European RFID markets set to explode

Edited by the Engineeringtalk editorial team Sep 28, 2006

Frost and Sullivan finds that the European RFID markets for automotive, aerospace and industrial manufacturing generated revenues of $23.7 million in 2005.

The ability of radio frequency identification (RFID) technology to make the tracking and managing of assets more efficient and make inventory more visible offers an ideal solution for companies seeking to improve their manufacturing performance.

At the same time, as companies strive to tighten their brand security and protect their products from counterfeiting, RFID is emerging as the optimal solution to safeguard valuable products throughout the supply chain.

Frost and Sullivan finds that the European RFID markets for automotive, aerospace and industrial manufacturing generated revenues of $23.7 million in 2005 and estimates this will reach $109.3 million in 2012.

"The unique features of RFID technology enable the development of a constant stream of innovative applications for manufacturing sectors", says Frost and Sullivan Research Analyst Rengarajan Srinivasan.

"The rising need to accurately track valuable assets and products is creating significant scope for the use of RFID across a range of industrial sectors".

The highly competitive nature of modern manufacturing is driving manufacturers to reduce costs and adapt business to increasingly demand-oriented systems.

In this context, RFID can enhance product availability for customers and boost productivity across the entire production process.

Moreover, its ability to enable just-in-time inventory control and asset management will allow companies to reduce order turn-around time and effectively manage fluctuating demand in automotive and consumer products markets.

However, the return on investment (ROI) from RFID deployments is difficult to quantify, as the full benefits of the technology depend on its degree of integration into wider business processes.

Difficulty in identifying a clear stand-alone ROI, coupled with its high implementation cost, poses a significant challenge to prospective entrants into the RFID market.

The excitement and euphoria surrounding RFID in recent years, fuelled by the early retail mandates and pilot schemes, have created unrealistic expectations of the technology among many industries.

"As the RFID market starts the transition from technology trial stage towards early adopter phase, a key challenge will be to clearly identify the range of expected benefits", cautions Srinivasan.

"The uniqueness of each new RFID implementation due to varying company environments compounds this challenge, making meaningful comparisons of new systems with existing implementations unreliable".

"Over-optimistic or unclear objectives for implementing RFID are likely to have a negative impact on ROI and deter wider adoption".

The maximum ROI achievable from the adoption of RFID can only be realised if the designing of business processes allows operation within real-world environments and well-integrated IT infrastructures.

"Manufacturers need to establish a strong business case for implementing RFID systems and develop flexible frameworks for evaluating ROI", advises Srinivasan.

"New entrants are likely to have a better understanding of the nature of ROI that is practically achievable from the experience of early adopters and increasing numbers of credible pilot schemes".