RFID - manufacturers are still waiting for the facts

Microsoft Corp. has announced research findings (from a research undertaken by Benchmark Research Ltd) that show manufacturers are hesitant about investing in RFID (Radio Frequency Identification) because they do not feel they know enough about the technology. With 60% either having not heard of RFID or not really understanding the technology, this is a major barrier to adoption in the UK. Before addressing any of the more technology related concerns, vendors need to bridge the current knowledge gap, Benchmark Research suggests.

"There is a huge gulf between the perceived vendor understanding of RFID in the manufacturing community and the actual levels of awareness therein," says Bjarne Schon, Global Director of Supply Chain Strategy, Microsoft Business Solutions. "Moreover, the majority of this awareness is invariably at an executive summary level - people are aware of the claims and promises, but have neither the means by which to achieve this or even a basic understanding of the technology itself." Simon Holloway, European RFID Manufacturing Co-ordinator for Microsoft agrees. "The research shows manufacturers are interested in RFID and in the benefits it offers, but they aren't willing to commit until we can show them how the technology will drive value into the business and deal with the issues they have highlighted. This is something Microsoft and its partners are working hard to address."

The research was carried out in May 2004 to determine the level of RFID understanding within both the manufacturing and retail sectors in the UK. 68 manufacturers were surveyed in the UK, 53% of whom worked in companies with 500 or less employees. Respondents were those in charge of supply chain or logistics, heads of operations or CEOs.

When asked to choose what they felt were the biggest potential barriers to adoption, the factors were the following:- . Don't know enough about the technology - 56% . Cost of tags- 27% . Difficulty in demonstrating tangible ROI- 23%

. Unconvinced by the business case- 24%

. Lack of agreed standards- 12%

Despite the lack of education, lack of pilot trials and the resulting wariness, there was general agreement that the potential future applications of RFID lay mostly within the supply chain. However this was often in terms of localised point solutions or solving specific supply chain issues, not in terms of a complete transformation of the supply chain.

Potential future applications of RFID were recognised as:-

. Logging the receipt of materials and components - 60%

. Tracking WIP in the factory - 46%

. Managing storage/retrieval of finished goods in the warehouse - 48% . Recording the despatch and receipt of finished goods - 46% . Managing storage/retrieval of components/materials in the warehouse - 42% . Reverse Logistics - 24% . Affixing tags to Kan Ban cards - 26%

Guy Washer, Managing Director Benchmark, explains the results. "We found the majority of manufacturers were receptive to the idea of RFID, and most people could identify where an RFID solution might be deployed. However, there was a lack of real knowledge on key issues like price, required IT infrastructure and business benefits. Our research has shown that manufacturers see RFID like any other technology purchase; it must be justified in terms of return on investment. Vendors need to recognise that manufacturers will probably adopt RFID as a point solution, primarily to solve a problem in the supply chain, so the education process needs to address these kinds of issues first and not make RFID into a technology panacea."

Washer continues: "It takes research like this to give a rounded view of what's really happening in the market today so that these education issues can be addressed and manufacturers can see how this technology, and investment in technology in general, can benefit their business."

And this needs to be at more than an executive summary, blue sky theory level. Some 61% of manufacturers stated they would most like to see details of practical "real-life" applications, with 54% at least wanting to see details about how RFID would work within a practical, if only hypothetical, setting. The provision of this level of education is an essential building block in moving the potential benefits of RFID from promise to reality within the wider manufacturing community, claims Benchmark Research.

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