VDC Research: RFID, Barcode, Retail Automation & Self-Service Market Blog

RFID Tracks Well with IT Assets

We’ve been hearing about tracking IT assets with RFID since the rumblings of Sarbanes Oxley and the ‘pains’ associated with its compliance.  There’s a variety of flavors of RFID solutions targeted at this application; however, only a few have gained traction.  

Why?  Similar to many emerging applications for RFID, most vendors jumped into the market without a deep understanding of the requirements, preferences and processes.  They were essentially pushing a solution instead of developing one. 

The point here is that, as with most RFID applications, there are additional layers of complexity that need to be addressed.  And although this market could be an early adopter of OTS (Off-The-Shelf) packaged solutions, there is more to it than just tagging and reading. 

Market intelligence from all RFID communities – Supplier, Channel and End User – indicates that an RFID solution for IT asset tracking solutions should:

• Be more cost effective and efficient than existing alternative solutions
• Provide business intelligence on the tagged asset – on demand
• Provide unique asset identification and location within a rack within a room within a facility, and in some cases, tracking their movement
• Function in environments with high metal and RFI
• Be compatible/integrated with systems and solutions
• Enable simple scale and solution expansion
• Be able to store additional data pertaining to the asset, its location and environment, service record, movement …
• Be easy and low-cost to manage and maintain

I’d like to draw your attention to a few companies we feel are moving in the right direction and seem to have a deeper understanding of the solution requirements:

• RFID Global Solutions (www.RFIDGLOBALCORP.com): Partnered with Imation to provide complete data center solutions, including but not limited to receiving and commissioning, tracking movement (i.e.: data tape moving between storage facilities), inventory and auditing, and decommissioning or disposal
• RF Code (www.RFCODE.com): Introduced a rack-based solution – for open or closed racks – that leverages active RFID and IR to provide rack-level visibility with high precision and reliability … and it doesn’t take up a U (most rack-based solutions require at least 1U)

Please do not misread our tone or tenor:  We believe that this application could be as close to low hanging fruit for RFID as exists in the market. 

A number of factors point to it:  solutions continue to be developed and refined, performance is increasing while cost is decreasing, and even source-tagging (i.e.: Dell and HP) is gaining traction. 

But, work remains to close the gap between current OTS solutions and market requirements.

Electronic Shelf Labels: Where’s the Tipping Point?

VDC’s analysts have been following the electronic shelf labeling market for years, and with good reason: we love disruptive technologies. 

Many of the disruptive technologies we follow have proven more evolutionary than revolutionary:
• 2D barcode symbologies,
• RFID, and
• voice recognition

Each of these technologies has made fools of optimists and cynics alike.  Still waiting for that much ballyhooed 5 cent smart label?  Take a number.  Still waiting for multi-modal data capture to be embraced globally by warehouses and T&L operators?  We’re already there.

So what’s the deal with electronic shelf labels? 

The value proposition is as compelling as it was in the eighties and nineties, even more so with the new functionality ESL suppliers have added in recent years:
• dynamic displays,
• temperature and stock monitoring,
• longer life displays that consume less energy,
• Stock to light capabilities, etc. 

Yet, ESL suppliers have yet to successfully secure that elusive retail reference account that will start those dominoes tumbling, particularly in North America, which remains largely under-penetrated.

The capital outlay required to support ESL is far from insignificant and is compounded when high volume retail chains (those who stand to benefit the most) consider investing.  With the average North American supermarket carrying 46,852 items and ESL volume pricing approaching $5.00, the cost to outfit a single supermarket can easily exceed $250,000.   The alternatives are far less CAPEX intensive.  Accounting for labor savings alone won’t provide a return on investment in less than three years, not with the “median stock clerk” earning $9.38 per hour, sans benefits. 

As with the aforementioned technologies, finding the tipping point has as much to do with accessing incremental revenue as it does with labor savings and operational efficiency.

How much incremental revenue might a typical supermarket access through pricing optimization, and what impact might this incremental revenue have on the ROI calculation? 

These are the questions forward thinking retailers are contemplating, and endeavoring to answer.  Is this the breakout year for ESL?  Are we there yet?  Are we there yet? 

ESL is one of nine retail automation technologies we’re covering in 2010.  Learn more here: Retail and Transaction Automation Equipment, 2010

Authentication and Anti-counterfeiting: The Next Key Application to Drive Growth for RFID?

There is more to the emerging success of RFID in markets such as retail and pharmaceuticals aside from the benefits associated with track and trace applications on an item-level. 

The successful use of item-level RFID within the supply chain is also creating new opportunities for suppliers to create a more secure supply chain.  It’s a natural extension – if you are able to track an individual item throughout the value chain with an RFID transponder, you should be able to use that same system to ensure that all product within the value chain is authentic.

It is true that the installed base of RFID systems in these environments is already enhancing security, but hardly. 

In order to materially, persistently and flexibly enhance the security of an open supply chain, RFID needs to be deployed across a number of levels of a commercial value chain – from the point of manufacture through the point of sale.  In addition, infrastructure must be further developed to provide rapid and reliable authentication in tamper-proof remote installations.

Reads like a heady mix of requirements, no?  This is not necessarily a ‘giant leap for RFID-kind’. 

IC suppliers such as Impinj, Alien, and NXP all introduced new product families this year that enable higher security and improved authentication capabilities – at prices that the market should be able to accept.  Tag manufacturers such as Avery Dennison and Raflatac continue to develop and ship tamper-resistant product for a wide range of installations.  

The developer and supplier communities appear to be on the right track, but, they will, as always, need a fair amount of help from educated, visionary, liquid customers. 

From brand name fashion to pharmaceuticals to electronic components, demand for anti-counterfeiting and authentication has been a primary adoption driver of RFID since the very beginning.  The pharmaceutical industry is a prime example … over 30 million tags are to be placed on individual bottles and cases of high-theft, high-counterfeited drugs (i.e.: Viagra, OxiContin) over the next year, and the primary driver was secure supply chain, not operational efficiencies.  In fact, based on responses from more than 580 RFID end users and channels, the use of anti-counterfeiting and authentication applications is expected to increase more than 100% over the next 3 years and was listed as one of the most important adoption drivers.

The market is absorbing and applying more RFID technical and commercial requirements and capabilities information than ever before.  From market share leading Tier 1, through fast-growth Tier 3 enterprises, the vision is there.  And balance sheets continue to improve – highlighted by the 1.25 trillion in cash in the treasures of the S&P 500. 

So, let me leave you with this … the trend toward anti-counterfeiting is authentic.