RFID strategy

What is your RFID strategy?
The time for talking about RFID is over; it's execution time

July 15, 2004

Let us first review some latest developments in the world of RFID before we get into its implications for your business and how you can leverage these developments for strategic growth:

Wal-Mart has already started experimenting with RFID tags in selected stores on selected products from such companies as Hewlett-Packard, Johnson & Johnson, and Proctor & Gamble.
Gillette (pushed somewhat by Wal-Mart) is another early adopter with a targeted goal to order half-a-billion tags.
Michelin is going to put RFID tags in its tires.
The METRO Group Future Store Initiative (a testing ground for RFID and other innovative technologies) is a cooperation project between METRO Group, SAP, Intel and IBM as well as other partner companies from the information technology and consumer goods industries. This makes METRO Group as the first retail company in the world to use RFID throughout the entire logistics process chain
About 70 percent of IT executives report that their companies are undertaking the first steps to adopting RFID, according to a new survey conducted by BearingPoint, the Software and Information Industry Association, and CIO magazine. About 46 percent of the respondents were considering RFID due to government and retailer mandates, while 54 percent claimed "strategic advantage" as their motivation. Those who were for the technology expect RFID to reduce labor costs, increase efficiency, and tighten their collaboration with business partners.
Faced with industry mandates, almost half of North American manufacturing executives anticipate a high return on their RFID investments, according to results of a survey released by Accenture. While nearly all (86 percent) of the executives at 30 manufacturing companies who participated in the survey said that RFID's greatest benefits would expand beyond the "four walls" of individual organizations to the extended supply chain, 45 percent reported that they are still evaluating the technology's benefits for their own organizations.
RFID technology gets a boost from the FDA and pharma industry.

So what are the implications of RFID adoption?

The implications and the nature of business opportunities created vary by your position in the value chain:

Participant Implications & Opportunities

RFID user Potential to lower costs, mostly in labor and damaged/misplaced/stolen goods (or what is sometimes called 'shrinkage'). Wal-Mart is expected to save as much as $8 billion a year. Take a look at your logistics and supply chain and be prepared to embrace it as soon as possible.

RFID manufacturing/supply What can you do to join the RFID manufacturing value chain? There will be tremendous growth opportunities for all types of companies (material, logistics, labels, shipping, design, testing, etc.).

Equipment/device manufacturers To read the data from RFID tags, there will be need for a range of readers. Then these readers will need to be serviced and repaired. Plus, there will be additional hardware needed in the back-office.

Battery supplier RFID technology demands a whole new set of battery performance attributes. And the batteries have their own value chain.

IT firms If you are an IT firm that has been hurt by the downturn, the RFID boom will be the next big thing, and probably your savior. Both hardware and software will be needed to collect, process, analyze, and interpret all that data.

Consultant (particularly supply chain management consulting firms) To help firms implement RFID initiatives, plus preparing them to do business on a new technology platform.

Application developers I am expecting that this will be a new category that will evolve over time. The current applications being considered are primarily focused on the retail sector (for the simple reason that the early adopters are retail companies). In the future, however, RFID will find use in many other areas.

Security services provider For lack of a better term, I am calling it "security" but the kind of services that I am talking about are privacy protection (almost all consumers are very concerned with privacy issues), data security, etc. Have you noticed how large the anti-virus, anti-spam, network-security, etc. markets have become?

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