DENVER-Radio frequency identification technology is reaching maturity. Such an assertion seems almost absurd for a technology that has recently received hype rivaling that of other newfangled short-range wireless technologies like Wi-Fi and Bluetooth.
But RFID is nothing new. It was introduced during World War II when it was used to detect enemy aircraft, and since then, RFID applications have been developed to prevent theft, provide secure access and track livestock.
Still, future possibilities for RFID seem endless. Someday your refrigerator will be able to warn you that your milk has reached an early expiration date because it sat in the hot car too long on its ride home from the store. Someday just walking past an RFID reader at a grocery store will tally up your purchases. Someday an electronic reader will recognize you walking into a secure building without you having to present your ID badge. The reader will also recognize that you’re carrying the correct company-issued laptop.
However, technology players currently dabbling in the field are looking to the more realistic, near-term applications of RFID. Many of those players are focused on the supply chain, as evidenced at the recent RFID World conference held here.
In a nutshell, RFID is being looked at to replace, or at least augment, barcodes on products in stores. By equipping pallets of products with RFID tags, recognizable by an RFID reader in a certain range of the pallet, retailers will be able to better track and manage inventory as it is shipped and sold. Eventually, retailers will apply tags to each item.
Indeed, according to Vijay Sarathy, group marketing manager of RFID solutions at Sun Microsystems Inc., several factors, including RFID mandates from major retailers and the development of standards for the technology, have converged to push RFID toward maturity-hence the recent hype over a 70-plus-year-old technology.
Perhaps most responsible for the hype over RFID reverberating through the tech and retail industries, are recent mandates from retail magnates including Wal-Mart, TESCO, Albertson’s and the Metro Group, among others, for their suppliers to implement RFID tags on products coming into certain distribution centers.
In the United States, Wal-Mart’s mandate has been credited with providing the kick-start RFID needed. The company announced last summer it would require its top 100 suppliers to put RFID tags on pallets and cases going to three distribution centers in Texas beginning in January 2005.
“Wal-Mart has essentially stepped up to the plate and said, `We’re going to force this.’ As one of the major players in the retail supply chain, Wal-Mart mandating compliance may drive enough volume to get lower unit costs,” said Bill Allison of Deloitte Consulting L.L.P. in a recent report.
The Gillette Co. has taken Wal-Mart’s mandate a step further and is conducting a trial in which it is tagging all cases of a specific brand of razors to test the benefits to the supply chain. In early 2003, the company ordered 500 million electronic product code tags from RFID technology supplier Alien Technology and began tagging. The tags tell the company how many cases of razors it has, where a case is, how long it was there, where it was stored and when it was shipped.
The Department of Defense has also issued a mandate for its suppliers to use RFID tags on cases and pallets shipped to the military by January 2005.
Notably, the mandates are just the first steps in enabling RFID in the supply chain. Tags are being required, yes, but the reading and recording of the data encrypted on those tags-which is where the real value of RFID lies after all-has not yet been addressed.
And as always, cost is key. The general belief is that as more tags are sold, the price of the tags will drop. But Wal-Mart suppliers affected by its mandate are reportedly facing hurdles over the current cost of RFID tags. The magic price point bantered about the industry is 5 cents per tag, but analysts and industry players have warned that suppliers using the cheapest tags available, just to comply with mandates, may be in trouble in the long run. In addition, delaying compliance to wait for lower costs may not be an effective strategy.
“Five-cent tags are a component to the overall success of RFID, but they are not one of the top-five, most-important elements,” said Erik Michielsen of ABI Research in a recent study. “Without proper commitment, planning and partnership, cheap RFID hardware is not sufficient to make a sustainable long-term difference with consumer packaged goods suppliers looking to benefit from RFID.”
Furthermore, analysts believe the cost of the tags will not be the long-term concern. Rather, the cost of readers, infrastructure and ongoing maintenance of the systems need to be considered.
Another factor key to the development of RFID is the adoption of standards. EPCglobal, for example, is working to adopt standards for an electronic product code Network that will support the widespread use of RFID. Under EPCglobal’s vision, RFID tags on products will include EPCs that will be recognized by an object name service, much the way URLs are recognized as specific addresses on the World Wide Web.
EPCglobal emphasizes the importance of the adoption of open standards for identifying products, communicating with tags, and describing products and their status-not only to drive down the cost of RFID tags, but also to enable any tag to be recognized by any reader anywhere in the world.
