Radio Frequency Identification (RFID) was perhaps the biggest non-story of 2006, Managing Automation Editor-in-Chief David R. Brousell recently noted. The technology continued to move much slower than anticipated as manufacturers struggled with return on investment. "Over-optimistic or unclear objectives for implementing RFID are likely to have a negative impact on ROI and deter wider adoption," said Frost & Sullivan Research Analyst Rengarajan Srinivasan in a Manufacturer.com article in October.

That is not to say that the technology was without success.

"New entrants are likely to have a better understanding of the nature of ROI that is practically achievable from the experience of early adopters and increasing numbers of credible pilot schemes," Srinivasan says.

According to a recently published study from ChainLink Research Inc., two-thirds of 275 manufacturers surveyed said they are implementing or plan soon to implement RFID. The study found that RFID activity is as prevalent among smaller companies as it is at larger companies.

Although overall tag volumes came in well below expectations for 2006, some observers consider RFID a success in several key areas — most notably with Gen 2. Industry commentary suggests Gen 2 capability is better than expected and equipment is readily available.

According to wealth and asset management firm Robert W. Baird & Co.'s RFID Monthly for December, market progress was better than weak volumes suggest:

The quality, form factors and application functionality have improved throughout the year. In addition, the market now has access to multiple sources of tag silicon. We also have seen a significant amount of pilot programs that have meaningfully improved the knowledge base.

In fact, reports Modern Materials Handling, Gen 2 has become the de facto standard.

Even though Gen 2 tags, readers and printers have been on the market for less than a year, the standard has been embraced by the two biggest users: Wal-Mart and the Department of Defense, which have announced sunsets on Gen 1 technology.

The past year was one of transition for RFID in the supply chain. The Department of Defense rolled out its RFID program; Wal-Mart added more suppliers, stores and distribution centers to its mandate; Gen 2 tags and hardware started to ship; and the RFID-enabled lift truck moved closer to reality.

Although slightly behind schedule, says Baird & Co., Wal-Mart is expected to have 1,000 stores RFID operational by the end of Q1 of 2007; the chain is expected to have as many as 2,000 stores RFID enabled by the end of 2007.

Moreover, when it comes to RFID tags, there are enough of them and they are working just as they were intended. "That's not a surprise," Chris Kelley, director of RFID business development for Intermec, told Modern Materials Handling as early as August. "This was the first spec built upon a number of proven technologies married together to meet specific user requirements."

One early concern was whether silicon makers could produce enough silicon chips — the "meat" of an RFID tag — to meet the demand for Gen 2 tags, due in part to there being only one producer, Impinj, manufacturing Gen 2 chips. Those concerns appear to have been unfounded, as the company has been shipping tens of millions of units per month to label makers, according to Bill Colleran, Impinj's president and CEO. Further, both TI and STMicroelectronics are now producing silicon for Gen 2 chips, which could result in lower prices and more options down the road.

Further, as we noted in October, a lack of standards and compatibility issues with existing IT systems have been giving manufacturers wet feet.

Yet according to Manufacturing.Net's "Myth-Busting" article in September:

Over the past several years, industry standards have been developed that define the data entered on RFID tags, and there are technical and interface standards to define the compatibility among products from different manufacturers of RFID devices. These standards include a defined protocol between the four frequency bands of RFID: low-frequency, high-frequency, ultra-high frequency, and the microwave frequency band.

"What the industry needs now are application notes, guidelines and best business practices to show potential users the value of RFID and what it has to offer," according to Dan Mullen, president of AIM Global, the Association for Automatic Identification and Mobility. "A manufacturer can use bar coding, mobile computing, wireless communication devices, and RFID in a plant environment. If a manufacturer is currently using a bar code system, they do not have to rip-out that system and replace it with RFID technology, unless that is the best decision for cost benefits and efficiency."

Baird & Co. found expects strength seen during 2006 will continue in 2007 in the aviation, library, transportation and fashion markets, as well as increased traction in Europe in 2007, given improving technical solutions.

Unfortunately for the technology and its providers, however, pharma tagging received a setback in 2006, as a federal judge issued an injunction that effectively continued the stay on the FDA's e-pedigree mandate as formed by the Prescription Drug Marketing Act (PDMA). Baird & Co. reports: "While the injunction only maintains the status quo, we believe that it may slow the adoption of RFID by some pharmaceutical companies."

One major obstacle that remains is that of the public's privacy concerns. As the technology becomes more widely used, ABI Research RFID research director Mike Liard recommends that RFID suppliers focus more on educating the public. "The challenge now is to separate myth from reality. There's been so much sensationalizing about what can be done with this technology."

References

RFID Monthly - December 2006
by Reik Read, Robb Timme and Samantha DeLay
Robert W. Baird & Co., December 2006

RFID In Manufacturing Can Boost Productivity, Increase Revenue
by Andrea Lyn Van Benschoten
Manufacturing.net, Oct. 2, 2006

A year in RFID
Modern Materials Handling, Oct. 24, 2006

RFID Adoption Tilting Towards Process Improvements, Report Finds
by Alan Alper
Managing Automation, Dec. 27, 2006

Gen II tags: No surprises here
Modern Materials Handling, Aug. 23, 2006

RFID Myth-Busting
by Anita LaFond
Manufacturing.net, Sept. 25, 2006

What isn't going to happen with RFID in 2007
Modern Materials Handling, Dec. 19, 2006