have all suppliers tagging cases and pallets with RFID smart tags by the end of 2006.

Anyone who ships to Wal-Mart knows how that worked out. But, let’s give the retailer credit where credit is due: Without that mandate, we might not be talking about RFID today. And make no mistake about it, when it comes to tackling problems in the supply chain, leading companies of all sizes are talking about RFID.

“The euphoria around Wal-Mart spurred a lot of innovation by the RFID industry,” says Kerry Krause, vice president of marketing for Impinj, a provider of RFID readers and silicon chips. “You saw investments in reader technology, chip technology, and software that arguably accelerated the progress of the technology.” 

Those innovations led to pilot projects that are now rolling out across the organizations of the early adopters in a big way. The result is that the market for RFID technology is projected to grow at a compound annual growth rate of 19.5 percent through 2014, according to VDC Research Group.

Where then is RFID today and how does it look compared to what we expected back in 2003? To find out, we talked to analysts, hardware and tag manufacturers, and solution providers. We learned that while most companies are not attempting to track cases and pallets through an open supply chain, which was the idea back in 2003, a new vision for RFID is taking hold and driving real value for early adopters. 

Behind the growth
So, what’s behind the growth? For starters, the technology had to overcome three important hurdles involving perception, functionality, and price.

First, there was a hype cycle. RFID’s evangelists promised to replace bar codes and deliver real-time, end-to-end visibility across the supply chain for pennies. That was unrealistic. “At the top of the hype cycle, you would’ve thought RFID could solve world peace,” says Chris Schaefer, director of global market development for RFID at Motorola. “There was a set of expectations that were impossible to deliver.” 

Second, it didn’t work so well. Radio waves are finicky. RFID, for instance, did not work well around metal or liquids. Given the prevalence of steel racks, lift trucks, and metal truck trailers, that described most manufacturing and distribution environments. “The technology was in its infancy, and there were high failure rates,” says Carolyn Ricci, senior product manager of RFID for Zebra Technologies’ specialty printing group. “That made it a difficult sell to the business side of the house.” 

Last, but certainly not least, it was expensive. The goal back then was the 5-cent RFID tag. But when a bar code cost a fraction of a penny, those nickels would add up across the billions of cartons and pallets that are shipped every year in the retail supply chain. 

What happened? In a nutshell: The technology now works. “On the tag side, we’ve got better silicon that can be read more accurately, at increased ranges, and requiring less power to excite the tag,” says Phyllis Turner-Brim, director of RFID strategy and licensing for Intermec. “On the reader side, there has been a real focus on eliminating spurious reads and making sure that you’re only reading the tags that you’ve selected to read.” They’ve even come up with solutions to reading in environments with lots of liquids and metals. 

The price of the technology has also come down. Part of that is the result of Moore’s Law. But part is also the result of the role of standards, says Helge Hornis, manager of intelligent systems group for Pepperl + Fuchs, a provider of RFID solutions to manufacturers. “In the past, we’d have a chip manufacturer develop a chip that would work for our solutions, which resulted in an expensive RFID tag,” says Hronis. “Today, we can develop solutions utilizing one of the open standards available on the market. That is a significant advantage to our customers.”

The result of these technological developments is that perceptions have also changed. “There are still nuances in an operating environment because RFID is tied to physics,” says Michael Liard, practice director for RFID at ABI Research. “But it’s now part of the solution tool kit. RFID is real. It’s here and people are using it. That’s the most important change.”

About the Author

Bob Trebilcock
Editor at Large

Bob Trebilcock, executive editor, has covered materials handling, technology and supply chain topics for Modern Materials Handling since 1984. A graduate of Bowling Green State University, Trebilcock lives in Keene, NH. He can be reached at 603-357-0484 and .(JavaScript must be enabled to view this email address)

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