The Bottom Line: RFID will have a dramatic impact on the operation of global supply chains over the next 10 years, and while widespread adoption is 5 years away, world-class supply chain companies are starting to pilot RFID now.
Radio Frequency Identification (RFID) is a transformation in the making. It allows the immediate polling of inventory, supporting real-time monitoring and management of any item or container in the supply chain. Real-time access to this data will revolutionize all aspects of the supply chain planning and execution markets. Already gaining traction in the Retail and Consumer Packaged Goods (CPG) industries, RFID will likely see adoption in aftermarket service, support, and resupply as an effective technology for managing the post-sale supply chain.
However, compliance and complexity management will eventually force the rapid deployment of RFID in complex, consumer-oriented manufacturing industries like Aerospace, Automotive, Pharmaceutical, Food, Consumer Electronics, and CPG. Beyond this, it will be of value to any company looking to improve the execution or reduce the cost of supply chain operations.
RFID will play a substantial role in the next generation of supply chain execution, but the transformation will take time. We expect that for the next several years the market will be slow to develop as companies try to come to grips with the specific opportunities created by RFID and the challenges of working with a rapidly maturing technology.
Think of this as the Y2K problem as seen from 1993. While we expect the eventual market to be substantial, the high growth and adoption of the technology being hyped today is at least several years in the future.
The real implications from RFID come in three key areas
Real-time item identification and location
Real-time item identification and location is valuable and will revolutionize supply chain thinking and strategies:
- Tags coupled with data-aware storage and conveyance provide a 24x7 view of material availability.
- This view can be shared (on demand) with customers to support their advanced supply chain efforts, providing a real-time look into a company supply network that enables real-time, constraint-based promising and planning.
- Locating any part in real time significantly reduces loss as well as the costs associated with physical inventories and cycle counting.
- The shrink of valuable components can be eliminated by applying software algorithms to monitor the rack and provide real-time alerts of suspicious removal of goods and materials.
- Vendor-Managed Inventory (VMI) can be automated, including both replenishment and payment.
Compliance initiatives
RFID will be a fundamental technology in new compliance initiatives, enabling the following:
- Locate specific lot number / serial number / expiration date controlled material in real time
- Provide component (part) source / serial data
- Provide Hazmat data and other human safety requirements
- Locate affected documents/components instantly
- Use in document management systems, with tagged documents residing in file cabinets equipped with readers that will log every withdrawal and deposit
- Serve as an authentication device to deter counterfeiting and act as a key for digital rights management
technologies
- Play a role in tracking the movement of currency
Service and MRO supply chain
RFID will play a significant role in the service and Maintenance, Repair, and Overhaul (MRO) supply chain in the following ways:
So wheres the money? RFID fuels a technology replacement cycle in
manufacturing, supply chain, transportation, retail, service, and support
The RFID market will develop in three distinct phasesPilots, Supply Chain Infrastructure, and Item-Level Tagging:
Recommendations
Ultimately, RFID will be a core technology deployed across the supply chain in most industries. While we see this as a 10-year progression, leading world-class supply chain companies are already beginning to pilot implementations to gain a more complete understanding of the benefits and challenges that RFID presents. The advantages that improved information availability generates and the likely supply chain cost savings that RFID creates make it an essential technology for companies looking to remain competitive. Vendors and service providers need to move quickly to provide products that allow early adopters to pilot the use of RFID in the supply chain.