Users Should Push Forward with RFID – Despite Issues

March, 2004

In several conferences lately, I’ve noticed a great deal of user interest in RFID, much or most of it driven by mandates from major players such as Wal-Mart, Target, Albertson’s (just announced last week), and the US Department of Defense (DoD). However, one thorny issue is that there are two competing RFID standards: one, the Electronic Product Code (EPC) standard, favored by the retail supply chain, and the other, the international (ISO 18000) standard favored by the U.S. DoD.

Enrico Camerinelli at Meta Group thinks that users should push ahead with RFID pilot projects, in spite of the uncertainty surrounding RFID standards. He writes:

    Among the issues surrounding RFID technology, the hottest relates to the final standard (e.g., EPC, ISO) that — when eventually decided — will open the gates to its mass adoption. The fear of choosing a potentially “wrong” standard is preventing many end-user companies from launching pilot RFID projects. This is a mistake, as the benefits of getting acquainted with the utilization of the technology and the ability to shape processes around it offset the risk of choosing the wrong standard. We believe the debate surrounding RFID standards, while important for achieving consistency and direction, is in reality an excuse used to “take time” and catch the passing RFID train by those enterprise software vendors who did not foresee the wide interest in RFID and have lagged in their support.

I’m not sure which enterprise software vendors Camerinelli is referring to. In the Oracle and SSA events I attended recently, RFID was a hot topic. I think vendors are hoping that RFID will be the “next Y2K,” at least in those industries where there are customer mandates.

Separately, Soundview Research encourages users to push ahead with RFID pilot programs as the only way to work out problems with the technology:

    RFID is still a developing technology and, as a result, there are problems with existing tags and readers. There are concerns that new RFID technology will interfere with existing RFID technology within the areas through which products are being trafficked. It is also obvious that one frequency and one tag design will not fit every situation; each business will have to figure out how RFID technology can best be deployed in their respective warehouse or backroom. The only way to get through these hurdles is by trial and error. Nothing is going to happen while everybody is on the sidelines. Wal-Mart realizes this and continues to push forward, causing the RFID obstacles to be addressed now. As RFID is adopted, the price of chips and readers will come down, and read rates will improve. The anticipated short-term solution will be a hybrid environment with both bar codes and RFID tags being utilized until all the kinks within RFID are worked out.

IDC is now forecasting the U.S. market for RFID as $1.3B by 2008, noting that several of Wal-Mart’s major suppliers have launched pilot programs after realizing that Wal-Mart isn’t going to move its January 1, 2005 deadline. As Soundview Research notes, “Over the last couple weeks, RFID-related-technology suppliers have seen a significant increase in customer inquiries which appears to be driven by the outcome of one-on-one meetings with Wal-Mart.”

March 2004