Radio frequency identification (RFID) has climbed from relative obscurity to become one of today’s most discussed supply chain technologies, spurred by industry speculation that a US¢5 RFID tag will be available in the near future, according to analysts Gartner. (See Electronics News 23 Oct 03 pg 19.)
However, the price speculation is premature, claims Stephen Smith, research vice president at the company.
“There are conflicting problems with assembling low-cost tags,” explains Smith. “One of the primary things vendors must do to reduce tag cost is reduce the size of the chip. However, reductions in the size of the chip make assembly more expensive. Currently, no vendor has been able to get out of this paradox.”
Passive tags today cost from US¢40 (¢55) to US$10 ($14). Active tags usually start at US$4 to 5 ($5.50 to 7), increasing to hundreds of dollars. By 2009, the most competitive RFID tags will cost US¢20 (¢28).
“But rather than ask at what price does RFID become effective, retailers should identify if a specific business case exists for the technology in their business based on today’s price,” says Smith.
According to Smith, companies will go through a two-phase adoption of RFID. First will be the creation of RFID-enabled business processes, using RFID within the context of existing business processes and thereby achieving marginal benefits from it. The second phase will be when companies adopt RFID-centric business processes, involving a radical re-engineering of business processes.
“RFID technology and the business benefits it promises will not arrive with a big bang,” concludes Smith. “High capital costs, imperfect read-rates, unproven systems and uncertainty around standards will all need to be addressed before retailers can adopt and benefit from the technology. This means that over the next 10 years, retailers will continue to use barcodes and gradually introduce RFID tagging, creating an environment of co-existence.”