Dedham, Massachusetts; January 19, 2007: The need for manufacturers to comply with supply chain and retailer mandates for tagged finished goods has led to rising interest in RFID for internal applications that promise greater ROI. While numerous pilot activities designed to evaluate the potential for RFID in manufacturing are currently underway, the number of pilots that actually result in full-blown implementations will be a key determinant of the rate and timing of overall market growth. The worldwide market for RFID in manufacturing applications is expected to grow at a compounded annual growth rate (CAGR) of 8.9% over the next five years as standardization and technology convergence drive prices downward and elicit strong growth in unit shipments.
The market totaled $208.8 million in 2006 and is forecast to be over $319.5 million in 2011, according to a new ARC Advisory Group study. Continued growth in existing applications, such as WIP tracking, will combine with increasing adoption in growth segments, such as asset tracking, to fuel healthy overall market growth through the end of the decade.
“Compared to the challenge of generating ROI from mandate-driven RFID implementations, numerous opportunities exist for internal RFID applications to generate ROI for manufacturers,” according to Vice President Chantal Polsonetti, the principal author of ARC’s “RFID in Manufacturing Applications Worldwide Outlook.”
Continued Pursuit of Process Improvements
RFID’s ability to enable process improvements has been one of its traditional raisons d’etre in manufacturing applications. In applications such as in-process error proofing, RFID can be used to take human functionality and its variability out of the ROI equation. The ability to match the correct part or tool to the unit under construction, such as in automotive or aerospace industries, can similarly provide rapid process improvements. The ability to optimize processes by knowing where things are, such as the use of RFID to support JIT production, is another example of how RFID can contribute to process improvements.
Technology Standardization and Commoditization
Many legacy RFID applications in manufacturing employ custom frequencies and proprietary protocols in closed loop, single vendor applications. Standardization is rapidly coming to all segments of this market, whether passive, active, RTLS, and/or Wi-Fi/802.11. Examples include the crossover impact of the EPC global standards, currently for passive implementations only, but which may include active standards in the near future, as well as ISO 15693 for HF and ISO 24730 for Active RFID.
Rising Interest in Wi-Fi Based Location Tracking
Wireless infrastructure provider, Cisco, sparked significant interest in the use of Wi-Fi for location tracking when they announced the 2700 Series Wireless Location Appliance, adding major supplier support and a standards-based infrastructure to the growing list of drivers behind this segment. Wireless location tracking providers are currently pursuing integration of their offerings with the Cisco appliance, now called the 2710. Most Wi-Fi providers are making location tracking a feature of their networks and building relationships with more established location tracking solution providers as well as the new crop of Wi-Fi based providers.
About ARC:
Founded in 1986, ARC Advisory Group has grown to become the Thought Leader in Manufacturing and Supply Chain solutions. No matter how complex your business issues, our analysts have the expert industry knowledge and first-hand experience to help you find the best an-swer. We focus on simple yet critical goals: improving your return on assets, operational performance, total cost of ownership, project time-to-benefit, and shareholder value.