TRUE OR FALSE: Like the Mesozoic, the Paleolithic, and the Industrial Era, the Age of the Bar Code has come and gone. The answer: Partially true. You may have heard rumors that radio frequency identification technology is replacing bar codes. If so, you have probably also noticed that the extent of the replacement, and its perceived benefits, still seem unclear. 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 real question turns out to be whether Web-based RFID is simply the latest hype and glitz, or whether it represents the future, offering tangible benefits to users.
Even though companies have gained significant control over supply chain product flow through warehouse management systems and traditional bar code technology, products still move more slowly than some would like.
Now, however, RFID tags can keep track of products at every step of the supply chain by using an electronic product code (EPC). Workers and managers can maintain real-time views of product data (e.g., SKUs, serial numbers), and obtain relevant information about product location and intended destinations.
“The impact on warehouses will be enormous,” predicts Gordon Fuller, a practice leader in secure logistics for Farmington Hills, MI-based Covansys, a global consulting and technology services company. Fuller points to the greater throughput and greater level of detail that RFID technology can provide. Another advantage of RFID, Fuller says, is cost savings: Each bar code scan includes the cost associated with an employee performing the actual scanning. With RFID, purchasing the scanner is the cost; goods are scanned in their normal course of movement.
PUTTIN’ ON THE RITZ
Currently, in most RFID projects, scanned data related to product movement is transmitted within private corporate networks. This allows information on product movement to be exchanged with databases outside of a company’s private network. The next step is to make this information available over the Internet to designated supply chain partners. For example, if a retailer needs more information on what is in containers with radio frequency ID tags, an RFID reader can identify the SKU and serial number, plus any other information available on the system, and then pull the needed information from the supplier by way of an Internet connection. In addition, each time an RFID reader scans a tag, all authorized users can have access to this information almost instantly on the Internet.
“The EPC system format is based on XML, which makes the Web effective for asset-tracking technology,” says Fuller. With Web-based RFID, users can utilize portals to access an area where the asset tracking information is of particular value to them. For example, suppliers can use the technology to send advance ship notices. “It will allow the stores to know what is at the warehouse and what will be coming,” Fuller says.
THE HYPE PHASE
As of this writing, there is as much or more Web-based RFID technology in the minds of inventors as there is actually in place. “Actually,” says Scott Lundstrom, chief technology officer for Boston, MA-based AMR Research, “it’s still in the ‘hype’ phase, where the hype exceeds the actual implementations and expenditures.”
In fact, it is difficult to find companies currently utilizing Web-based RFID applications, and the majority of those that do are involved only in proprietary pilot programs, rather than full rollouts, and have instructed 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 provider executive who requests anonymity.
While potential users are keeping quiet at this point, an industry group called the Auto-ID Center (www.autoidcenter.org) is busy promoting the technology, working to develop universally applicable standards, and developing cooperative initiatives among various industry players. One challenge facing the organization is addressing security issues. Greg Gilbert, RFID strategist with Atlanta, GA-based supply chain software developer Manhattan Associates, asks, “How do you restrict who can and cannot see data? How much data should people be able to see? This leads to the basic question: Who owns the database — the vendor or the retailer?” Fortunately, according to Gilbert, security is another Auto-ID Center initiative; a security firm recently joined the group. “We hope they can provide a lot of guidance on these issues,” he adds.
Manhattan Associates itself is attempting to jump-start interest in Web-based RFID. Working with Alien Technology, Manhattan has developed “RFID in a Box,” which provides users with the necessary middleware, some hardware, and limited use of Manhattan’s trading partner management solution (all for a limited period of time), to enable Web-based supply chain visibility as well as to gain process efficiencies in operations.
Despite attempts to promote the technology, potential users are offering resistance, largely due to financial concerns. Companies experimenting with the technology generally limit involvement to tagging containers, pallets, or cartons. 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.
Tags currently cost between 50 cents and one dollar each (depending on volume purchased), down from as much as five dollars three years ago. They are expected to be available for five to ten cents each in the near future, then possibly drop to as low as two cents each. “The cost of tags is [now] an issue at the item level,” says Gilbert of Manhattan Associates.
AMR’s Lundstrom agrees. AMR expects that RFID tagging at the level of individual items will become commonplace between 2004 and 2008. “However,” Lundstrom says, “it will take longer than this for tag prices to get lower than five cents.” Until then, he believes, tags for individual products will be limited to larger-ticket items.
Even at higher costs, though, the tags may be a bargain: Unlike bar codes, which require that scanners be in almost direct contact, RFID wands can read tags three feet away. This represents huge savings in time and improved productivity.
THE REAL BENEFIT
There is another reason distribution center users may choose to adopt the technology, required or not. “RFID in general, or Web-based RFID particularly, produces speed and productivity benefits,” says Fuller.
“Activity will pick up before the January 2005 deadline,” says Manhattan’s Gilbert. “People are already starting to react to the Wal-Mart announcement; we’ve been inundated by customers and prospects interested in ‘RFID in a Box’ and RFID middleware as a result.” Customers, though, are also interested in the technology as a way to reduce costs. “The real savings come in the area of labor efficiency, where you can eliminate the 25% of the time that employees spend scanning product with bar code readers,” Gilbert says.
If and when potential users are convinced that Web-based RFID, despite its cost, will provide appealing ROIs, adoption should begin to increase, regardless of whether external events require the implementation and use of the technology.
William Atkinson is a business writer based in Carterville, IL. He can be reached at firstname.lastname@example.org.
The Fab Four
Gordon Fuller of Covansys cites four programs that may make RFID essential in the near future:
- The Container Security Initiative
Since 9/11, there has been a major, formal governmental effort to secure the nation’s supply chains. In Phase One, importers are required to provide information on what is in the containers they ship to the U.S., in greater detail and at an earlier point in the process than ever before. Phase Two, beginning in October 2003, will require proof of what is in each container, and it will mandate electronic filing of this information. RFID chips, if used, can be scanned and read at 300 units per second, and (in the soon-to-be-available next generation) through container walls.
- The ‘Sunrise Date’
On Jan. 1, 2005, the Uniform Code Council (UCC), which issues new product ID codes for bar codes, will introduce a program that will add one digit to the UPC-12 code, changing the technology used to track assets, and incidentally providing an important opening for RFID.
Within two to three years, government agencies will have jointly developed a system called the Electronic Supply Chain Manifest (ESCM). The expected result of this system is that “there will be required electronic reporting at greater level of detail at every stage of the supply chain,” says Fuller.
- The Wal-Mart Factor
Wal-Mart announced earlier this year that it would require its top 100 suppliers to begin using RFID chips, at least at the pallet level, by January 2005. Not coincidentally, this is also the “Sunrise Date.” AMR’s Lundstrom says that almost 80% of goods coming through consumer-oriented supply chains will have RFID tags by 2006 to 2007.