The adoption of radio frequency identification (RFID) technology to manage retail supply chains will rise but still fall short of market hype, according to a PricewaterhouseCoopers report.
There is, and will be, a market for RFID technology in this space, but adoption will be lukewarm, said Lino Casalino, partner and Canadian supply chain and logistics leader with PricewaterhouseCoopers.
“We just don’t see an alignment with where the market is today and where we see the market going over the next five years,” said Casalino.
The growth, he said, is partly due to large retailers, namely Wal-Mart Stores Inc., which requires its suppliers to use RFID technology. Other vendors, including Target Corp. and Tesco PLC, have also announced they will also launch RFID initiatives.
“As these companies continue to do that, there will be a market for RFID services and technologies,” said Casalino, adding he’s observed companies expanding applications for RFID or contemplating possible applications for the technology.
Nigel Wallis, research manager for application services with Toronto, Ont.-based research firm IDC Canada, acknowledges there were very high expectations in North America for RFID adoption in retail supply chain – and that Wal-Mart played a role in creating that.
But the retail giant’s announcement came almost five years ago, said Wallis, yet adoption among Canadian retail chains has dawdled – surprising, considering they would want to maintain the same “technological level that their major competitor would.”
Wallis notes that IDC surveys have seen a slight growth of RFID adoption from two per cent to 5.5 in the last three years among all Canadian sectors.
Michael Liard, research director for RFID and contactless with Oyster Bay, NY.-based ABI Research, has always been “cautiously optimistic and still am around RFID adoption because the standards development process is time intensive, he said.
According to Casalino, market expectations are in part due to the litany of RFID technology vendors and systems integrators that are “creating demand, raising the bar, the market hype.”
“Clients are not necessarily getting an unbiased view of what’s happening out there,” he said.
And adoption rates are slow because technology is found to be more costly and complex than previously thought, said Casalino.
A contributor to this complexity is the integrated approach that RFID requires, he added. “They need to really look at not just this technology piece, but at the legislative, corporate and social responsibility, legal, consumer advocacy aspects of an RFID strategy.”
Wallis said that a perceived lack of return on investment (ROI) hinders adoption: businesses feel that current technology is sufficient, or adopting RFID will not reap an ROI that is fast nor high enough in the relevant time period.
Companies who use RFID in retail supply chain, he said, have “mostly done slap and ship compliance” to meet different compliance requirements. “And you’re not going to see ROI when all you do is the bare minimum to make sure you’re compliant.”
However, according to Liard, enterprises looking to use RFID are beginning to ask the right questions: What does software infrastructure need to look like? How is that going to impact the enterprise and operations? What is the business benefit of RFID?
But unfortunately, there is no “cookie-cutter ROI model” that everyone can leverage, said Liard, because each implementation and use of the technology is unique.
“You’re still going to see a lot of piloting and limited deployments to date.”