Radio Frequency Identification's Rich Future Is in Doubt

Radio frequency identification (RFID) refers to short-range communication between a tag and a reader. An RFID tag usually has limited capabilities, such as transmitting identity. Some tags can also receive and store information sent from the tag reader.

The technology can be used in any scenario in which goods, people, or devices need to be identified. Ultimately, a transaction takes place based on the identification of the tag. For example, a tag inside a key chain can disable a vehicle alarm or authorize payment at a gas pump (such as ExxonMobil's Speedpass). In manufacturing, a more advanced RFID tag attached to a part signals instructions to the assembly line.

The greatest opportunity for RFID is tracking goods in the supply chain from supplier to retailer, and even to the cash register. This future for RFID is uncertain because manufacturers and retailers are struggling to determine how the ROIROI of RFID compares with bar codes. Alles zu ROI auf CIO.de

Technology Trajectory

In the consumer market, RFID will continue to find its way into devices like key chains and car transponders. Most business cases are built around customer loyalty. For example, ExxonMobil has found that customers with RFID key chains visit their service stations one more time per month and spend 2 to 3 percent more each visit. Nokia and Visa continue to experiment with RFID tags on mobile phones, but the business model is uncertain (retailers and service stations won't enjoy greater loyalty in an open system, in which the RFID tags work at their competitors as well).

On the supply chain side, Wal-Mart has mandated that its top 100 suppliers apply RFID tags to pallets (and potentially cases) by January 2005. However, the company backed off its in-store RFID applications, to the chagrin of Gillette, which is investing in 500 million tags (rumored to cost $0.10 per tag).