RFID: It's rationalization time

It may only be a matter of time before RFID is accepted universally across the market. Or is it? Find out why adopted RFID may or may not be the best option for your business.

IT channel takeaway: It may only be a matter of time before RFID is accepted universally across the market. Or is it? Find out why adopted RFID may or may not be the best option for your business.

With Brian Kilcourse, chief strategist for the Retail Systems Alert Group [www.retailsystems.com], which recently surveyed 122 manufacturers and retailers about their RFID deployments and plans for the future for its third annual study, "RFID: How Far, How Fast?"

Question: Your research showed that manufacturers appear to be adopting RFID at a much faster rate than retailers. Why is this so?

Kilcourse: Manufacturers and retailers are adopting it at different rates. Manufacturers are going after it at a much faster pace. Mandates are still the number-one driver for them, by far. It isn't the only driver, but it's the single largest one. Retailers aren't under any mandates. It's important to remember that mass adoption is rarely driven by mandate. Ultimately, the market determines what gets adopted. The adoption curve for RFID seems to be following one that is stunningly parallel to the UPC code. People forget that it took 30 years for (UPC code) to be adopted. Wal-Mart mandated it in the mid-1980s, but it didn't really catch on until retailers really saw the value.

Question: Other than mandates, what reasons are companies citing for their interest in RFID?

Kilcourse: IT and logistics are the two most influential groups internally. They are looking at (RFID) largely as a way to improve traceability of the supply chain, especially between the manufacturer's warehouse and the retailer's warehouse. Rationalization seems to be the key word for this year. The proponents of RFID would like to see home runs, but we are largely hitting singles right now. However, any baseball manager will tell you that you win the game with singles and the occasional home run. Rather than taking a scattershot approach across product lines, they are focusing on fewer product lines and high-value inventory. They want to focus RFID where mistakes are most costly. Consumer electronics is number one, followed by pharmaceuticals/controlled drugs, and computer peripherals and high-end apparel tied for third.

Question: You say that you are "cautiously optimistic" about the outlook for RFID. Can you explain?

Kilcourse: Retailers are adopting a wait-and-see attitude, but that doesn't mean they aren't interested. At the C-level, awareness of RFID's capabilities has improved since our last survey in 2005, though it hasn't yet translated into increased spending. Compared to 2005, 33 percent of companies with RFID timelines are devoting the same amount of resources to RFID, and 43 percent are devoting more resources to it. For companies without RFID timelines, 61 percent are devoting the same amount of resources to it, 18 percent are devoting more resources to it, and only 14 percent are devoting fewer resources. They are staying the course.

This 3 Questions originally appeared in a weekly report from IT Business Channel.

This was last published in September 2006

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