» News Releases » RFID News » RFID News Article
Barcode & RFID News
RFID Adoption Still Driven by Compliance, Not Business Case
Article courtesy of Frontline RFID
Aug. 3, 2005 -- Compliance with customer mandates remains a key driver of RFID implementation, according to a new report from AMR Research Inc. In a recent survey, the research concern found that 69% of respondents plan to evaluate, pilot, or implement RFID in 2005, with an average budget of more than $548,000. Average RFID budgets are expected to increase to $771,000 by 2007.
Among manufacturers, customer compliance was the leading driver of RFID adoption. Among process manufacturers, 53% identified customer compliance as the top reason for deploying RFID; 31% of discrete manufacturers were driven by compliance issues.
Only 8% of respondents are in full deployment mode, although 23% are piloting RFID. The largest group, 26% of respondents, plans to evaluate the technology in 2005, and 12% won't evaluate RFID until 2006. Another 12% plan to implement the technology for the first time in 2005. A full 18% of those surveyed have no plans for RFID.
"RFID is still in its formative years," said Dennis Gaughan, research director, AMR Research. "The market will be hotly contested across all technology segments from tags and readers through middleware and enterprise applications."
AMR surveyed 500 companies for the report.
Same Old Obstacles
The RFID market still faces familiar challenges. Dominant vendors are still emerging, and the majority of respondents had trouble identifying a return on investment (ROI). More than a quarter of respondents cited ROI issues as their biggest obstacle to adoption.
Only 29% of all respondents believe standards have reached an appropriate level of maturity. Among large companies (more than 5,000 employees), 35% believe standards are mature enough to deliver ROI.
The vendor community also faces challenges. Many, fueled by venture capital, have found that market growth is not equal to investor expectations. AMR describes the market as still being wide open, with vendors both large and small jockeying for position.
Although leaders are emerging, end users are keeping their options open. When asked who their primary strategic vendor was, 32% of those surveyed by AMR responded they were "not sure at this time."
As for the vendors that customers are most likely to consider for their deployments, responses were all over the map. Symbol Technologies (at 35%), Intermec Technologies (32%) and Alien Technology (30%) took top honors, but the remaining companies all registered less than 30% of respondents, and are a hodge-podge of integrators, software and hardware vendors -- IBM, Texas Instruments, SAP, Microsoft, Oracle, Philips,and Manhattan Associates, among others.
AMR expects a 16% increase in spending from 2005 to 2006, then 20% growth from 2006 to 2007. "While these are very good growth rates in a mature supply chain management (SCM) market of 3% to 4%, they do not support the market hype or over-inflated expectations of many investors," the report said.
Process manufacturers have budgeted the most for RFID, with an average of $628,000 in 2005 (rising to $1 million in 2007). The majority of budgets in 2005 (56%) are still less than $100,000, however.
"These technologies are still too immature to address the top three supply chain issues of supply visibility, store-level replenishment, and inventory management," the AMR report said. "The technologies hold future promise, but are not today's answers to these supply chain issues."