I was in Chicago this year for the ProMat material handling technologies trade show. I had become accustomed to seeing RFID mentioned in almost every booth in previous trade shows, even in cases where the connection between a vendor and RFID technology was tenuous, at best.
But during this year's show, I was struck by how little RFID hype was apparent on the show floor. The media frenzy over Wal-Mart and EPC Global initiatives has clearly cooled, reflecting the difficult realities facing the case-level consumer-goods tagging market. Despite this, the overall adoption of RFID technology is increasing. This reflects the creativity and chaos of the market working out uses for RFID technology.
EPC Tag Volumes Fail To Meet Projections
The analysts at IDTechEx released a report in the last two weeks that nicely illustrates the numbers facing the EPC Gen 2 UHF market. At the beginning of 2006, breakthroughs in tag production to reach the magical "five cents per tag" were predicted to create a boom in tag demand. Although tag prices are now routinely fewer than ten cents per tag (averaging around 7.5 cents in our experience,) the total number of case and pallet tags reported sold in 2006 by the IDTechEx report was 200 million. This works out to a few hundred thousand per each participant in the Wal-Mart mandates. If you include the other retail mandates (Target, Best-Buy) the average tag-per-vendor count decreases even further. This reflects the reality that EPC Gen 2 tag use is driven by mandates from the big retailers, not from the value proposition to the rest of the supply chain.
Venture Development Corp. also published an interesting report in January that points a finger at a cause for slow adoption of EPC UHF technology -- the limited amount of case studies and other data showing positive ROI available to the public. The Venture Development Corp. report takes the view that, when enough RFID end-users share their real-world ROI data with the rest of the industry, RFID use will increase accordingly. I can't share their optimism. My experience with clients shows that companies do not currently have a positive ROI from retail RFID, unless they are end-users such as Wal-Mart (see RFID Strategy -- Case Studies Via Press Release for more on this subject.)
Major Progress In Active RFID Tracking Of Shipping Containers
This year's ProMat show had one example of an RFID success story that was easy to miss unless you were looking for it. This was the presence of RFID case studies as a prominent feature of Lockheed Martin's booth. Lockheed Martin bought Savi Technologies in late 2006 and capitalized on the acquisition by featuring Savi Technologies and executives in their ProMat booth. Savi's use of proprietary active tags to track shipping containers was featured in show handouts and booth displays.
I noted the explosion of interest in container tracking during 2006 in RFID Strategy -- The Boxes Can't Drive Yet. Container tracking has been characterized by contradictory trends. Data visibility has expanded to become an expected part of port services, but the underlying hardware is a growing set of proprietary tags that actually provide the data. However, this situation may have been resolved by a November decision by the government of China.
China announced that the ISO 18000-7 standard for active tags is approved throughout their territories. They join other import/export powerhouses such as Korea, Taiwan and Singapore in approving this standard. Furthermore, a January request for information by the U.S. Department of Defense indicates that the DoD is considering ISO 18000-7 as a standard.
This standardization is good news for Savi, since ISO 18000-7 incorporates essential parts of Savi's intellectual property. Any company wishing to manufacture compliant tags will have to pay a license fee to Savi. Thus we have an interesting case of China, the US DoD and the free market all working together to create a standard infrastructure for active-tag RFID tracking of shipping containers throughout the logistics chain.
What If They Used RFID To Track Individuals, And Nobody Showed Up To Protest?
Finally, I would like to briefly consider two applications of RFID technology that made the news recently. These applications have become so accepted that they pass almost unmentioned as RFID technology, even though they involve the politically sensitive issue of tracking individuals.
The first was the tragic story of the Rocky Mountain climbers who were trapped by a sudden snowstorm, ultimately perishing. This story featured efforts by rescuers to determine a hiker's location by homing in on his cell-phone signal. Left unmentioned is the fact that a modern cell phone is an active RFID tag that can be used to locate every user who carries one.
The second story was the recent Miami Marathon. As in previous years, each runner was tracked via an RFID tag attached to their shoelaces. The RFID tag provides the basis for time calculations during the mass-start (i.e., when a particular runner crosses the start line in a process where it takes tens of minutes for the entire pack to get across the start line), and real-time updates on runners' positions during the race. Friends and family could actually go online to a tracking website to see where their particular runner was on the course. Such RFID tracking has become commonplace in sporting events across the country.
Of course each of these stories involve RFID tracking that is acknowledged and voluntary; but it's instructive to consider the very ordinariness of such use against the state of the industry even five years ago. Real progress is being made in RFID in some very unexpected applications.
The Wal-Mart RFID mandate represents a centrally planned technology development initiative. While this effort has created impressive benefits for Wal-Mart, the value proposition has yet to be made for other participants in the EPC-compliant supply chain. No student of economics should be surprised, however, to see that the chaos of the market is generating interesting new applications of RFID on an increasing basis. It appears that the foreseeable future of RFID technology is one of industry-specific applications building on technological innovation across several frequency spectrums and tag standards. We will continue to bring interesting applications of RFID to your attention as they arise in the marketplace.
Paul Faber is a Principal with Raleigh, N.C.-based Tompkins Associates, a supply-chain-solutions consulting firm. As the chief manager of RFID equipment implementation at Tompkins Emerging Technology Center, Faber possesses extensive experience in material handling solutions, systems integration, and installation. He has managed field integration and operations activities at material handling sites around the world.
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