Will RFID become industry's next 'big thing'?

Radio frequency identification (RFID) first appeared two decades ago as a wireless non-contact reading technology that allowed it to be used in harsh manufacturing environments where some barcode labels could not survive. Recently, Microsoft announced its intention to study the possibility of its software participating in the now ever-expanding world of RFID processing systems.

Putting its words into actions in April this year, Microsoft demonstrated its interest in RFID by forming the Microsoft RFID council, a multi-vendor group which includes the likes of Accenture and Intermec and whose aim will be to study the requirements for the company's products to participate in the growing list of RFID data processing systems.

According to IT sector analyst Gene Alvarez, vice president of the technology research services company, Meta Group, "This is a good move for Microsoft because it will help them out with their existing installed platform in the retail arena."

Not surprisingly, Microsoft sees its latest foray into RFID technology as an investment in the future. According to Javed Sikander, program manager for RFID strategy at Microsoft, "With RFID in the early stages of adoption, we are continuing to expand and evolve our partner-driven strategy based on the needs of industry."

"RFID problems are 10 times worse than those in e-business if the integration is not done."

But it's not just Microsoft nor only the retail arena where RFID is starting to mark out its territory. A number of well-known software and hardware vendors such as SAP, IBM and Oracle have all unveiled RFID products over the last couple of years, aiming to grab a share of what IT analysts say is a burgeoning industrial market for RFID technology.

Newly-appointed Sun Microsystems president and COO Jonathon Schwartz, for example, recently noted that his company will become one of a long list of suitors in the RFID process.

"Our main focus is one we call RFID middleware," said Schwartz.

Norma Flint from the Australian Data Capture Association (ADCA) says, "Everyone is interested in radio frequency identification (RFID) technology..." adding, "The perfect home right now for RFID is in the supply chain as this is where the most benefit can be gained; improv-ed productivity and customer service and increased profitability."

In a recent article in The Australian newspaper, Kelly Mills wrote: "In Aust-ralia, most RFID projects are popping up in manufacturing and agriculture..."

"Barcodes are applied, at the carton level, just before transporting to a warehouse or distribution point. The manufacturer receives no benefit from the technology and yet bears most of the implementation and ongoing application costs - and these are substantial."

The first manufacturing sector that will benefit from the use of RFID, noted Mills, is the pharmaceutical manufacturing industry. "In the next 12 to 18 months, all global pharmaceutical companies will use RFID to track boxes of products in North America. The US Food and Drug Ad-ministration decided earlier this month the technology will be used to track drugs in containers. It will be the standard for tracking and tracing by 2007."

However, looking at the entire spec-trum of Australian industry, the picture is not that clear.

"Radio frequency identification, or RFID, shows great promise," says Rick Fox, president and CEO of FOX IV Technologies, and who was recently in the country. "But," he continues, "so did barcodes."

"I estimate the adoption level of barcodes within the United States' ware-house/distribution segment of the supply chain at about 20 per cent. This per-centage applies to a combined grouping of those cartons that manufacturers and warehouses have properly marked, and distribution centres that are proper-ly equipped to scan barcodes as they are received. "This dismal US performance is despite several factors such as the existence of global barcode standards, the cost of printing a barcode being significantly less than an RFID tag, existence of industry-developed formats and stiff penalties for non-compliance.

"My question to our industry is: what are we going to do differently, or what do we think is going to happen, with respect to the implementation of RFID, that didn't happen with barcodes?"

Two areas Fox, who is on the Uniform Code Council Global Symbology Committee (UCC is part of EAN group), feels contributed to the slow adoption rate are a skewed cost-to-benefit distribution in the supply chain and the lack of software/hardware infrastructure.

"Barcodes are applied, at the carton level, just before transporting to a warehouse or distribution point. The manu-facturer receives no benefit from the technology and yet bears most of the implementation and ongoing application costs - and these are substantial. A real eye-opener for manufacturers would be to do a survey of the number of their customers who are actually equipped with the hard-ware and software to read barcodes. For whatever reason, supply chain members have, for the most part, not been able to financially justify the software/hardware infrastructure.

Considering the fact that RFID will face the same supply chain issues, why do we feel the adoption of RFID technology will be any different?"

Fox lists several issues he says the supply chain needs to address in implementing RFID. Many are the same issues faced with barcodes - it's just that the hardware and software solutions are different.

"RFID problems are 10 times worse than those in e-business if the integration is not done," IBM Global Services business consulting services consultant Will Duckworth was quoted as saying in a recent interview.

Furthermore, Fox says, "Our experience with labels with RFID tags implanted on the adhesive side of the label found about five per cent of the tags dead on arrival. For whatever reason, the tags could not be read with the RFID reader. Tag ver-ification must be done before label application. If found to be defective, the label must be discarded. It is costly to find you have an unreadable tag after it is applied to the carton. A five per cent reject rate is an unacceptably high level. As well as slowing the entire tag-application process, the low yield increases the net cost per tag."

Norma Flint says that this also is becoming the Australian experience. "Tag verification is essential and as it can be costly to remove faulty tags after they have been applied you need to decide how you will apply the tag - manually or automatically. If by hand, do you need to change current work practices; if automatically, how should the product be orientated and presented to the automatic application system.

Then, at some point, the tags' readability needs to be reconfirmed and the irony is that a barcode may be used for confirm-ation and to ensure nothing happened to damage the tag in the manufacturing and shipping processes.

However, Fox also adds a salient point to the RFID debate. "RFID tech-nology shows in-credible promise to remove costs from the supply chain. However, the im-plementation hur-dles are significant, and, unfortunate-ly, those burdened with implementa-tion costs will not receive much of the value."

ADCA's Flint agrees, "There is one important issue that is presently not being addressed and until it is, RFID will not gain any real momentum. This is that not all RFID standards, across all levels, have yet been finalised. It is essential that if you are considering RFID you consult an expert in the technology before im-plementing a system.

You would not want to find that you've installed a system that does not meet ratified standards because, just as with barcodes which have long established standards, the RFID tag needs to be readable by everyone in your supply chain for any system to be fully effective."

Merrick Spain, general manager of Brisbane-based company, Mobile Data Systems, in a recent interview said, " While RFID was useful for certain quite specific areas such as tracking gas canisters and meat processing, many mainstream users would continue to find barcoding more practical and cost effective for the meantime."

Other industrial analysts though continue to talk about RFID as the 'next wave' of industrial automation technology that will become not only mainstream but also an economic saviour as well.

Neil Powers, vice president of application and deployment products of RFID vendor Progess Software, said, "Over time RFID will change most aspects of how we deal with data. We'll be dealing with much more data, new dimensions of that data and new methods of acting on that data."

In a recent report by the US-based Automation Research Council (ARC), RFID was touted as the potential economic lifesaver to the financially challenged Warehouse Management Systems (WMS) industry. According to one of the reports' findings, "In the short term, WMS suppliers can help suppliers to the retail behemoths become compliant through offering a new add-on WMS module that allows RFID tags to be placed on cases in the warehouse. In the longer term, RFID capabilities are apt to become part of most suppliers' base solution.

Some manufacturers, not under immediate pressure to become compliant, may also choose to gain RFID capabilities through a WMS upgrade once suppliers have RFID-enabled their base package."

But overall, there seems to be an across-the-board industry agreement that RFID is on the increase in the manufacturing sector.

Rick Fox says, "Manufacturers need to find ways to benefit from the RFID technology other then forced compliance. This is where the biggest obstacle to a successful adoption cycle lies. This is our biggest challenge as an auto-ID industry - and our biggest opportunity."

But unlike the US, in Australia it is the manufacturing sector that is the driving force behind the adoption of RFID technology and with this comes the obvious flow-on effect into the whole supply chain spectrum from the warehou-sing, transport, distribution and finally retail adoption of the technology.

Scott McNealy, the chairman of Sun Microsystems, views RFID tags as one of the keys to "connecting everything with a digital, electrical or biological heartbeat, even inert objects - and conceivably every object on the planet - to the network", according to an article in the December 2003 issue of Sun's internal magazine.

"The evolution from a network of hundreds of thousands of computers to millions, billions, even trillions of things will be here much sooner than we expected," McNealy is quoted as saying.

But Norma Flint soberly notes, "RFID implementation will gain momentum but it is unlikely that it will ever replace the barcode entirely. It does promise to introduce some very real cost-saving benefits."

However, it seems with RFID, like all other emerging technologies, the answer to the question whether the adoption will be widespread or not looks like it will have to wait for the benefit of hindsight.

And as John Brand, vice president of the Meta Group says, "There are a whole range of environmental factors that will determine the success rate (of RFID technology), and that is not always science. There's a bit of science, art and magic to this."

Branko Miletic