2004 Turning Point for RFID

By Allen Bernard

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With manufacturers and distributors scrambling to meet the requirements of these mandates, IDC expects RFID spending for the U.S. retail supply chain to grow from $91.5 million in 2003 to nearly $1.3 billion in 2008. Once these initial deployments are complete, however, RFID spending will level off as the industry prepares itself for the next wave of RFID: item-level tagging.

"RFID will be deployed in fits and bursts as manufacturers and retailers move along the learning curve and as tag and reader costs come down over the next several years," said Christopher Boone, program manager, U.S. Vertical Industry research at IDC.

"Although many suppliers and distributors are currently unfamiliar with RFID technology, they will soon need to comply at some level with customer demands for RFID tagging of cases and pallets. Changes to business processes to take advantage of data from RFID tags should determine which enterprise applications will need to be modified, and ultimately how the RFID layer should be designed and deployed. Today, the RFID layer is driving the business decisions, and this is backwards."

Hardware purchases will dominate RFID spending over the forecast period, reaching $875 million in 2007. Most of this spending will occur among manufacturers and their distribution partners who will bear the burden of purchasing RFID tags on top of the necessary infrastructure and systems integration.

RFID-related services will grow quickly at first, approaching $270 million in 2007, but growth will slow after 2005. Meanwhile, software spending will accelerate in the second half of the forecast period as the need for RFID middleware expands to more and more companies.