Trends and challenges in RFID implementation



David Sommer, Vice President, Electronic Commerce, Computing Technology Industry Association, Oakbrook Terrace, Illinois, USA


Immense interest has been generated around radio frequency identification (RFID) technology over the last several years. Though the technology has been in existence for decades, its application had been limited for most of these years. But now, thanks to newfound and revolutionary applications such as supply chain management and asset tracking, it is currently one of the most promising – and problematic – technologies.

Industry participants expect this market to grow explosively in the next 18 – 24 months. The growth of the RFID technology market is expected to be driven by different factors such as mandates from retail houses, possible cost savings due to better visibility of inventory and governmental and/or regulatory body pressures.

RFID is disruptive to existing systems and processes. Some of its aspects call for complete process reengineering. Its implementation calls for a paradigm shift in the way business is conducted with channel partners and customers. Investment in RFID has strategic implications on businesses.

RFID technology has the potential to affect all businesses that are dependent on a physical supply chain. Businesses have started to realise the benefits that RFID can provide, such as increased visibility of supply chain, better inventory management and item tracking capabilities.

Markets are gradually waking to the fact that RFID technology is more than just the next step from barcodes or another data generating sensor-based technology. Apart from supply chain management, there are a large number of other potential RFID applications like electronic toll collection and physical access control that are gaining interest. In any market with a high need to track items in real time there is strong potential to benefit from RFID deployment. By using RFID in conjunction with global positioning systems, logistics and transportation companies can provide their customers with information on exact location of containers. Such ability would, in certain cases, help their customers optimize their supply chain.

RFID mandates

One of the key early market drivers for RFID adoption has been mandates from the likes of retailing giant Wal-Mart and the United States Department of Defense.

Wal-Mart announced in 2003 that it would require its top 100 suppliers to become RFID compliant – by tagging at the case and pallet level – by January 1, 2005. Other major retailers soon followed Wal-Mart’s lead.

The US Department of Defense required its 43,000 suppliers to put passive tags on cases, pallets and items costing $5,000 or more. An estimated 45 million items are covered by this mandate. The impact of mandates from the likes of Wal-Mart, the US Department of Defense and the US Food and Drug Administration (FDA) are not impacting the automotive and transportation sectors as heavily as other vertical markets.

A recent survey of 500 end-users commissioned by the Computing Technology Industry Association (CompTIA) and conducted by Frost & Sullivan, a global leader in strategic growth consulting, found that within the automotive sector, 15 percent of organisations said they are impacted by the DOD mandate, 12 percent by the FDA directive and 9 percent by Wal-Mart. The numbers are even smaller for companies in the transportation and logistics market: 9 percent each for FDA and Wal-Mart mandates; and just 6 percent for DOD.

At the same time, however, the auto, logistics and transportation industries are among the most aggressive sectors in their plans for RFID deployments, the survey found.

Just over one-half of more than 500 organisations surveyed in North America have either completed RFID implementations or plan to do so within the next 12 months. This includes companies that are evaluating, pilot testing, implementing, or currently using RFID. The most aggressive adoption is planned in the automotive industry, where 59 percent of companies surveyed said they will deploy the technology over the next 12 months. The consumer goods industry and the transportation and logistics sectors were close behind, at 58 percent each.

The automotive segment also leads the way in planned spending on RFID training, allocating 20 percent of its total RFID investment for training and hiring. By comparison, the logistics/transportation industry plans to use 17 percent of its total RFID spending on training and hiring.

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