RFID: Technology That's Ahead of Adoption

In principle, it's a fantastic idea: electronically tagging goods, from individual items to pallets to entire shipments. In supply-chain logistics it's a valuable tool for security, productivity and delivery accuracy. So, why has the adoption of Radio Frequency Identification (RFID) been slow, falling short of successive annual targets? Technology industry experts are not in agreement about the answer.

Proponents cite numerous examples of effective introduction of RFID, sometimes mandated to suppliers and shippers by big customers such as Wal-Mart and the U.S. Department of Defense. Other examples come from specific tracking initiatives undertaken by carriers such as DHL or inventory control by the likes of United Kingdom retailer Marks & Spencer.

In fact, research suggests that the overall global market for RFID (including all hardware, systems and integration) was worth just short of $5 billion in 2007, a figure not to be sneezed at.

However, skeptics point to the abandonment of pilot projects by some carriers and retailers (Albertsons for example), delays in introduction by others and overall shortfalls against rosy forecasts when the technology was first developed and introduced a few years ago.

The true picture seems to be that potential RFID users are still sitting it out, awaiting technology and operational changes that will create better cost-benefit equations.

Global adoption has been slowed by several key stumbling blocks:

• The lack of a standardized technology. Several different types of RFID devices are on the market — some which broadcast their presence ("active" and "beacon"), others that wait to be interrogated or found ("passive"). And there are different specifications in each category.
• The relatively high unit cost of tags. The electronic tags use integrated circuits, especially for active and beacon tags, which require battery power, resulting in a cost that leads to poor or negative ROI. The need for manual fixes when problems arise and a shortage of personnel who have the needed skills exacerbate this problem.
• Poor linkage between the front-end (the tag or transponder plus the close-range antenna that identifies it and transmits its location) and the broader end-to-end supply chain.

Solutions could be on the way. Calls for a Supply Chain Technology Standard (SCTS) are swelling, while the development of chipless RFIDs, without integrated circuits, could revolutionize the cost base.

Yet, these are early days and the industry has some way to go before these solutions are in place. Meanwhile, introduction of RFID lags behind targets. But when these changes do occur, uptake is expected to accelerate as bottom-line benefits — reduced theft, improved productivity, better inventory control and streamlined logistics — become more apparent and achievable.