Suppliers must look beyond RFID compliance, analyst says

Companies dabbling with RFID technology to meet compliance mandates must look at the broader picture to find ROI, according to an analyst at Boston-based Yankee Group.

CHICAGO -- Many early radio frequency identification adopters are failing to look beyond retailer compliance mandates resulting in inefficient deployments of the technology, according to Robert A. Goodman, director of supply chain services and RFID specialist at Boston-based Yankee Group.

Until companies understand how to make the leap from compliance into real value and understand where it's at and how to go after it, RFID is going to lag.
Robert A. Goodman,
director of supply chain servicesThe Yankee Group

The failure to look at long-term benefits of RFID is also hindering broader adoption of the technology, Goodman said.

"Compliance doesn't show ROI," Goodman said. "Until companies understand how to make the leap from compliance into real value and understand where it's at and how to go after it, RFID is going to lag."

RFID technology uses microchips to track products and goods in the supply chain. The technology has been in use for more than 30 years, but until recently it's been too expensive for commercial use.

Despite the roll out of a variety of RFID products from hundreds of software vendors, many early RFID adopters are only spending enough to meet compliance mandates. Those projects will not result in enough valuable data to gain ROI, Goodman said.

Companies at the RFID Journal Live conference here in Chicago will begin sitting in on dozens of sessions today to learn how to gain ROI from RFID deployments. SAP, Oracle and IBM all are hosting sessions on how to gain the most value from an RFID investment.

The conference officially kicked off Sunday night with a keynote from former Department of Homeland Security secretary Tom Ridge. The federal government has been a user of RFID technology and is advocating its use to its suppliers.

Goodman, who is attending the conference, predicts that the use of a mixture of bar coding and RFID tags will allow companies to get the right information out of the two technologies and eventually gain ROI.

For example, pharmaceutical companies can use RFID, coupled with bar coding, to track and analyze the chain of custody of a drug, from the manufacturer to the dispensing pharmacist, Goodman said. By using the supply chain data collected from RFID tags and information such as pricing, contracts and outdated product returns from bar codes, pharmaceutical companies can begin to achieve significant benefits, Goodman said.

Over the past several years, SAP, Oracle Corp., IBM and a slew of best-of-breed vendors have been rolling out tools and software packages designed to deploy RFID and harvest the data generated through the use of the technology.

SAP has been among the loudest advocators of the technology, touting its Auto-ID infrastructure, coupled with its event management and supply chain management software, and SAP Enterprise Portal. SAP's product is built on the SAP Web Application Server.

As RFID devices become more advanced, RFID specialists selling middleware -- software that provides reader integration and device management -- to early adopters will eventually fade away, Goodman said. Larger software vendors like SAP, Oracle and IBM could be the real winners, as business applications handle data management, administration and analysis.

"Middleware is a stop-gap measure," Goodman said. "The future is all about larger deployments that integrate data harvested from a variety of RFID and non-RFID devices."

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