SAP, which makes software that links RFID data to business applications, has seen a 1,000% spike year-over-year in customers that deploy RFID, he said. And the company expects great things from the nascent technology during the next few years.

If you study what is on the minds of CEOs today, 88% of the CEOs surveyed said the No. 1 strategic imperative for the next 3 to 5 years is to grow their businesses. I look at RFID as an enabling technology, McDermott told ComputerWire.

He said RFID is a means for US companies to reduce the 47-day average of inventory on hand, which will boost profit margins. RFID gives businesses greater visibility into their supply chains and would stem inventory leakage, he said.

This, in turn, will improve American business competitiveness, create more manufacturing jobs locally, and potentially stem the need for companies to consider outsourcing, he said.

Forty seven days on average of supply and inventory on hand is simply a very difficult operational model to operate in.

RFID also drives product excellence by brining consumer-goods companies closer to the buying action, McDermott said. Many new product introductions … aren’t successfully largely because they don’t have a real-time understanding of what the customer’s buying patterns are, McDermott said.

RFID also promises to lower the country’s average 10% stock out of consumer goods, which refers to the 10% chance of a product not currently being in stock, he said.

McDermott also gave a keynote speech yesterday at an RFID global policy summit in Washington, DC, cosponsored by SAP and the US Chamber of Commerce.

Security and privacy concerns – the hoary chestnuts of RFID – were on the agenda for much of yesterday’s conference.

Acting deputy secretary of the US Department of Commerce David Sampson pointed to privacy and security as falling into the second category of the aptly named RFID: Opportunities and Challenges in Implementation, released by the federal government late last month.

But McDermott said he believes Americans would be willing to forgo a level of privacy to gain the benefits of RFID. I think consumers would give up a little bit on the privacy side for speed and efficiency, he said.

For instance, drivers would have an RFID tag embedded in their vehicles if it meant they could quickly pass through toll lanes, he said.

I agree there are certain privacy concerns and we need to be very thoughtful about them, he said. But the misnomer, and this is a big one, is that most people don’t have any idea what they’re talking about.

For example, many consumers do not know there are essentially two types of RFID tags: passive and active. A passive tag on, say, a CD would expire once it leaves the store, yet an active tag used on a passport would remain active.

McDermott said privacy, as a barrier to adoption, is nothing more complex than just knowledge.

Potentially a greater sticking point for RFID is the lack of a global standard, which promises interoperability headaches.

On the whole, RFID around the world may be characterized as being in a testing and policy-making stage. While the technology exists, policy perspectives and the way it will be integrated into existing technology systems has not yet been set.

Sampson stressed that the federal government, which has set a mandate for all goods shipped from the Department of Defense bear an RFID tag, does not want to get into the standards game on this one. We are working on practical and market-driven technical standards to enable greater interoperability. And I do want to emphasize market-driven.

RFID needs common, open standards borne from partnerships among tech companies, standards bodies, regulatory and non-regulatory agencies and industry and consumer groups, he said. I think all of us would agree that a market-based solution is preferable over the government establishing a potentially onerous framework of rules that could stifle RFID deployment and ignore market needs, he told the crowd.

Next month, the government’s National Institution of Standards and Technologies will hold a standards and trade workshop in China focusing on RFID. As more economies like China enter the global trading system, often with unique standards of their own, the need for harmonization becomes acute, Sampson said. Multiple standards create huge costs … as well as can often represent very significant non-tariff trade barriers.

Of course, there are other concerns surrounding RFID adoption, such as which spectrums different systems will operate in. A Department of Defense event speaker highlighted this as a security concern.

Jurgen Reinold, senior director of technology of Motorola’s secure asset solutions unit, also pointed to the niggling problematic aspects of RFID spectrums, such as being susceptible to interference, cancellation and reflection.

I have some bad news: RFID is based on RF and RF is a very beastly thing to control. It doesn’t travel along a straight path like a laser would do, for example.

If you think about dumping that little rubber ducky into the bathtub and all the waves that you’re seeing that’s basically what RF is all about. RF systems have to be designed from day one with a systems approach in mind. You can’t just say I have a tag, I have a reader …

He pointed out that RF spectrums are regulated around the world by more than a hundred regulatory bodies.