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Weekly UpdatesRFID technology has been around for decades; however, the promise of simple, low-cost tags about five years ago energized hundreds of companies to start looking at potential uses. It also spawned the Wal-Mart Stores Inc. and U.S. Department of Defense compliance programs. These mandates failed to produce the desired results. After suppliers complained that the tags were too expensive and the technology was bulky, Wal-Mart and the Pentagon relaxed their directives so that now only five Wal-Mart distribution centers have been RFID-enabled.
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Companies in different sectors have come to understand that RFID technology can do a lot more than just track boxes in the supply chain, and classrooms everywhere are reviewing the case studies. The message that students are learning is that RFID is slowly re-emerging as a valuable way to improve internal efficiencies. According to a forecast, the global RFID industry will be valued at $9.7 billion by 2013, equaling nearly a 15 percent annual growth rate over the next five years. A reason for the rosy forecast is the announcement of major RFID projects by large firms such as Airbus, Sam's Club and the U.S. Department of Defense. RFID technology has a great future in large network application, and graduating engineers and information technology specialists will contribute to the business landscape that's ripe for it.
As an example of this emergence, note that in 2008, Wal-Mart reportedly sent letters to its large suppliers, warning that soon they would be charged up to $3 per pallet for failing to place RFID tags on shipment to a Sam's Club distribution center in Texas. Around the same time, the Pentagon predicted that its full rollout of RFID would be completed by 2015.
There is also a general enthusiasm for the technology among smaller users. Health care providers, transportation providers, specialty retailers and energy companies are all investing in asset management applications. Implemented properly, the technology can bring velocity to certain markets by serving more customers faster and increasing customer royalty. RFID has the real potential to enable accuracy, reliability, service enhancement and cost reduction.
Obstacles to rapid implementation
No technology in recent years was hyped as vigorously as RFID and the technology never seemed to live up to its ample potential. Despite the decrees, RFID has been struggling to gain a foothold. Many firms that made initial investments in RFID have yet to realize a return on those investments as they wait for the rest of the industry to catch up. Reasons for the slow adoption range from technology issues to economic justification of RFID tags and are summarized below.
High costs. RFID tags are still more expensive than bar codes. The average cost of the non-reusable tags is 25 cents each. That is a high price to try to pass along to customers. Many suppliers find the prospect of item-level tagging prohibitive. To reduce tag cost is to reduce the size of the chip. However, reductions in the size of the chip make assembly more expensive.
Business justification. Many companies decide against RFID implementation for fear of achieving a measurable return on investment. Implementing full-fledged systems in a large manufacturer can cost $10 million to $25 million. Considering the sheer cost of RFID implementation, there is no return on investment for the technology if you only pursue compliance. Companies should get away from thinking of RFID as a cost-cutting tool and look at its broader strategic role. Similarly, there is the question of the drivers for adaptation. A return on investment is not always a straightforward calculation. Uncertainty around standards and high capital costs, including expenses related to project management and network integration, will also need to be addressed before retailers can adopt and benefit from the technology. Finally, fascination with technology advances should not be confused with business justification of the technology.
Reliability. Tag failure rates are reported to be as high as 20 percent to 30 percent. Quality concerns have dampened enthusiasm for RFID.
Proper implementation. Implementation of RFID technology is a huge undertaking and the whole project should not be done at once. Before deploying RFID, companies need to determine where RFID will add business value and plan a scalable deployment approach. Breaking the project down into manageable chunks will improve chances of success. There are many variables such as environmental, regulatory and product quality considerations that affect the type of systems needed for optimal performance.
System integration. RFID creates huge volumes of data that are difficult to manage. The challenge for IT experts is to develop cost-effective ways to manage data and integrate it into their back-end systems. Merging RFID data into back-end enterprise resource planning systems might be a nightmare. Data-formatting issues and software incompatibilities could make it hard to import accurate data. Many companies are investigating how they can integrate RFID deeper within business processes, both for closed-loop applications and for external supply chains. The middleware to link RFID hardware to various IT systems is still young.
Lack of in-house experts and passive resistance. Most companies lack in-house experts to implement RFID technology. Employee education is critical in the success of RFID adoption. As negative as it sounds, employees might think RFID has been implemented to spy on them. They simply might be afraid of change or resistant to having to learn new processes. They might show passive resistance or take active steps to make sure an implementation or trial fails. Evidence shows that if the technology is going to fail it will be due to people, not because of the technology itself.
Top management support. Successful implementation requires executive champions with both the vision and guts to change the way the organization operates. The ability of the organization to change is often the primary limiting factor in realizing RFID's return on investment.
Abuse by hackers. Counterfeit tags that are substituted for genuine tags on high-value products allowed many counterfeiters to escape detection. New chips that cannot be cloned are needed to help turn the tide against counterfeiting.
Privacy issues and government regulations. RFID has profound social implications. It has the potential to jeopardize consumer privacy and threaten civil liberties. Consumer groups have expressed concern over the potential privacy invasion that might result with widespread application of RFID tags. Governments around the world regulate the use of the frequency spectrum. There is virtually no part of the spectrum that is available everywhere in the world for use by RFID. This means that an RFID tag may not work in all countries. This gap in functionality may hinder the use of RFID tags in a global environment.
Evolving technologies and trends
RFID technology is maturing and continues to see tremendous innovation. Today, RFID systems have become broader, deeper and cheaper. Readers are using less power and are operating faster and at longer distances and with more ability to handle interference. Other trends include the following:
* Intelligence and enhancement in devices. RFID readers are growing more intelligent. This means better systems performance, the ability to use tags with more data and easier integration into existing systems without reprogramming. Intelligent new RFID devices enable users to determine the direction, distance and speed of ultrahigh-frequency tags and locate tags in 3-D space. Similarly, a newly developed high-frequency (HF) 13.56 MHz passive RFID tag with an antenna is capable of functioning as multiple sensors. In addition, using silicon biometrics technology, "unclonable" tags are designed for anti-counterfeiting and other applications. This process prevents counterfeiting of high-value, high-interest items such as luxury goods, pharmaceutical products, secure IDs and access card embedding.
* Mobility. Hand-held, forklift-mounted and mobile cart readers are changing the paradigm for RFID, opening up new applications. RFID mobility cuts the time it takes to do inventory to a fraction of what it normally takes by bringing readers to the tags instead of passing tags through stationary readers installed at the warehouse doors.
* Growth in applications software. Microsoft and other software companies are creating platforms upon which RFID resellers and consultants can create RFID-enabling software and applications.
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Industries to benefit from applications
With the global economy slowing, companies are looking for ways to cut costs, improve quality, increase efficiencies and enhance their competitiveness. RFID technology can help.
RFID technology holds immense potential for private and public sectors. It is having a major impact on various industry segments such as automotive, aerospace, retail and health care. Impacts include streamlining business processes, supply chain management, improved inventory management, better accounting and financing of assets and global visibility into distributed enterprises.
The initial application for RFID technology was retail supply chains, though the technology is proving to be more useful in non-retail environments. Hospitals are using RFID for asset tracking to streamline workflows and to improve health care processes; use of RFID at hospitals has tripled from 2005 to 2008. The food supply chain is estimated to spend approximately $5 billion on RFID technology in 2018, becoming more important than any other application. Another fast growing use of RFID is to monitor assets at IT departments and data centers due to improvements in tags where they can better transmit signals in environments with a lot of metal.
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