Most of the North American food and drink companies adopting radio frequency identification (RFID) technology are being driven to do so by mandates from key organisations, including Wal-Mart, the US's department of defence and the Food and Drug Administration, according to a survey.
Just over one-half of more than 510 organisations from all sectors surveyed in North America have either completed RFID implementations or plan to do so within the next 12 months, according to theComputing Technology Industry Association (CompTIA).
The survey was done by Frost & Sullivan for CompTIA, an international trade association for the information technology industry.
Those surveyed expect the RFID market to grow explosively in the next 18 to 24 months, driven by different factors such as mandates from retailers, possible cost savings due to better visibility ofinventory, and governmental or regulatory pressures. However high tag prices, which remain at about 20 cents each, will remain an important barrier to adoption, CompTIA stated.
The survey found that 46 per cent of consumer goods makers, 34 per cent of food and beverage makers and 24 per cent of textile and apparel manufacturers are implementing RFID because of a mandatefrom Wal-Mart.
Another 24 per cent of food and beverage makers were going the RFID route because of Food and Drug Administration requirements. Thirteen per cent were doing so because of a mandate from thedepartment of defense.
Those making the move to the technology but who were not under a mandate stated that improved efficiency was the top reason influencing a decision to adopt RFID, followed by a desire to improvecustomer satisfaction, the development of industry standards and a reaction to the competition.
In the food and beverage sector, 74 per cent of respondents said they were still learning about the technology, the highest level among the 10 segments surveyed by Frost & Sullivan.
Another six per cent said they were still using the technology but did not yet understand it, while 22 per cent of those surveyed classified themselves as having an "intermediate level ofunderstanding".
The survey also indicates a low level of RFID adoption among the suppliers and customers of food and beverage companies. An average of 15 per cent of their suppliers and eight per cent of customershad adopted RFID among the companies surveyed.
In general all companies cited the cost of implementation as the most important factor affecting their decision on whether to adopt RFID or not.
"Out of the components that make up the cost of implementation, tag cost is the most prominent," the report stated. "This assumes importance especially when the item to betagged is low-priced."
Tags reached a low of 20 cents each in early 2005. The takeoff stage for RFID adoption is generally thought to be in the five cent range. Frost & Sullivan does not expect that price level to bereached for another six to seven years.
The next biggest barrier or challenge is the integration of RFID with legacy systems like barcodes and other automatic identification systems. The challenge also includes integration withmanagement systems like enterprise resource planning solutions, warehouse management systems and transport management systems.
"As is evident from the figure, a lack of clearly defined standards, low knowledge and understanding of RFID among employees, security and privacy concerns, availability of suppliers andtechnical limitations of RFID are other barriers," the report stated.
One of the most important mandates that affected the RFID market was the one announced by Wal-Mart during the second quarter of 2003. Wal-Mart's demanded that its top hundred suppliers becomeRFID compliant by 1 January 2005. The deadline is applicable only to a case and pallet level. Item level tagging is expected to be implemented at a later date.
The US department of defence requires its 43,000 suppliers to put passive tags on cases, pallets and items costing $5,000 or more by April 2005.
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