Closed-loop RFID drives new market growth
Although 2007 was the year that RFID market prognosticators sobered from the deluge of hype about imminent explosive growth—especially for open-loop supply chain applications—the year was far from a bust. Natick, Mass.-based market-research firm Venture Development pegs the total volume of RFID tags sold during 2007 at 1.
Although 2007 was the year that RFID market prognosticators sobered from the deluge of hype about imminent explosive growth—especially for open-loop supply chain applications—the year was far from a bust. Natick, Mass.-based market-research firm Venture Development pegs the total volume of RFID tags sold during 2007 at 1.6 billion. UHF smart labels accounted for 500 million, registering 25-percent growth over 2006.
While open-loop deployments are still in the mix, the real fuel for growth was in closed-loop applications.
“A company that has a process problem it wants to address doesn't have to work with five partners to get something done,” says Dean Frew, president and CEO of Xterprise , a turnkey RFID solutions provider. “They can just do it. There's a lot more traction with closed-loop because the friction in getting something done is less when you don't have to work with multiple parties.”
Michael Liard, VP of research for Oyster Bay, N.Y.-based ABI Research , concurs. In a recent research note authored by Liard, It is a Closed-Loop World After All, Liard says, “While much of the market hype over the last few years centered on RFID in the open-loop retail CPG supply chain, closed-loop applications continue to drive the current market.”
And Liard agrees with Frew as to why. “With open-loop supply chain applications, you're looking at multiple trading partners adopting it. As a result, complexity goes way up,” he says.
The Wal-Mart RFID mandate of late 2003 simply didn't have the “network effect” that everyone anticipated, claims Bob Cornick, VP and general manager of closed-loop applications for Avery Dennison . But it did spur enough activity to foster technology advancement that boosted performance, reduced costs, and provided early adopters with enough experience to see the potential.
“We're in the process of building nodes in the network—kind of the way wireless networks grow, by addressing one business case at a time,” Cornick says.
Avery Dennison makes RFID inlays that converters turn into RFID tagged labels and feed, for example, into Xterprise's growing turnkey solutions business.
“Whether it's in the warehouse to deliver RFID-enabled tracking for put away, or in the manufacturing plant to manage inventory and work-in-process, different applications are evolving quite nicely,” says Cornick. “Instead of creating a broad open-loop network effect right out of the chute, we're helping companies solve known problems in their business processes.”
Gen 2 tag specifications, reader performance improvement, and overall price/performance gains in turnkey solutions all set the stage for viable closed-loop application growth.
“As a company, Avery Dennison focuses on markets with two prime characteristics: demonstrated benefits, and large volume,” Cornick says. “We're not making tags and saying, 'Please buy them'. We're targeting markets where there's real opportunity.”
In addition to warehouse and manufacturing closed-loop applications, Avery Dennison is developing production capabilities for making continuous roll-to-roll inlay transponders in high volume.
“Our capacity is large, and product consistency is high,” says Cornick. “When a customer comes to us saying they need a million tags in a week, we ask if they want us to ship them this afternoon.”
The vision for open loop was essential to advancement of the market, but according to Xterprise's Frew, “The focus now isn't on mandates, but business value. The real benefit of the technology advancement is it allows us to better focus on solving business problems. Before, it was technology demonstration. Now people are squeezing more value out of the solutions they're implementing.”
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