August 31, 2005

According to a recent survey conducted by Frost & Sullivan and CompTIA, about 50 percent of companies in North America are either using, testing, piloting, or just evaluating RFID (radio frequency identification) technology.

Interestingly, while RFID has always been most visible in the consumer goods space (thanks to the Wal-Mart mandate), the survey found that automotive is in the lead, with 59 percent of companies involved with RFID. Consumer goods and transportation/logistics companies are tied for second place with 58 percent.

eMarketer, a company that aggregates from different sources, called attention to the business reasons behind RFID adoption by citing an A.T. Kearney survey, dated May 2005, in which 31 percent of companies cited reduced inventory and 30 percent mentioned reduced out-of-stocks as the major benefits.

Reduced lead-time variance came in at 17 percent, and increased manufacturing uptime was at 16 percent. Meanwhile, reduced labor and fees (3 percent), increased container security (2 percent), and prevention of lost containers (1 percent) were minor factors.

What's interesting about the A.T. Kearney survey is the way in which it highlights RFID benefits for both retailers and suppliers. While RFID has undoubtedly been a cost burden, particularly for those companies compelled to launch it quickly, the survey shows how it has created value through the extended supply chain, with possible benefits to all participants.

Of course, if you want that value, you have to get beyond the base compliance mentality with which many suppliers are meeting retail RFID mandates.

This is a problem for consumer goods manufacturers in particular, 46 of whom are using RFID because of the Wal-Mart mandate.

"The result among many of the pressured companies has been 'slap-and-ship' implementation, where RFID tags are simply attached to shipping containers rather than more fully integrated into the overall process," notes eMarketer.

"On the other hand, industries like banking and finance, information technology, and transportation and logistics are integrating RFID more fully with their business methods."

Not coincidentally, these are the industries seeing most business value from RFID.

Source: Line 56