The use of Radio Frequency Identification in manufacturing can boost productivity and increase revenue, and is emerging as a favorable solution for security issues throughout the supply chain, according to a recent report from Frost and Sullivan.
According to the report, the European RFID markets for automotive, aerospace and industrial manufacturing generated revenue of $23.7 million in 2005, and he firm estimates that 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,” Frost & Sullivan Research Analyst Rengarajan Srinivasan said. “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.”
When working in a demand-oriented system, RFID can improve product availability for customers and increase productivity through the production process. By doing so, the “just-in-time” inventory control and asset management can reduce turnaround time and provide better control over demand in the automotive and consumer products markets.
The study was unable, however, to determine a specific return on investment from RFID implementation, since the system's benefits depend on its level of integration. Combined with high implementation costs, some companies have shied away from moving toward a complete RFID system.
“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,” Srinivasan said. “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 from the adoption of RFID can only be realized if the developing of business processes allows operation within real-world environments and properly integrated IT infrastructures.
“Manufacturers need to establish a strong business case for implementing RFID systems and develop flexible frameworks for evaluating ROI,” Srinivasan said. “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.”