))) Web-Based RFID: Hype or Glimpse of the Future?

William Atkinson
February 2, 2004

Many in the apparel industry are well aware that radio-frequency identification (RFID) technology promises to replace bar code technology, but the extent of the replacement, and the perceived benefits, still seem vague in many respects.

Adding to the confusion is the advent of a "technology upon technology," called Web-based RFID, which links supply chain partners to RFID information. The question arises: Is Web-based RFID simply the latest hype and glitz, or does it represent the future, offering tangible benefits to the apparel industry?

RFID vs. bar codes: Do we have a winner?

Even though companies have gained more control over product flow through their supply chains via warehouse management systems, products still move slower than some would like with traditional bar code technology. For example, locating bar codes on pallets for scanning is often a time-consuming task.

Now, though, RFID tags, using an electronic product code (ePC) system, can keep track of products at every step of the supply chain. Workers and managers can maintain real-time views of product data (SKUs, serial numbers, etc.), product location and intended destinations. RFID technology uses microchips to wirelessly transmit product serial numbers to a scanner without the need for human intervention.

"With bar code technology being unable to provide the high throughput capabilities and the level of detail that RFID technology can, the impact on warehouses will be enormous," reports Gordon Fuller, practice leader, secure logistics, for Farmington Hills, MI-based Covansys. A global consulting and technology services company, Covansys specializes in industry-specific solutions, strategic outsourcing and integration services.

"Another advantage of RFID is cost savings," Fuller adds. That is, with bar code technology, each scan involves labor costs because it requires an employee to do the scan. With RFID, once you purchase the scanner, that's it for cost. The goods are scanned in their normal course of movement. In other words, there are no separate events involved to take inventory or determine what happened to a specific container. Rather, it is continuous monitoring. Depending on your environment, you can achieve inventory reductions of between 5 percent and 25 percent with RFID.

Web-based RFID's goal: linking the supply chain

Today most RFID data is transmitted within private corporate networks. The next step is to make this information available over the Internet to designated supply chain partners. This allows information on product movement to be exchanged with databases outside of a company's private network. For example, if an apparel supplier uses RFID-tagged containers, it can track and store data about the containers' movement and contents (SKUs, serial numbers, etc.) in its systems and allow designated retail partners to pull the data into their own systems via the Internet.

In addition, each time an RFID reader scans a tag, all authorized users can have access to this information almost instantly on the Internet. "Older systems don't tell you when the status of something changes," explains Fuller. "You have to go in and look up the status of certain shipments to see if anything has changed."

The new event-driven systems not only provide alerts when a status has changed, but possess logic to determine who should be informed. "Different entities will track shipments at different points in the supply chain," continues Fuller.

For instance, the raw material supplier can track its goods through delivery to the manufacturer. The manufacturer could track it until it is delivered to the distributor or retailer. Transportation companies, such as truckers and ocean carriers, can also track shipments using RFID. "As such, it is of great value for all of these entities to cooperate in sharing information in a timely fashion," Fuller says. "For example, when an air carrier scans the goods as being loaded onto a plane, for purposes of planning, the ultimate retailer would love to have that information."

The ePC system format is based on XML, which makes the Web effective for asset tracking technology. With Web-based RFID, users can utilize portals and access their own particular area where the asset tracking information is of value to them. For example, suppliers can use Web-based RFID systems for sending advance ship notices. The technology will also allow warehouses to have better information on what will be arriving. "Along the same lines, it will allow the stores to know what is at the warehouse and what will be coming," adds Fuller.

Adoption levels: wait and see

At this point, Web-based RFID technology is as much or more in the minds of the inventors as it is actually in place. That is, we are in the early stages of the technology. It is difficult to find companies using Web-based RFID, and the majority of those that do are involved in proprietary pilot programs, rather than full rollouts, with instructions to their providers not to divulge their names.

"Our clients don't want anyone knowing who they are, because they consider this technology to be a competitive advantage once it's up and running," notes one RFID provider executive who requests anonymity.

While potential users are keeping quiet at this point, an industry group called EPCglobal Inc. is busy promoting the technology. A joint venture between EAN International and the Uniform Code Council Inc. (UCC), EPCglobal has taken over the work of the Auto-ID Center to develop RFID standards, and cooperative initiatives among various industry players. For example, it is attempting to create a standards-based RFID tag that can be processed by any standards-based reader.

Another EPCglobal initiative is addressing security issues. Greg Gilbert, RFID strategist for Atlanta, GA-based supply chain software developer Manhattan Associates, says the center is working on solutions to questions such as: How do you restrict who can and cannot see data? How much data should people be able to see? And the basic question: Who owns the database – the vendor or the retailer?

Manhattan Associates hopes to jump-start interest in Web-based RFID by working with Alien Technology on a project called "RFID in a Box," which provides users with the necessary middleware, some hardware and limited use of Manhattan Associates' trading partner management solution for a limited period of time, Gilbert says. The project is designed to give users Web-based supply chain visibility as well as process efficiencies.

Roadblocks: item-level tagging a pricey proposition

Despite attempts to promote the technology, potential users are offering resistance, largely because of financial concerns, especially as they relate to the cost of the tags. That is, while RFID technology has been used successfully for a number of years by companies that want to track the flow of expensive parts and subassemblies, the cost of RFID tags has been too high for use with less expensive products.

For this reason, companies that are experimenting with the technology generally limit involvement to tagging of containers, pallets and perhaps cartons. They typically tag individual parts or items only if they are expensive. As tag prices come down, though, it is expected that most products in the U.S. supply chain will be tagged.

In specific: Tags are available for between 50 cents and $1 each (depending on volume purchased), down from as much as $5 three years ago. They are expected to be available for 5 cents to 10 cents in the near future, then possibly as low as 2 cents each.

"The cost of tags is an issue at the item level," says Manhattan Associates' Gilbert. "If you're tagging at the pallet or case level, of course, the cost of the tags is not significant."

Even at higher costs, though, the tags may be a bargain when compared with the time it takes to read them. That is, unlike bar codes, which require that scanners be almost in direct contact with them, RFID wands can read RFID tags three feet away, even when the tags are not in direct view. This represents huge savings in time and improved productivity.

Implementation: users dragged into RFID kicking and screaming?

Besides attempts by the Auto-ID Center and RFID technology suppliers to promote Web-based RFID, there are some other factors that may encourage more aggressive adoption. "Several events taking place over the next couple of years may make RFID not just a nice thing to have, but a requirement, whether you want it or not," notes Covansys' Fuller.

Fuller cites the following four factors:

Factor No. 1: The Container Security Initiative. Since 9/11, there has been a major effort to secure the nation's supply chains. The first phase requires importers to provide information about contents of containers bound for the United States. This is done via the 24-Hour Rule, which requires importers to report the content of containers in a greater level of detail and at an earlier point in the process than ever before. There are also U.S. Customs inspectors at foreign ports to oversee and certify inspections. Phase two requires importers to prove what is in each container. Customs introduced these regulations in late 2003. This involves being able to secure your loading area and to be sure that what you say is in a container is actually in the container. It requires mandated electronic filing of this information. "This is where asset tracking becomes key," explains Fuller. "In fact, asset tracking is the cornerstone on which these security programs are based."

For example, one way to get containers to move quickly through foreign ports is to be able to quickly reconcile contents with documents. If you use bar codes, you will be subjected to a time-consuming process as containers must be opened so the bar codes can be scanned. If you use RFID chips, which can be scanned and read at 300 units per second through container walls (a feature of the soon-to-be-available next generation of RFID products), you can reconcile a container in a matter of seconds.

Factor No. 2: The "Sunrise Date." On Jan. 1, 2005, the UCC, which issues new product ID codes for bar codes, will introduce a program that will add one digit to the UPC-12 code. "This, obviously, will change the technology being used to track assets," continues Fuller. That is, it will provide an important opening for RFID technology.

Factor No. 3: The electronic supply chain manifest (ESCM). Within two to three years, there will be a system called the ESCM, jointly developed by the Transportation Security Administration (TSA) and the Department of Transportation (DOT). The TSA also is working with customs officials to oversee container security initiatives. "As such, domestically, we will see the same kind of information requirements that are already demanded for imported goods," states Fuller. "In sum, within two to three years, there will be required electronic reporting at greater level of detail at every stage of the supply chain, from the decision to restock to the point of sale, and possibly even after that in terms of support issues."

Factor No. 4: Wal-Mart's RFID Strategy. Last year Wal-Mart announced that it would require its top 100 suppliers to begin using RFID chips, at least at the pallet level, by January 2005. A number of apparel companies are in this top 100 list. Not coincidentally, this timeframe matches that of the Sunrise initiative previously mentioned. "Use of the Web is obviously necessary for complying with Wal-Mart requirements," states Fuller.

Likewise, Bill Allen, marketing communications manager, RFID systems, for Texas Instruments, notes: "Until the Wal-Mart announcement, RFID had been pushing a snowball up the hill. … Now Wal-Mart has it at the top of the hill, and it will be rolling downhill and gaining momentum from now on."

Plano, TX-based Texas Instruments, which has been involved in RFID for 15 years in the livestock and auto industries, is now offering RFID solutions for the retail supply chain.

As large manufacturers start to fall in line with the Wal-Mart requirement, they will try to maximize their investment in the technology by using it with a broader base of apparel retailers. According to research by Boston-based AMR Research, if the top 100 suppliers to the top 30 retailers use RFID, this translates to almost 80 percent of consumer goods' having RFID tags. AMR expects this level of adoption by 2006 to 2007.

Apparel applications: Hurdles to overcome

"So far, we are seeing most of the RFID activity in the apparel industry in tracking items from the point of manufacture to the distribution center or the back room of the store," reports Dan Bodnar, director of product marketing for Everett, WA-based Intermec Technologies. "This is done via tracking cases and pallets."

That is, for the most part, the technology has not yet proliferated into the front of the apparel store. One reason is that apparel retailers haven't yet explored what value-added benefits may come from having RFID data available on the shopping floor at the item level, Bodnar says.

Further, the sheer amount of data that would be available would be very difficult to manipulate. And there are two major hurdles facing retailers that want to use the Web to make RFID data accessible by in-store personnel. "First, the volume of data would be overwhelming for the average retail outlet, which usually has a computer with a 56K modem," he states. "Second, if all the data does reside on a database managed by a third-party somewhere, there could be some competitive concerns, such as if one company's retail data is inadvertently shared with another retailer."

The American Apparel & Footwear Association is following RFID trends in the industry. "Web-based RFID seems to be the new 'next wave' of technology hitting our industry, especially with the Wal-Mart announcement," reports Mary Howell, director of program development. "It is inevitable, and we see it as having significant, positive benefits, such as the ability to track goods through the supply chain. … All of our members are preparing for it, but they are being careful in how they approach it."

The biggest concern for apparel firms is determining a uniform frequency that will be adopted globally for communicating RFID data, Howell says. "Our suppliers want to be sure they won't have to use different systems when shipping to customers around the world," she states.

A second concern relates to how to use and store the large quantifies of RFID information, she notes.

The real benefits: reducing costs, improving service levels

If targeted users reluctantly enter the world of Web-based RFID as per the four factors covered earlier (i.e., Sunrise initiative, Wal-Mart's mandate, etc.), adoption of the technology may occur, but not quickly. However, there is another completely different reason users may decide to adopt the technology, regardless of whether it is required. "One thing we try to impress on our clients is that when you implement RFID in general or Web-based RFID in specific, there are speed and productivity benefits," reports Fuller.

And Manhattan Associates' Gilbert adds: "People are already starting to react to the Wal-Mart announcement, so activity will pick up before the January 2005 deadline. … We have already been inundated by customers and prospects interested in the 'RFID in a box' and RFID middleware as a result of the Wal-Mart announcement."

Customers are interested in the technology as a way to reduce costs, not just to comply with requirements. "For example, by using RFID in put-away/receiving and in order picking, you can recoup the cost of the system," he states.

While supply chain visibility is a benefit, Gilbert says it is difficult to tie dollar amounts to this advantage, except for measuring reduction in theft or shrinkage. "The real savings come in the area of labor efficiency, where you can eliminate the 25 percent of the time that employees spend scanning products with bar code readers," he states.

And some specialty apparel manufacturers are embracing RFID earlier than their counterparts in other industries because of their higher margins per item relative to grocery items and other consumer products, Gilbert says. "Gap has done studies showing that by being able to have all of the right sizes in the right places on the selling floor, they can increase sales significantly," he states.

Jeffrey Unger, CEO of Boston-based GenuOne, also says the focus should be on the benefits of RFID rather than requirements. "Some companies are getting involved because they need to be compliant with Wal-Mart, but the real driver should be the value of the system itself," he states.

GenuOne offers TraceGuard, an end-to-end supply chain visibility and security system that follows product from the raw materials stage to the retail outlet via RFID and other technologies. "Many of the apparel and footwear companies we're working with are not suppliers that will be affected by the Wal-Mart requirements," Unger says. "They see the benefits of RFID in terms of labor savings, anti-diversion track-and-trace ability and supply chain visibility."

If and when potential users are convinced that Web-based RFID, despite its cost, will provide appealing ROI, adoption should begin to increase, no matter whether external events require its implementation.

Recommendations: strive for standardization, have a back-up plan

Texas Instruments' Allen says it can be a challenge to get Web-based RFID to work, depending on the user's environment and products. "It is not a cure for bad business practices," he emphasizes.

He adds: "Putting your business in the hands of the Internet can also be an interesting challenge."

For example, what if the Internet system goes down? What are the implications for your supply chain? What are the recovery capabilities? "Most companies like to have their destinies in their own hands, so being linked to the Internet in this way can be a concern," states Allen.

As such, it is very important to have disaster recovery plans.

Gilbert also points to the importance of implementing a standards-based RFID solution if you are using Web-based RFID. "Standards are the only way you will be able to share data among your trading partners," he says, adding that costs also will be less than if you create a proprietary technology.

Also related to RFID standards, Fuller says: "The Department of Defense (DOD) has piggybacked onto the Wal-Mart announcement, stating that their suppliers will be required to have the same capabilities on roughly the same schedule."

However, because DOD follows International Standards Organization (ISO) standards, and because the RFID format has not yet been standardized by the ISO, there is some confusion as to which standard will dominate. "I think they will converge in the future, so it won't be an issue later, but it does pose a challenge for early adopters," Fuller says.

To get started with Web-based RFID, Allen recommends creating a pilot program at some point in your supply chain. "Then you can roll out a further implementation, either back in the supply chain to your suppliers, or forward to your customers," he concludes.

WILLIAM ATKINSON has been a full-time free-lance business writer for 27 years, covering virtually all aspects of business, industry and management. He lives in Carterville, IL.