Radio Frequency Identification (RFID) tags were supposed to have their big coming out party in 2005. That was the year Wal-Mart announced to great fanfare that it would require suppliers to begin placing the small chips—essentially computer processors with antennas that can wirelessly transmit detailed information—on thousands of products to help it better track inventory.
It’s now almost three years later, and progress has been painfully slow. Only a handful of Wal-Mart’s 120 distribution centers use RFID, and the biggest reason is cost. The typical RFID chip still costs $0.10 to $0.20, which limits their value on lower-margin items.
This slow progress has led some analysts to label RFID as yet another overhyped, underperforming technology. A closer look, however, shows that verdict may be a bit premature.
In just the past few months, several RFID projects have started, and some are already delivering results. In January, 3M announced it would work with the prestigious Mayo Clinic to use RFID tags to track cancer biopsies. The project comes on the heels of an even larger $3.75 million, three-year project with the U.S. Army to track the medical records of 150,000 service personnel. The two projects have caused 3M’s CEO to identify RFID as an important part of his company’s future growth strategy.
In February, the British government announced plans to use RFID technology to reduce the number of counterfeit cigarettes reaching the market. Lest you think the amount is trivial, Her Majesty’s government estimates that 27% of all cigarettes in Britain are counterfeit, costing the government $5 billion in lost tax revenue per year.
In the wake of last fall’s E. coli spinach scare, Dole Food has started using RFID to track lettuce and other produce as they move from the field to the grocery shelf. In the event of another outbreak, the company can quickly track the problem back to its source. In addition to potentially saving lives, the technology could save the company untold amounts of money by limiting the scope of a product recall. If you doubt this, I’d encourage you to read this posting I wrote last month explaining how Dole’s investment has already paid off by preventing a repeat of last year’s E coli outbreak.
But for even more promising applications, executive should pay attention to the pharmaceutical industry. The sector represents less than 2% of the overall RFID market, but this may be about to change in a big way.
Since May 2006, Pfizer has been conducted a large-scale RFID pilot project to authenticate all Viagra prescriptions and eliminate counterfeits. The company says it will extend the program because of its positive impact on the safety of the pharmaceutical supply chain.
An even more interesting project is scheduled to begin this fall when Cardinal Health, an $81 billion global provider of pharmaceutical products, will outfit its Sacramento, Calif., distribution facility with RFID.
This may just be just the tip of the iceberg, though. Florida and California, together with the Food and Drug Administration, have recently mandated that pharmaceutical companies verify the pedigree of all drugs from the point of manufacture to the end consumer, as a way of limiting health problems caused by counterfeit drugs.
You might expect the industry to oppose such an expansive mandate, but in this case, the pharmaceutical companies are interested—according to RNCOS, a research and consulting firm, the industry loses as much as $30 billion annually to counterfeit drugs.
The success of RFID will, of course, lie in companies’ ability to justify the upfront costs. But even here, RFID is starting to shine. In May, Toshiba reported a very strong return on investment from the RFID tracking system it installed at a manufacturing facility in Germany. According to the company, the technology reduced employee handling time by 75% and increased daily production capacity by 81%.
Stories like these get supporters of RFID excited about the technology, and rightly so. Prosing young companies such Zebra Technologies, Printronix, VeriChip and Alien Technology are all making great strides. Moreover, some familiar names such as IBM, Hewlett-Packard, Lockheed Martin and Motorola are also all investing heavily in the field.
These larger companies have the advantage of the economies of scale necessary to drop prices to a point where the devices are compelling for smaller business to adopt. They also have the resources to help customers make more sense out of all the data the chips devices can collect and transmit, as well as to devise new uses for the technology.
For instance, IBM has developed software to let manufacturers, distributors, wholesalers and customs agents work with and share the same data, while Motorola is exploring how RFID chips might help businesses adopt digital cash by allowing consumers to use their cell phones as payment devices.
RFID is still an evolving technology, but it is evolving fast, and businesses are beginning to put it to profitable use. The Exponential Executive is advised to keep an eye on on the technology because it appears to be advancing exponentially. If you doubt this, check out this article on Hitachi’s “Powder” RFID technology … or if you prefer, just look at this picture:
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Jack Uldrich is a writer, futurist, public speaker and host of jumpthecurve.net. He is the author of seven books, including Jump the Curve and The Next Big Thing is Really Small: How Nanotechnology Will Change the Future of Your Business. He is also a frequent speaker on future trends, innovation, change management and executive leadership to a variety of businesses, industries and non-profit organizations and associations.
