RFID: The reality behind the hype

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Asset tracking is emerging as the clear leader for the use of RFID technology. the latest trend survey by the RFID centre suggests that more than half of companies considering RFID wanted to use it to track assets colmpared with only a quarter looking for supply chain solutions.

Kevin Kelly, of the RFID Centre, says: “The early view of RFID was that it was really only a supply chain technology. There were always going to be issues of integration and data sharing which can give RFID a high shelf ticket. While these costs are falling fast there is even more rapid growth in RFID in keeping track of fixed assets – assets that are often far more costly than working capital. 55 per cent of our visitors are looking for improved asset tracking compared to 25 per cent looking for supply chain solutions.

The study was based on data from 2,079 visitors who attended events at the centre during the year.

He points to the example of a chilled foods logistics company which was looking to make significant savings. Reducing queries on delivery discrepancies seemed a good place to start. However, tagging product deliveries was not an option given the many smaller retail outlets lack of IT infrastructure.

“What we found instead was that the biggest losses were occurring in the mislaid roll cages which double as in store merchandising units. We also found the delivery trucks were fitted with telematics. It was relatively straightforward to fit tags to the cages and scan them on and off the truck with the time and place of transfer being sent by the telematics unit on to the company data base. To make it even easier for managers, this application is web based and hosted by a third party. By using an existing mobile working application payback was achieved within a year.”

Another study, this time by Cambridge-based consultancy IDTechEx, provides some insights into who is using RFID tags and how usage is likely to develop. At the start of 2007, the cumulative number of RFID tags sold over the past 60 years is 3.752 billion. Some 27 per cent of that number were sold in 2006 and 19 per cent in 2005, showing how sales have demonstrated a very robust increase.

However, says IDTechEx chief Raghu Das, the sale of 1.02 billion RFID tags in 2006 (35 per cent of those being RFID cards) has been disappointing to those expecting higher volume sales of versions in the form of labels.

Pallet and case tagging came in well under forecast last year. IDTechEx says that despite the progressive mandates by retailers in the US, consumer packaged goods companies have yet to realise any significant benefits let alone payback. The benefit has flowed rapidly to the retailer from the RFID solution providers who significantly funded development for this sector. What was anticipated to be a market of perhaps 5-600 million tags in 2006 came out at only about a third of this number – 200 million. That’s an average of a few hundred thousand tags that each mandated Wal-Mart supplier bought for the whole year.

Technical problems persist although users are pleased with the significantly improved performance from Gen 2. Infrastructure is still threadbare. Tag prices below 10 cents announced by suppliers in late 2005 were intended to trigger hundreds of millions to billions of tags being ordered. The volumes never came in 2006 and there is now over capacity.

IDTechEx reckons that some major tag producers are looking to get out of the business or at least outsource tag production. In 2007, it forecasts that the demand for tags for pallet and cases worldwide will be 420 million units, rising to more than one billion a year by 2009. However, the end game will probably happen broadly as anticipated, which means the tagging of most pallets and cases (about 35 billion globally each year) ten years from now.

While pallet and case tagging was below forecast, The report highlights successes in airline baggage, item level tagging of retail apparel, RFID card and tickets, tagging of animals, and other niche labelling markets.

IDTechEx expect that 1.71 billion tags will be sold this year. The total RFID market value (including all hardware, systems, integration etc) across all countries will be $4.96 bn. By far the biggest segment of this is RFID cards. For those not involved in that sector, the 2007 market value for non-card RFID (e.g. RFID labels, fobs, tickets, etc) will be $1.97 billion.

Excluding cards, 58.4 per cent of the market in 2007 will be in the US and 33 per cent in Europe. Consequently, although China, for the first time, dominates the total RFID business – virtually without exporting – the USA dominates everything beyond the card part. The market will rise to $27.88 billion in 2017. This includes many new markets that are being created, such as the market for real time locating systems using active RFID, which will itself be more than $6 billion in 2017.

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