RFID: Ready for Industry Deployment?

Radio Frequency Identification (RFID) technology has been hailed as a replacement for everything from bar codes to passports to mainframe computers. Early adopters, such as Wal-Mart and the U.S. Department of Defense (DoD), are requiring RFID participation by their largest suppliers, and RFID-specific modules are already integrated in some enterprise application suites, including the new PeopleSoft EnterpriseOne 8.11.

The customer-facing applications are almost too tantalizing to ignore. Finally, shelf stock will be truly accurate, enabling self-restocking shelves and elasticity-sensitive price tags. Self-checkout will go from risky proposition to a hands-free, loss-free process, echoing the infamously optimistic AT&T "You Will" advertising campaign of the early 1990s.

But it all depends on the technology delivering as promised, which Jeff Woods, Gartner principal analyst, believes is still some time away. "I think we're at the top of the hype cycle, and users should be preparing for disillusionment with the technology," he says. Most RFID applications remain fixed at the cargo carrier or palette level, and the inconsistent operation of RFID readers has made them a poor substitute for bar code scanners.

In fact, Woods believes one of the limiting factors in RFID adoption is that too many people are fixated on replacing bar codes in situations where they already perform well. "[People] think of it as bar codes on steroids, and that's a terrible way to conceptualize the technology. The problem with this idea is that the bar code--based processes probably already work pretty well, and you ought to be looking for places where bar codes don't work." Detecting when a product has moved from the receiving dock to the showroom floor, for instance, or automatically sorting out disparate items in a large tote of returned products are currently bigger retail challenges than counting goods as they are removed from a truck.

As for the early adopters, consider them unique cases still in a long-term pilot stage. "Users who build their business case or internal momentum for RFID because Wal-Mart or the DoD is doing something are going to be at terrible risk," Woods says. But it appears few have. He writes in a recent research note that he has been unable to locate a single manufacturer willing to articulate a business case for RFID, aside from meeting Wal-Mart requirements.