November 06, 2006
The Network Effect Of RFID Use
Paul Faber of Industry Week gives a very nice explanation of a phenomenon called the network effect, where the value of a good or service increases in direct proportion to the number of people or companies using that good or service. For example, early email systems were only of value to those few researchers who had access. Now, email access is ubiquitous and valuable. Faber discusses how the network effect applies to RFID in retail, EPCglobal's EPC (Electronic Product Code), and container tracking.
The beauty of the EPC, aside from the fact that it's being promoted as a standard, is that it is designed for the sharing of information, collected by RFID readers, between organizations. So anyone in a particular supply chain that uses EPC could benefit from it. So while Wal-Mart's use of it is unfortunately relatively isolated, their mandate to introduce their suppliers to RFID and EPC should increase the value of its use to both them and the suppliers, especially beause Wal-Mart plans to share such data. However, at present, RFID in retail, Faber suggests, is not large enough yet to enjoy the positive side of the network effect, "[d]ue to the incomplete infrastructure of EPC RFID tools." Layoffs in companies such as Checkpoint Systems would bear that out.
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