BANGALORE, INDIA: It is easy to imagine a day when retailers will know exactly when to restock a particular shelf in a particular store because each item in their inventory is individually tagged, tracked, and counted by RFID. Or, a day when pharmaceutical counterfeiters will be stymied by smart identification tags on every drug bottle.

Hundreds of benefits can be accrued by consumers, vendors and suppliers when detailed information is available about all of the items in stock, including their size, colour, date of manufacture and authenticity. Those days are coming. However, experience tells us that complex systems involving multiple players do not roll out overnight, or even in a matter of a few years.

So, despite a robust annual global growth rate of about 30 percent (and much higher in countries such as India where there are a wealth of new applications like gas cylinder tagging) RFID technology faces a dilemma, it can sometimes be over-hyped.

Experts predict a bright future for the industry and it will deliver benefits one step at a time. Basic RFID IC products are inexpensive, time tested and elegant in their simplicity. A cycle of incremental improvements continues to make the RFID labels and the systems that interact with them more robust, efficient and less expensive. International standards are also in place; there's plenty of know-how for building large-scale RFID-based information systems. These are the main reasons why we hear over-enthusiastic growth projections of 100% or more each year.

To best understand RFID's evolutionary path, it is useful to examine a few representative applications that have achieved maturity.

Library systems
Over the past several years, there have been numerous successful deployments of RFID systems that track books, CD-ROMs, DVDs, and media typical of a library's inventory. The chief advantages of these are fast and easy self-service check-in and check-out, theft protection, accurate and easy inventory control with handheld readers and automatic sorting and cataloguing. 

Library patrons find it easier to check out and return books and they are more likely to find the book they are looking for because RFID has unarguably made managing the library's inventory easier. This can happen on a very large scale, and in this respect, Asian countries can lead the way, it wasn't until Singapore undertook the first nation-wide public library implementations that other countries followed, including Germany and the Netherlands. RFID has now become the technology of choice to efficiently manage new libraries or libraries which receive new IT infrastructure. 

Retail outlets
Retail stores, particularly chains, are on the other end of the maturity scale from libraries. Nevertheless, they can reap many benefits from a company-wide adoption of RFID technology. Recognizing these benefits, the world's largest retailer, Wal-Mart, has mandated an RFID program for its stores and some of its biggest suppliers to tag pallets and cases, but this has not yet spread to item-level tagging.

While RFID has been mandated for supply chain management and to enhance the control of product flow, it is also true that the ROI for suppliers can be limited. When RFID is mandated, suppliers may believe they have no other choice but to comply. In doing so, however, they may have to absorb the extra equipment costs associated with RFID. For suppliers to benefit from RFID, they must use RFID themselves at their manufacturing facilities.

Typical benefits include better production control and improved product flow at their facilities. Even greater benefits can be realized by engaging with their supplier base to use RFID as well. One major hurdle is that in order to maximize the benefits of RFID, one cannot just replace the barcode and the hardware that reads the barcode. One also needs to adapt inventory management processes so that the technical advantages of RFID can be realized. 

RFID has several advantages over barcodes, which include not requiring line-of-sight for scanning, insensitivity to dirt and harsh environments, simultaneous scanning of several labels (multi-label operation), user-programmable memory and security capabilities (EAS functionality possible. Retailers have a pre-existing IT infrastructure that must be synched to the vast amounts of data generated by the RFID system in order to realize these kinds of benefits.

Retail is a challenging application, particularly if item-level tagging is the goal. Still, there are success stories.

RFID's benefits in retail are even more persuasive from both a financial and customer satisfaction perspective when looking at the future. They include enhanced shopping experience, reduced supply chain costs, increased customer service and real-time inventory and stock control

One can easily imagine revolutionary technologies such as interactive displays and 'smart shelves' creating a connected shopping experience with RFID helping to manage promotions, reduce out of-stock situations, support anti-theft initiatives, and simplify checkout systems. With the increasing focus on sustainability and green lifestyles, RFID offers a more efficient supply chain by reducing each product's environmental footprint. 

Fashion: On the cutting edge
Fashion retailers also share some of the characteristics noted for libraries. Fashion retailers are using RFID to speed up turn-around time from the designer's catwalk to manufacturing to the boutique, ensuring that the boutiques are filled with right items and replaced quickly with the latest fashion.

In addition, RFID can help intervention into counterfeit and grey market items that represent 22% of all fashion clothing and footwear sold worldwide. There are also benefits for the consumer including proof of originality, easy management of returns, and the availability of constantly updated product information and marketing content on information kiosks.

RFID in fashion is migrating from technology demos in Europe and in the U.S. to source tagging when the clothing is produced in Asia. Label printers are extending their offerings to RFID-enabled tags in print shops worldwide. 

At the other end of the supply chain spectrum - retail stores - RFID is offering not only fast and accurate inventory management but also the opportunity for self check-out and the use of RFID for theft protection.

Next step in RFID adoption
Many developments enabling widespread RFID adoption are already realities:

* Standards are in place to allow end users to multi-source RFID solutions and components out of the market.
* RFID ICs are mature, and multiple players are offering ICs for RFID frequencies (LF, HF, UHF).
* Hardware (readers, handhelds and printers) are now mature for low frequency (LF) and high frequency (HF), and are quickly maturing for UHF technology.
* Technology know-how is available to optimize the performance of the RFID solution for the challenges /applications of the customer.
* Competence (systems know-how, business calculations and the system integration)  necessary for creating ROI is also in place.
* Technology discussions have been successful on topics such as which frequency should be used for which application.
 
RFID continues to evolve with two key goals of reducing cost and adding functionality for end users as well as the supply chain. In principal, all the components for today's RFID applications are available, so why has the hype we've heard over the past few years not turned into a massive rollout of the RFID technology into the market? 

Size and complexity are the two biggest challenges for the RFID industry. 

Conclusion
When viewed objectively, the RFID market cannot be considered a monolithic application with a single growth trend line. It is the combination of numerous applications, some mature and others maturing.

While most of the basic building blocks needed for a robust, fast-growing RFID market are in place, some of the stakeholders in the supply chain do not see much benefit to make RFID equipment investments. The industry must take the appropriate steps to see that benefits are widely shared, even with consumers.

The author is Director: Global Sales, NXP Semiconductors