RFID – will the adoption pick up?

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Sep 22, 2011 | Total views: 217

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We have been hearing for the past decade that RFID (Radio-Frequency Identification) is going to revolutionize the way industries function. Industries including transportation, Consumer Packaged Goods (CPG), manufacturing, wholesale and retail industries will transform in terms of storage, distribution and tracking/monitoring of movement of products/goods.

The utility of RFID in the transportation industry, for airlines, airports and ports is thought to be potentially high.

One of my good customers in the air cargo industry used to say that dealing with cargo is more difficult than passengers. At the least, the passengers can talk and communicate in some way if they get lost during travel, but in air cargo, the shipment can never talk and find its own way! If it is misplaced, it is gone. This raised the need to track passive cargo shipments.

Quite obviously for an airliner, there is a cost associated with any mishandled baggage, cargo shipment, ULD, twenty foot Containers in ports/rails and the cost also comes with the inconvenience that goes along with such mishandled cargo. Mishandled baggage also gets complicated further depending on whether it is a perishable product, time sensitive product etc. Industries have been spending money in implementing solutions for tracking/tracing mishandled packages, ULDs, TFU Containers, truck trailers etc.

The advantages of RFID technology were obvious. The tags and readers with the middleware were supposed to be the answer to resolve such industry recognized problems. But it looks like the technology adoption has been very slow in lieu of the cost of tags as well as the industry dynamics. Even Walmart influenced its suppliers to conform to RFID technology but it seems to have met with not much success during the initial part of the last decade. Now, Walmart is once again re-launching the RFID tags program in its clothing and apparel vertical.

As usual, with any new technology adoption, security aspects also play a key role. In addition, privacy issues are also coming up. For example, if an RFID device is tagged lifelong along with the product (e.g. Shirt); people might raise privacy issues as the tag can be tracked. The idea of tagging for the life of the product might be to complete the cycle of tracking the product on its journey from manufacturing plant to distribution channels to retails to customers and back to manufacturing company for any defective part replacement.

With RFID technology, the ROI does not seem to be justifiable as yet. In the Gartner Hype Cycle, RFID as a technology still seems to be just getting out of the trough of disillusionment, though there are claims that it is a 5B USD global market today with 40% CAGR.

If we look at the industrial revolution that happened during the last couple of centuries, one of the primary disruptive innovations which started the revolution was steam engine. On looking at the journey of steam engine; though a crude form of engine was invented during 1698, it took almost 82 years (1780) to give it a rotary motion by fixing a crank, rod and flywheel. Only by 1802, the world got a commercial passenger ship and by 1825, the first public railway locomotive opened up.

It took more than a century to apply the scientific discovery/invention innovatively onto solving real word problems (of either pumping out water from mines or giving it a wheel and make the transportation easier) and reap benefits.

But yes, time has progressed and it does not take so much of time in the current digital flat world for an invention to get innovatively applied. For example, ARPAnet went online in 1969 and by 1985 we had commercial AOL offering emails and news. It was a matter of only 16 years. Some technologies like the pager, came and vanished with the same speed. The mobile phone technology just erased pagers from most of the markets.

By looking at the pace at which adoption of RFID technology is going on, it might need a little more time before it gets widely adopted in the manufacturing/retail/travel/cargo industries.

Before RFID picks up momentum in those verticals, it looks like the counterpart of RFID technology, NFC (Near Field Communication) might get adopted much quicker and revolutionize the payment industry and probably the loyalty and travel industries through smart phones. More discussion about the same will be in my next blog.

Till then, please provide your comments!