Item level tagging, or ILT, is not a new concept or application in the RFID universe. In fact, ILT was an early vision for supply chains – the ability to track RFID-enabled items from the point of manufacture to the point of sale or point of delivery. The early vision for RFID-enabled ILT, however, differed from the early reality. RFID technology, especially passive UHF, was not ready for high-volume, low-cost ILT applications largely due to cost, performance and lack of standards. That is no longer the case. ILT is now a reality in a number of industries, but the road has been long. During this QuickCast, VDC's Mike Liard discusses some of the key trends in the burgeoning ILT segment and why both vendors and solutions providers, particularly those in the passive UHF space, can no longer afford to ignore it.
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Thank you for that introduction. Today, I will be discussing the RFID market opportunity for Item Level Tagging, also known as ILT. Our presentation today is entitled: Look at me, I’m ILT. This is an appropriate title given that any vendor or solutions providers – particularly those in the passive UHF space – can no longer afford to ignore the burgeoning ILT segment. Let’s begin by taking a quick look at the agenda for this QuickCastWe will first discuss some high-level observations on the RFID ILT market as a whole including HF and Passive UHF considerationsNext we will hone in on the passive UHF ILT segment where VDC sees strong momentum We will then explore the passive UHF ILT market further, examining the influence of anti-counterfeiting and authentication on adoptionFinally, we will offer some strategic guidance to vendors and solutions providers targeting ILT
To start, let’s be clear item level tagging is not a new concept or application in the RFID universe. In fact, ILT was an early vision for supply chains – the ability to track RFID-enabled items from the point of manufacture to the point of sale or point of delivery.The early vision for RFID-enabled ILT, however, differed from the early reality. RFID technology, especially passive UHF, was not ready for high-volume, low-cost ILT applications largely due to cost, performance and lack of standards. That is no longer the case. ILT is now a reality in a number of industries, most notably retail apparel.It has been a long road to get to the current levels of adoption and planned usage. As passive UHF technology and solutions matured over the last decade, shorter range HF RFID systems were being tested and deployed. Costs and range limitations in supply chain environments, however, presented hurdles to broader HF adoption for item-level tagging. Nonetheless, HF solutions have found current and historical success in select markets such as high-end luxury goods. For example, many major high-end retail jewelers have deployed HF-based systems tying together employee access control, item-level inventory control and even RFID-enabled marketing in stores. A few years back HF and UHF tags battled it out for frequency selection in the pharmaceuticals industry driving by anticipated – now delayed again – e-pedigree compliance in California. Passive UHF has now become the frequency of choice for the vast majority of pharmaceutical ILT pilots and deployments.So, what’s hot and what’s not in passive UHF ILT markets? VDC sees three key trends.
Passive UHF tag volume for item-level applications far outpaces that of HF tag alternatives. This slide illustrates passive UHF tag shipments for item-level tagging by primary product category or type. VDC has grouped the passive UHF ILT opportunity into 3 key groups – Retail apparel, pharmaceuticals, and others (including fast moving consumer goods such as alcohol, tobacco and consumer electronics). There was a sharp spike in passive UHF volume two years ago, Hundreds of millions of passive UHF tags were shipped in 2010. The main factor then, and now, is the multi-year, multi-billion unit order from Wal-Mart for retail apparel items. Other retailers and brands contributing to volume demand include Marks&Spencer, Gerry Weber, American Apparel, JC Penney, Macy’s and others. In the pharmaceutical space, Korea’s government compliance program is driving strong volume. The RFID ILT initiative in Korea is being closely monitored by other countries including Germany and the US. ILT of alcohol products is driving strong volume in China and Korea, placing RFID tags on products such as wine and whiskey for authentication and anti-counterfeiting. At present retail apparel accounts for 75-80% of passive UHF ILT volume, with nearly 1.3 billion tags expected to be consumed this year. Category Shipments 2010 2011 2012 Retail Apparel (Millions) 620 850 1275 Pharmaceuticals (Millions) 85 125 175 FMCG/Other ILT (Millions) 25 100 200 730 1075 1650 85% 70% 77%
While the main value propositions for RFID-based ILT are inventory control and supply chain visibility, anti-counterfeiting and authentication are also main drivers for select high-volume goods. VDC highlights some of those specific items here.Pharmaceuticals…Alcohol…M2M…Other FMCGs…Anti-counterfeiting and authentication is playing such an influential role is these and other markets that VDC Research has dedicated its first RFID Fast Forward research effort to this topic, authoring a forward-looking paper on this market trend and opportunity. More information on our 2012 RFID Research Program and Fast Forwards is offered at the end of this QuickCast.
There are many strategies an RFID vendor or solutions providers can pursue in the passive UHF ILT market. We highlight a few of those recommendations today.
This slide offers a snapshot of VDC’s 2012 RFID Research Outline and Strategic Insights deliverables. The 2012 program offers two new exciting offerings to our clients:The Fast Forward TrackAND Custom Data Cuts The Fast Forward component takes a deeper dive into select markets and provides insight and thought leadership in areas that showcase the modernization of RFID. Custom Data Cuts enabled clients to select and purchase data relevant to their targeted and served markets and according to your budget. We are excited about our 2012 RFID Research Outline and hope you are as well. Thank you.