RFID: Befuddled by FUD

But experts predict a breakout in 2-3 years, led by retail

Radio-frequency identification (RFID) technology has shown promise as a way to monitor the movement and even the condition of all sorts of objects.

The advantage of using of radio-frequency electromagnetic fields to transfer data is that, unlike barcode systems, where the tag must be within the line of sight of a reader, RFID tags can be embedded with a tracked object. This can give organizations more flexibility in how they track and identify inventory.

The potential benefits of RFID technology include increased supply chain visibility, improved inventory management, better prevention against product loss and theft and improved food and drug safety.

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But RFID has not taken off as people once thought it would. For many prospective RFID users, there has been hesitation due to fear of the unknown.

Risky business

"All technology deployments involve risks, and new technologies involve even more risks — risks that the project might fail, the technology might not work, the vendor might not survive, etc.," says Mark Roberti, founder and editor of RFID Journal.

"The biggest reason more companies are not using RFID is simply because they perceive it as risky. Companies naturally wait for a technology to mature and be proven to deliver value by others," he says.

But that's not the only thing holding up RFID deployments. Roberti points out that RFID is fairly complex to deploy. "Each facility is different and radio waves might behave differently in each facility," he says. "Few companies sell integrated solutions, meaning a company might need to buy tags from one company, readers from another and software from a third company. Moreover, you might need to write a custom interface to your existing back-end software, or even customize that software to handle serial numbers."

John Devlin, a practice director at ABI Research in London who covers RFID, smart cards, security and other technology areas, agrees that the lack of vendors that sell complete solutions has had an impact on adoption of the technology, and while the RFID market has been growing in the U.S., a boom hasn't happened in part because of the fragmented market.

"There are not two or three solutions that can serve every [customer need], so you've got a lot of small vendors and systems integrators with specialty knowledge," Devlin says. "I think that in a way it provides a natural barrier to rapid uptake" of the technology.

RFID has succeeded in industries such as retail, Devlin says, because the technology has proven itself in meeting specific business cases for retailers, such as tagging some of the more expensive goods in stores to avoid theft, keeping tabs on inventories and even managing distribution networks. Retailers can see fully commercial systems and the returns that early adopters are achieving, he says.

Some retailers, such as companies that sell apparel, footwear and jewelry, "have been tagging for two or three years and we're seeing volumes [of tags] increasing now," Devlin says. "It seems to have proven the return on investment." He points out, however, that even in the retail industry RFID adoption has not grown at the rate people were expecting.

Integration headaches

Many companies that have considered implementing RFID, including retailers, did not realize how much integration work was needed or how long the integration would take, Devlin says. "Within a large chains of stores you are not going to have the same IT infrastructure" among all the stores, he says. "And if you're going to put RFID in place it has to be uniform across" all the stores.

One reason why expectations have been high for the technology is that some RFID product companies have attracted venture capital groups of investors, who have talked up the market, Devlin says. "It's maybe partly out of hope, partly out of expectation or maybe some hype," he says.

But as many companies and industries continue to go through a learning process with RFID there will be more clarity in terms of how the systems work and how much they cost, and a better understanding of the business cases and expectations of what RFID systems can deliver, Devlin says.

Roberti thinks what needs to happen — from a technology, cost and standards standpoint — in order for RFID to gain some significant traction in the U.S. depends on which sector you are talking about.

Healthcare, for instance, needs to determine a standard for real-time location systems, which use tags and readers to determine the specific location of an object or person within a particular facility such as a hospital.

"Other industries, such as apparel retail, have essentially agreed that EPC Gen 2 [EPCglobal UHF Class 1 Generation 2] is the technology to use," Roberti says. EPC Gen 2 is an international standard being developed by EPCGlobal — an organization created to achieve worldwide adoption and standardization of Electronic Product Code (EPC) technology.

"In general, I would say that software solutions need to mature to the point where they solve specific business problems or deliver clear improvements," Roberti says. "Then, early adopters must prove the solutions deliver business value."

RFID "needs to continue to evolve in terms of performance and prices," and end-users need to be educated about the technology, Devlin says. He predicts a coming "boom" in the use of RFID in retail that will have a positive impact on use of the technology in other industries such as transportation and logistics, healthcare, pharmaceuticals, aerospace and oil and gas utilities.

But it is apparel merchandizing that seems like the best fit for RFID today. "Retail apparel has a major problem no other technology can solve economically — namely inventory inaccuracy," Roberti says. "Studies show inventory accuracy is about 65%. That leads to lost sales because the store thinks it has an item on the shelf when it isn't there."

RFID can cost-effectively get inventory accuracy up to 98% or 99%, Roberti says. In addition, "there is agreement on the type of RFID to use, UHF Gen 2," he says. "And the ROI is pretty clear. Sales go up when you have 99% inventory accuracy."

Aerospace is another sector with challenges that RFID can solve. "Every part on a plane has to have a unique [identity] and must be tracked throughout its history," Roberti says. "Some parts need to be removed from planes for regular maintenance and everything that happens to the part must be recorded."

RFID will allow the parts history to be stored on a chip built into or put onto every part, Roberti says. "This means that someone working on a plane on the tarmac could read a tag and know everything about a part," he says. "Airbus and Boeing are both pushing for this solution, so it looks like it will gain some traction."

Companies that have implemented the technology in various industries report a variety of benefits.

Mission accomplished

Mission Foods Corp., an Irving, Texas, supplier of food products, since 2009 has been relying on RFID to track reusable plastic trays that it uses to transport packaged food products within its warehouse and out to customers.

Prior to implementing the system, each year the company was losing thousands of the plastic trays to theft and misplacement, at a cost of about $3.5 million.

RFID

“By using RFID to track our containers we have seen a significant reduction of our use of corrugated boxes and the reduction on purchasing plastic trays as well,” says Eduardo Valdes, vice president of MIS at Mission Foods.

"By using RFID to track our containers we have seen a significant reduction of our use of corrugated boxes and the reduction on purchasing plastic trays as well," says Eduardo Valdes, vice president of MIS at Mission Foods. "We continue to use plastic boxes that are 3 years old and have [traveled] a few thousand miles."

The company also plans to use RFID to track pallets, racks and other assets that go in and out of its warehouse.

Another company, TekEase (formerly Dr. Know PC Medic), a Peoria, Ill., company that provides on-site technology service and repair to residential clients and small to midsize businesses, uses RFID to track tools and other assets on its vans.

The company, which will soon launch a national franchise, in 2010 began using a fleet of vehicles that came with a built-in RFID system that could be used for managing tools, inventory and equipment used in servicing clients.

TekEase tags all its important or expensive tools, equipment and other inventory. Prior to implementing the RFID system, tool requirements for specific jobs were kept on lists with checkboxes, and technicians would need to look at each required tool and verify that he had it. The process had to be repeated at the end of each service trip, in order to verify that nothing was left behind at a job site.

With the system in place, before a technician goes on a job, he opens an application on an in-dash computer in the vehicle and selects the appropriate job type. The system automatically reads the tags of all tagged items in the vehicle and looks for the tags associated with the particular job type.

If any tags or items are missing, the system lists missing items, and the technician knows to look elsewhere for the items before leaving for the job visit.

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When a job is complete, the technician loads the tools in the truck and uses the RFID system to make sure all the tools are in the vehicle.

"The key benefits we have realized [are] the ability to manage and better secure valuable assets, improvement of productivity and ultimately increased revenues," says Corbett Speciale, president of TekEase.

"RFID readers continue to improve and while there will always be some limits, the benefits already far outweigh those," Speciale says. RFID "will continue to big part of TekEase future," he says.

When will RFID likely reach critical mass in the U.S? "I would guess that within two or three years we will see retail apparel reach critical mass and switch to RFID," Roberti says. "That will lead to wider adoption in other sectors because it will show that the technology works and is mature. Also, the technology will be more visible because you will see people taking inventory of 1,000 items in 30 seconds. Right now, almost no CEOs have ever seen the power of RFID technology."

Bob Violino (Twitter: @BobViolino) is a freelance writer covering a variety of technology and business topics.

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