Wherever you turn today, you will surely hear or read something about radio frequency identification (RFID). Many organizations are attempting to determine what its implementation could mean to them, their customers, partners, suppliers and employees. While several large organizations such as Wal-Mart, Target, and the U.S. Department of Defense are mandating RFID use among their suppliers and contractors, other organizations continue to evaluate RFID’s impact on their operations and supply chains to determine its benefits and to what extent it should be implemented.

In Wal-Mart’s case, they have established January 1, 2005 as the deadline for their top 100 suppliers to implement RFID. These suppliers have been working with Wal-Mart and technology providers in testing the RFID technology for locations in the Dallas-Fort Worth area, though only thirty percent of the suppliers are expected to meet the deadline. The deadline certainly has increased the visibility of RFID; but there are still challenges to overcome, such as immature technology, evolving standards, costs, and a shortage of experienced integrators.

What is RFID?
RFID is a method for tracking many types of tangible objects ranging from products to people. Implementation of an RFID solution involves many components including object data; hardware such as tags, antennas, readers and printers; communication protocols as well as reader, middleware and host software.

If tags are used (see picture), they are customized per the buyer’s specifications and can be active (transmitting signals via battery power to a reader) or passive (“wakes-up” when coming within range of a reader and the signal is picked up by an antennal device). The reader identifies the tags as they pass by; digital information in the form of an electronic product code is then transmitted from the reader into a computer system. Information is stored in the tags either during the tag manufacturing process (read only) or as the tag is being configured for an application (read-write). Tag design must consider the —

• Type of material it is affixed to
• Type of material contained within the item/packaging it is affixed to
• Distance required for the readers and the communication frequencies needed to transmit the tag data to the readers.

For example, the signal strength emitted from an active tag affixed to a metal drum filled with liquid will be diminished; therefore, the tag design, frequency and reader distance must be considered. Also, higher frequencies are required for transmitting larger amounts of data via the tag. It is at these higher frequencies where material types are critical factors and where read ranges must be decreased.

Given the proliferation of bar codes, many wonder how they differ from RFID and what their future will be. RFID solutions provide several advantages over bar codes, such as non-contact readability requiring no direct line of sight; better read accuracy; and longer read ranges, e.g., one-hundred feet or more with active tags; ten feet or less with passive tags. Many industry experts have said that for now, there will be a coexistence of bar codes and RFID.

Return on Investment
Although an RFID solution is technology-rich, a solution cannot be justified without identifying a commensurate level of benefit to be realized through improved business process performance. Because passive tags still cost between forty cents and ten dollars; and active tags range from four dollars to over one-hundred dollars, tagging every item in the supply chain is not yet feasible. To manage the costs, you may decide, for example, to tag a pallet rather than each case on the pallet; – or even less desirable – the individual items within each case.

Where RFID is Used
Although the consumer products industry receives the majority of RFID press, many industries are also very active with RFID pilots and implementations. Many types of organizations have already been leveraging RFID for a wide variety of operational benefits. Here are several examples.

• Automotive manufacturers. Signaling parts replenishment needs on the factory floor and enacting robots on the shop floor to perform operations based on vehicle option content.
• Vehicle yard operators and fleet and rental car operators. Ability to locate vehicles anywhere within the campus environment both indoors and outdoors in real-time.
• Manufacturers. Line-side manufacturing operators indicate a material, quality, or health & safety issue; or supervisory assistance, etc., which reduces time and cost.
• Manufacturers using automated messaging from machines. Communicate piece count, machine hours, preventive maintenance, machine fault codes, and pull-signals for material producing staff time and cost savings.
• U.S. Department of Defense. Tracking munitions and suppliers inventories throughout the world.
• Hospitals. Track mobile medical equipment to ensure its availability at the right time and location, which also improves staff utilization.
• School districts. Houston and Buffalo have put chips/tags in elementary student identification badges for tracking when and where students get on and off school buses. The information is fed automatically by wireless phone to the police and school administrators.
• Delta Airlines. Experimental programs for reducing the 800,000 pieces of passenger luggage lost per year as well as a rapid recovery program for bags that are lost.
• Logistics providers. Tracking returnable containers throughout distribution channels to avoid losses and reduce delays.
• ExxonMobil’s Speedpass™. A device for automated gasoline payments.

The Future of RFID
There are four main factors that will influence the direction of RFID —

Spending will increase. According to an ABI Research study, RFID technology spending is expected to increase at a forty percent compound annual rate through 2008 (as quoted in the Softer Side of RFID, APICS, October 2004).

Technology costs should decrease. As RFID implementation expands, technology standards develop and economies of scale are attained, the cost of the technical components should decrease. In the near term, however, the lack of technology standards will still plague the RFID community causing communication problems between tags and readers.

Benefits to organizations will increase. At this stage, much RFID activity is being driven by industry or customer mandates, and the result is more RFID implementation in existing business processes. In the future, business processes can be improved more dramatically by redesigning them around RFID, thus improving ROI. One driver will be reduced carrying costs of inventory, which will filter down to the bottom line.

Socio-political issues will increase. The Food and Drug Administration has approved the use of an RFID chip that can be implanted under a patient's skin and can carry a number that is linked to the patient's medical records. This application is similar to what is being used to track cattle. In addition to the issue of tagging elementary students, RFID usage for tracking people in general has raised many privacy concerns, and will continue to be a hot issue as RFID implementation expands.

RFID for Your Organization
If your organization faces an industry or customer mandate, work with the customer’s recommended solution to optimize RFID’s benefits for your organization. If a mandate does not apply, research your organization within its four walls and across its supply chain to identify opportunities where RFID can be cost effectively implemented. Also, if your implementation involves the tracking of people or information related to people, give strong consideration to the socio-political issues during the planning stage.

In any case, consider a gradual approach to implementing RFID so that you can leverage its potential benefits as technology standards evolve and the costs to implement decrease.

About the Author
Douglas Hockenbrocht is a manager in Plante & Moran’s Technology Consulting & Solutions Practice, in Southfield, Michigan, where he specializes in technology-enabled process improvement for manufacturers and distributors. Doug can be contacted at Doug.Hockenbrocht@plantemoran.com.