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RFID Worries: ROI, Reliability

A new survey of RFID technology vendors and end users finds uncertainties over the technology's ROI, tag availability and performance are the issues of greatest concern.

And while the world's largest manufacturers such as Gillette, Kimberly-Clark and Campbell Soup are beginning to show successful implementations of the tracking technology in their supply chains, others are still evaluating their options, according to a report published by ABI Research this week.

Many logistics and IT management staffs still struggle to integrate RFID hardware and software into enterprise systems for quantifiable long term benefits, without major disruption, ABI found. The survey also revealed concerns with tag availability and performance. The majority of the 49 end-user companies surveyed by ABI were global organizations, with over half making more than $500 million annually.

Although huge purchasers such as Wal-Mart Stores and the U.S. Department of Defense delivered highly publicized mandates that their top 100 or 200 suppliers begin using RFID technology that will automate tracking and receiving of goods, ABI analyst Erik Michielsen said that even these manufacturers have some leeway. "We're not talking about January 1," he said. "We're talking about early 2005."

According to Michielsen, the process of embedding tags into printed labels could be a sticking point in RFID rollouts. There's a question whether companies that make conventional labels will be able to produce the machinery to embed RFID tags in the labels at the rate needed. He said that there is substantial loss at each stage of the process.

Up to 30 percent of chips are damaged as they're attached to their antennae, with another 10 to 15 percent going bad when they're applied to the label during the printing process, he said.

"Everybody keeps on talking about tag price," he said. "But working tag price is another thing." He said that companies along the value chain must implement error handling process and quality monitoring. Label conversion and printing are the two most critical areas.

Perhaps unsurprisingly, the end-user companies surveyed picked supply chain management and asset management as the RFID applications that would most benefit them, with access control (automatically opening locked doors or gates) as the third most likely use. Nearly half of these companies either had a fully implemented RFID project, or were in the process of piloting or rolling one out.

These companies cited uncertainty about the potential for return on the investment as the major deterrent to a widespread deployment, with 23 percent identifying this as the major reason. The next most-cited reason, for 19 percent of the companies, was uncertainty about standards. At the same time, a full 79 percent of the end-user companies were not members of EPCglobal, the industry consortium working to create standards for product descriptions to be used with RFID technology.

Businesses hoping to find internal benefits for RFID will need to call on professional services firms. If 2004 was the year for manufacturers of tags and readers to get their acts together, Michielsen said, 2005 will be the year that services firms show their stuff.

In September, IBM expanded its year-old RFID consulting offerings to meet the needs of smaller enterprises. It also announced that it had formalized the learning from previous engagements into offerings targeted at specific industry sectors, including the automotive, petroleum and forestry industries.

Also in September, Sun Microsystems announced the availability of reference architectures for small, medium and large companies. Sun said these would enable clients of its RFID consulting services to benefit from Sun consultants' previous experience.

At the same time, HP announced closer collaboration with professional services firm BearingPoint, as well as a consolidated offering for industry verticals. HP handles the strategy, process work and integration, allowing HP to focus on hardware and infrastructure.

"Business consultants play a primary role in allowing companies to understand inherent value in RFID and how it can enable change in orgs," Michielsen said. "RFID is just another technology, but it is an enabling technology."