ARC's New Warehouse Management Systems Study: Will RFID Save the WMS Market?

[April 20, 2004]

ARC's New Warehouse Management Systems Study: Will RFID Save the WMS Market?

DEDHAM, Mass. --(Business Wire)-- April 20, 2004 -- The worldwide market for Warehouse Management Systems (WMS) experienced a rough year. Year over year revenues (2003 as compared to 2002) have shrunk. Total revenues dropped by 2.7 percent. According to Steve Banker, Service Director for Supply Chain Management at ARC Advisory Group (sbanker@arcweb.com), "Even more worrisome, because it is a key future predictor of growth, is that software revenues shrank by 6.9 percent. In other enterprise software markets we have examined, this has been a pre-cursor to several years of shrinking revenues for a market." Steve Banker is co-author of ARC's "Warehouse Management Systems Worldwide Outlook: Market Analysis and Forecast through 2008."

According to Dr. Banker, one question many WMS professionals are asking themselves is, "Can RFID save the WMS market?" One thing is different that could play a role in helping to save the WMS market. RFID is hot!

A new technology -- passive tag Radio Frequency Identification (RFID) -- has emerged. This is, in effect, a hands free, remote sensing version of bar code technology. Large companies are now mandating that their suppliers gear up to ship all cases and pallets with RFID tags, as well as to continue using bar codes. Wal-Mart was the first to mandate these changes; the US Department of Defense, Target, Albertsons, Metro, Tesco, and others are playing the role of fast follower and will soon announce their own RFID mandates.

In the short term, WMS suppliers can help suppliers to the retail behemoths become compliant through offering a new add-on WMS module that allows RFID tags to be placed on cases in the Warehouse. In the longer term, RFID capabilities are apt to become part of most suppliers' base solution. Some manufacturers, not under immediate pressure to become compliant, may also choose to gain RFID capabilities through a WMS upgrade once suppliers have RFID enabled their base package.

ARC's RFID Lift Model

ARC has completed a detailed model of the lift, or boost to the market, that RFID will provide. This model forecasts:

-- Global DCs that will be RFID enabled using WMS solutions

-- Average Selling Prices of RFID add-on modules, RFID enabled WMS, and RFID upgrades. While upgrades are generally "free" for customers paying a software maintenance fee, this is less likely to be true for WMS suppliers OEMing an RFID middleware layer from other suppliers.

-- The software revenue boost, by type of RFID WMS solution, to the WMS market.

Forecasting revenues driven by new technologies, if there is no historical track record, is particularly difficult. For that reason the key assumptions behind the RFID lift model are described in detail.

For more information on this study, go to: www.arcweb.com/res/wms.

Note to Editors: This document can be used with attribution to ARC Advisory Group. For a graphic containing "Worldwide Warehouse Management Systems Market in Millions of Dollars", please email Maryanne Flynn at mailto:press@arcweb.com.

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 answer. 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. Further information can be obtained from ARC, Three Allied Drive, Dedham, MA 02026, 781-471-1000, Fax 781-471-1100, E-mail info@arcweb.com, Web www.ARCweb.com.

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