D3.7 A Structured Collection on Information and Literature on Technological and Usability Aspects of Radio Frequency Identification (RFID)

Untitled STATUS QUO AND CHANCES OF USING RFID

Status quo and chances of using RFID

1. Current and future distribution of RFID

It is not surprising that 45% of 65 enterprises have already implemented a RFID application or are testing their RFID application, since the examined sample is focussed on industry which uses RFID very probably and it is not representative for all German enterprises. The further structuring of these enterprises is more expressive: 62% plan to expand the use of RFID and 14% test this technology in pilot projects. No enterprise will stop using RFID. This result is more surprising, since the participants are addressed via various and different channels (covering letter, web sides, e-mail newsletter of journals, references to the survey in journals, etc.) so that one cannot assume a distortion in favour of enterprises using successfully RFID.  

Besides this fact, 23% of the respondents plan to use RFID in the next two years. Only 32% of them reject the question of using RFID for business applications. The use of RFID is in general suitable for 71% of these enterprises. This fact is more meaningful, if their long-term planning is taken into account. 13 out of these 15 enterprises (87%) plan to implement RFID applications at the latest in ten years, although they have no medium-term planning for it. Only 29% of the enterprises who gave a negative answer to this question or 9% of all enterprises estimate the use of RFID as “in general not suitable” for them.  

Considering the branches of the 44 enterprises already using, testing or planning RFID applications, the branches services, in particular logistics and processing business put the main stress of using RFID. Regarding their planning, the branches consumer goods industry and logistics service providers will strengthen this trends, as shown in Table 1. 

Table : Distribution of those branches already planning and using RFID technology

Regarding the size of those 29 enterprises using and testing RFID, 82% of them are large-scale enterprises. But, if one looks at the planning status and at the minor role of SME in this sample, one can assume that they catch up: 8 planning large-scale enterprises stand facing 7 SME. 

1. 1. 1. Scale of investment

35 enterprises have responded the question concerning the scale of investment. Quantifying the investments for RFID applications as part of the whole budget for information and communication technology (IT), only 7.1% of investments for IT are spent in the average for RFID (relative standard error: 24.3 %; median: 1%). Regarding only those 19 enterprises who have already invested in RFID, the average part of their investments is 13.1% (relative standard error: 18.8 %; median: 10%). The corresponding value of the representative study for Germany “ECE 2005” (Sackmann, Strüker 2005) is 6.9% (relative standard error: 17.8 %; median: 5%). This makes it clear that the investments in RFID applications are at the time of this RFID survey reserved.  

However, one can assume a clear expansion of the investments. On the base of 59 enterprises, 85% state that they plan to increase (61%) or strongly increase (24%) their investments in RFID applications. Only 15% of the decision makers assess the development in the next two years as remain. No enterprise assumes a decrease of such investments. 

1. 1. 1. What are the targets of an RFID application?

Besides the application of RFID, the concrete targets that enterprises pursue with the use of the technology were also established. The main focus of attention of enterprises already using RFID in the field of logistics and stock keeping, or are testing or planning to use it within the next two years, is the high degree of importance of the optimization of company-internal logistic processes (18 out of 21 “(relatively) high degree of importance”) and the offer of new, extended or improved services for customers (17 out of 20 “(relatively) high degree of importance”). As can be inferred from , a relatively high degree of importance is attached to most of the targets questioned. Furthermore, it becomes clear that the “killer application” stocktaking previously identified as well as the high requirement for more frequent inventories may on no account be regarded as an end in itself. On the contrary, RFID-supported stocktaking must be interpreted as an “enabler” for advanced process optimizations. The optimization of logistic processes and the avoidance of out-of-stock situations are consequently rated higher in importance by the respondents than the pure price reduction of the inventory.

Figure : Targets of enterprises using, testing or planning to use RFID

In relation to the other targets, however, slightly less importance is attached to the lowering of personnel costs and the avoidance of theft. 

In the course of the introduction of RFID technology, various hypotheses regarding the opportunities of this step were drawn up, which are to be evaluated with regard to their significance. Accordingly, enterprises see the biggest opportunity in a reduction of stock keeping due to the possibility of being able to react in good time to fluctuations in demand through the employment of RFID. 46% (basis 50) attach a (relatively) high degree of importance to this potential. In contrast to this cost reducing potential, the possibility of increasing turnover with RFID is more soberly assessed. The corresponding proportion of enterprises that promise themselves higher turnover due to increased sales of their customers merely amounts to 32% (basis 47).

In contrast to logistics, other targets stand in the foreground for RFID employment in stores. A strong focusing on the customer can be primarily detected here. For 20 out of 24 of the respondent enterprises, the increase in customer satisfaction has a (relatively) high degree of importance. A (relatively) high degree of importance is also attached to the offer of new, extended or improved services for customers and the increase in sales by 17 enterprises in each case (both: basis 23). Of somewhat lesser importance, however, are the targets of avoidance of theft (14 out of 25 attach a “(relatively) high degree of importance” to this and the increase that customers will buy the same goods again (10 out of 23). A further segmentation of the replies according to enterprises that, on the one hand, already use RFID in stores, are testing or planning this and enterprises for which, on the other hand, this use is basically suited was dispensed with due to the low number of cases.

In addition to the targets of the use of RFID, the original reasons for an investment in the technology that were decisive were also ascertained. A strong customer-orientation is again to be observed: 20 out of 24 enterprises attach a (relatively) high degree of importance to the expansion of services for customers. In addition, for 16 out of 22 firms, the realization of a competitive advantage is of (relatively) high importance. The fact that this potential advantage over rivals will not last long according to the assessment of the respondents can be illustrated by the evaluation of the sustainability of competitiveness: This investment reason is to be rated almost equivalent with 14 out of 21 enterprises that certified it with a (relatively) high degree of importance. At least some of the enterprises questioned therefore estimate that competitive advantages can be realized merely for a short time with the employment of RFID. According to the assessment, the technology will soon be so widespread that it can only be a matter for companies when making investment decisions not to lose contact with competitors. The initiative of suppliers and customers, on the other hand, presents a rather insignificant reason for introducing the technology. Only 8 out of 23 enterprises regard this factor as crucial for the investment decision of their enterprise.  

1. 1. 1. What are the technical and economic risks of an RFID application?

The risks of an introduction of RFID are comparatively moderately evaluated. 47% (“(relatively) high degree of importance”; basis 49) anticipate an increasing retail market power due to the increasing availability of detailed purchasing information with RFID. The proportion of enterprises that fear finance problems with the introduction of RFID systems is similarly high (45%: basis 51). Other risks are rated significantly lower in importance however. Hence 35% (basis 49) of the enterprises attach a (relatively) high degree of importance to the danger of customer protests due to a restriction of the right to informational self-determination with the introduction of RFID. The respective proportions of further potential dangers turn out even less. For 27% of the enterprises (basis 49), the reduction in the order volumes of customers due to an RFID-related reduction in wastage together with respective turnover losses is a potential problem with a (relatively) high degree of importance. Financial problems with continuous RFID expenditure, e.g. for transponders, are feared by 26% of the respondents (basis 50). The increase in transport costs due to more frequent (just-in-time) orders of the customers (14%; basis 49) is ultimately practically ruled out as potential problem.