Radio frequency identification (RFID) technology has long had the potential to revolutionise the supply chain, but it didn't come front-and-center until Wal-Mart, the U.S. Department of Defense (DoD), and other high-profile retail organisations mandated it for their suppliers.

Driven by those mandates, suppliers have been working (some would say struggling) towards RFID compliance. 2005 was a key year in many of the mandates, and new research from AMR shows that RFID adoption is consequently spreading.

Specifically, AMR revealed that 69 percent of its survey respondents were either evaluating, piloting, or implementing RFID this year, and that the average RFID budget was $548,000 this year. The average budget is expected to rise to $771,000 by 2007.

July 2005

By Tamina Vahidy
Line56.com

Sixty-nine percent is a healthy figure, but it turns out that only 8 percent of all respondents are actually in deployment, with another 12 percent planning to be in deployment sometime this year. The reason for these low deployment figures is none other than what was once called supplier "clobberation" -- in other words, there can be more in it for the retailer than the supplier, and retailers hold a lot of the power in that relationship. Twenty-eight percent of AMR's respondents said that a lack of return on investment (ROI) was the biggest factor in the way of RFID adoption. If these respondents are under mandate and would have to spend the money anyway, they'd be well served to think about making the RFID investment more strategic, at least in the high-cost goods arena.

A closer look at the figures does show the RFID wave hitting, although perhaps a bit later than retailers would have liked. Currently, 23 percent of respondents are in pilots, and 38 percent of companies will evaluate RFID this year or next. Only 18 percent of companies have no plans for RFID; the rest are on the road to adoption, which AMR predicts as going mainstream in 2008.

As RFID is clearly an early market, AMR Research recommends users develop a long term strategy for RFID in their organisation as well as short term tactical requirements for meeting today’s needs. Vendors of the technology should work to combine different technology segments effectively and at a good cost of ownership in order to vie for market leadership. Vendors that can help customers find and exploit positive business models will win.

In August, AMR Research will host a Webcast on RFID with research directors Dennis Gaughan and Marianne D’Aquila. For more information on the Webcast or report, please contact Julie Sadowski at jsadowski@amrresearch.com. More information on AMR Research is available by calling 617-542-6000 or visiting www.amrresearch.com.

iStart will be running an update on the current RFID projects in New Zealand shortly. Subscribe to the iStart magazine here.