Will RFID in manufacturing drive market growth?

The need for manufacturers to comply with supply chain and retailer mandates for tagged finished goods has fueled interest in RFID for applications that promise greater ROI, according to ARC Advisory Group. While many pilot activities evaluating RFID in manufacturing are underway, ARC argues that pilots that actually result in implementations will determine overall market growth.

ARC expects the worldwide market for RFID in manufacturing applications to grow at an 8.9% compounded annual growth rate (CAGR) over the next five years as standardization and technology convergence drive prices down and elicit strong unit growth.

Continued growth in existing applications such as WIP tracking will combine with growth segments such as asset tracking to fuel overall market growth through the end of the decade, claim ARC’s analysts. “Compared to the challenge of generating ROI from mandate-driven RFID implementations, numerous opportunities exist for internal RFID applications to generate ROI for manufacturers,” says Chantal Polsonetti, principal author of “RFID in Manufacturing Applications Worldwide Outlook.”

Along similar lines, an Aberdeen Group study of more than 150 manufacturers using or planning to adopt RFID techology, completed in January 2007, found 53% of the manufacturers surveyed said integrating RFID with enterprise systems is the top challenge facing them when moving to an adaptive manufacturing model.

Some 82% indicated RFID technology selection is driven, in part, by a hostile environment or challenging production materials.

The Aberdeen study reported that best-in-class manufacturers are twice as likely to select an RFID vendor based on its customer service and infrastructure maintenance record.

Among the recommendations cited in the study, key actions for manufacturers were to:

  • Automate manual processes to reduce error propagation, and leverage real-time alerting, so staff can focus on exceptions.
  • Look for reductions in cost of labor in inbound logistics and receiving, stocktaking and warehouse movement, reduction of clerical errors and improved asset use as a means to show early ROI.
  • Anticipate an influx of real-time data and verify that critical systems and business processes can adapt to new sources of business intelligence.

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