))) Are You Prepared For RFID?

Whether the current RFID (radio frequency identification) mandates affect you or not, now is the time to investigate what it takes to adopt this technology.

Dan Schell
January 1, 2004

If you're reading this to learn the basics or the history of RFID (radio frequency identification) technology, you have come to the wrong place. Further, you won't find any information here on the latest privacy advocates crying wolf about item-level tracking. In fact, forget about item-level tracking with RFID tags. Carton/pallet-level tracking is the most realistic supply chain application for RFID right now. Of course, if you are a supplier to either Wal-Mart or the Department of Defense (DoD), you already know about carton/pallet-level RFID tracking. Both of these organizations issued RFID tagging mandates for their suppliers last year.

If your company is affected by one of these mandates, the good news is... well, there really isn't much good news. "It does not appear in the near term there is any upside to a supplier implementing RFID," says Scott Lundstrom, CTO at AMR Research (Boston). "All of the benefits roll up to the purchaser [e.g. Wal-Mart]. We estimate that a typical CPG [consumer packaged goods] manufacturer shipping 50 million cases per year will spend at least $13 million to $23 million to comply with Wal-Mart's mandate." To make matters worse, these mandates go into effect in 2005. So, time is running out. And you can bet some of your competitors are going to be implementing these RFID systems too, in hopes of gaining a competitive advantage. "One of the biggest benefits of implementing RFID is gaining a competitive advantage by pulling costs out of the supply chain," states Bill Allen, marketing communications manager at RFID vendor Texas Instruments RFid (Plano, TX). "Implementing an RFID system improves inventory visibility, which reduces safety stock, which reduces the overall carrying costs for inventory. Those are savings that go to the bottom line. That inventory reduction also frees up working capital."

What Does EPC Mean To You?

You will need to understand the term EPC (electronic product code)-compliant tag if you are investigating what it takes to comply with the Wal-Mart and DoD mandates. Why? Because these are the types of tags you'll be required to use according to these mandates. In particular, you'll hear a lot about the Class 1 and Class 0 specifications of the EPC protocol. A Class 1 tag is a write-once, read-many tag and a Class 0 is a preprogrammed tag. Both operate in the UHF (ultra-high frequency) band (e.g. 900 MHz). Wal-Mart says its suppliers can use one of these types of tags initially. However, eventually the retailer will require a merged version of these two specifications, termed Class 1 version 2 (C1 V2). With this specification, RFID tags are user programmable and will work in any country (unlike current EPC specifications that are designed for the United States' 915 MHz band). "The problem is, the standard for this specification probably won't be completed for two years," states Tom Pounds, VP of corporate development and product strategy at RFID vendor Alien Technology (Morgan Hill, CA). "However, Class 1 tags are available today. In fact, during the next six months we see Class 1's performance improving so much that it may render C1 V2 irrelevant."

Suppose you are one of those companies not affected by a current RFID mandate. You may be wondering if you should pursue implementing an EPC-compliant RFID system. After all, as Dan Mullen, president of AIM Global (a trade association representing the automatic identification and data collection industry) says, there are a range of "flavors" of RFID, and EPC is just one of them. "I think the mandates from the DoD and Wal-Mart are helping drive the RFID standardization process," adds Mullen. "It would be naive to think the vendor community would choose a different type of tag than the one they [Wal-Mart, DoD] decide on."

Get Started Now With A Site Survey

Allen says that the first thing you need to do to implement an RFID system is to analyze your business processes/operations and identify pain points. Find out how your software vendors (e.g. warehouse management and transportation management vendors) are prepared to deal with RFID technology. Conduct an RFID site survey to identify what in your environment will cause interference with RF signals. Some examples include nylon conveyor belts, proprietary wireless LAN implementations, electronic motors on lift trucks, and electric pallet jacks. The composition of your product should also be taken into consideration. "UHF tags can't be read through liquids, but LF [low frequency] tags can," explains Allen. "Conversely, LF tags don't work as well around metallic environments. Also, you'll probably need an array of readers on a portal door instead of just one for reading all of the tags."

RFID vendors like Texas Instruments RFid and Alien Technology offer RFID development kits for companies that want to try out the technology. These kits usually include a variety of tags, a reader, antennas, and detailed information on how to get started. Texas Instruments' kits, which are sold on the company's Web site, range in price from $250 to $600. Alien only provides its kits to attendees of its training course called RFID Academy. The cost for this two-day event is $5,000.

Segregate Your Distribution Center

Lundstrom expects a lot of manufacturers will deal with Wal-Mart's mandate by segregating the inventory they send to the retailer. Some companies will even designate distribution centers (DCs) for goods going to Wal-Mart. In either case, RFID tags often will need to be applied by hand at the end of a packaging line – a very costly process. (In the future, Pounds predicts that packaging like corrugated cardboard will already have built-in RFID tags.) "Many smaller companies that can't segregate a portion of a DC for this function may outsource RFID product tagging," Lundstrom says.

If you are confused and a bit nervous about implementing any type of RFID system, you're not alone. There is a lot of information to gobble up, and the current mandates don't give you much time to digest it. To ease your confusion, try partnering with an RFID-centric integrator or start attending education events like Alien's RFID Academy or one of Texas Instruments' RFID boot camps. If RFID hasn't affected your business yet via a mandate, it probably will soon enough. Be prepared.