In 2004, the Yankee Group, a consultancy, predicted that by 2007 the expanding RFID industry would affect 4m jobs in America alone; American Food and Drug Administration (FDA) predicted that most cases and pallets of prescription drugs would contain RFID tags by 2007; and a study by LogicaCMG, a systems-integration firm suggested that big European retailers such as Tesco in Britain adn Metro in Germany would have completed large scale RFID implementations by 2007.
Despite such predictions, however, RFID has not lived up to expectations. Mindful of the problems encountered by other early proponents of the technology, the FDA has called for a voluntary tagging "pedigree" among suppliers to combat counterfeit drugs entering the supply chain, but has stopped short of insisting on RFID. Tesco and other retailers dabbled with RFID tagging, but full-scale use is a long way off. After floating the idea of an RFID-based customer loyalty card, Metro abondoned the scheme under pressure from privacy rights groups.
Aside from over-optimism common to many new technologies and concern of privacy activists, RFID did badly for two reasons:
1. The first was that a veritable Babel of incompatible standards grew up. The lack of a common standard for tags and readers to begin with, and the later battle between various high frequency (HF) and ulta-high frequency (UHF) products meant you could not be sure the data on a tag could be read all along the supply chain. The ratification at the end of 2004 of a global "Gen2" standard for UHF RFID tags defined a much-needed common language for the industry, but much later than expected. Even with the new standard in place, regional and industry-specifica variations meant that getting all RFID devices to communicate with each other proved difficult. In 2006, European Union specified that member countries should make UHF the spectrum of choice for RFID, but its definition of UHF is different from the one in America, which in turn is different from that in Japan. However, on the positive side, with the wide adoption of Gen2 standard the price of RFID tags has fallen from around $2 each in 1999 to around $0.10 - 0.15 today.
2. More than the technical issue noted above, the lack of a clear business case for implementing RFID is the main limiting factor in wide scale adoption of RFID. For giants such as Wal-Mart and Department of Defence RFID is hugely attractive since it would allow them to trim costs by improving the efficiency of goods deliveries. By some estimates managing inventories with RFID to eliminate stockouts could add 3-4% to Wal-Mart's annual sales. But for the consumer-goods company that make and supply the stuff to Wal-Mart's shelves, the attractions of RFID are unclear, given that their profit margins are already razon thin. Some suppliers and retailers of expensive retail items, such as designer clothes, prescription drugs and consumer electronics, are beginning to see the cost of a tag as worth-while, because it can help reduce losses from counter-feiting or theft. RFID technology is also widely used in wireless toll passes for bridges and tunnels and in contactless travel passes.
More credible business cases are emerging for "closed-loop" RFID systems in which a company uses the technology to track goods within its own warehouses and factories, without the need to co-ordinate with other firms. In open-loop applications, the focus is beginning to shift beyond simple stock-taking and inventory control. RFID tags can, for example, be connected to external sensors in order to relay valuable information about sensitive cargo in transit, such as temperature and humidity.
Source: "Radio silence" The Economist Technology Quarterly, June 9th 2007: 20-21.