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The rush to RFID

David Margulius, Information Age

17/06/2004 11:56:41

In an airport at Frankfurt, Germany, a maintenance worker crawls through the cramped ventilation system, wearing a small device that reads data from chips positioned throughout the system to verify that he's done his job. At a US theme park, a teenager on a waterslide wears a special wristband with an embedded chip that will remember how many rides he has taken, no matter how wet he gets. And at a large drug company's warehouse, a shipment of the regulated narcotic OxyContin gets tagged with chips to track its route, and discourage theft and counterfeiting.

What do all these chips have in common? Each contains special RFID (radio frequency identification) technology, which enables a device to read data stored on the chips at a distance, without line-of-sight scanning or physical contact.

After years of use in applications such as vehicle tracking, factory automation, and anti-theft systems, RFID is suddenly poised to break into the same league as the transistor and the microprocessor. The cost of RFID tags has dropped from several dollars to 30 cents per tag or less, making RFID increasingly cost-effective for much higher volume applications, especially in the supply chain. Driven by recent RFID mandates from several large buyers including Wal-Mart Stores, Target, Albertsons and the US Department of Defence, much of the corporate world is scrambling to test and roll out pilots of RFID technology.

"There's a lot of hype around RFID and maybe a little bit of herd mentality," says Jon Brendsel, VeriSign's director of electronic product code network services. "Lots of end-users don't know why they need to do it, but they know they need to do it."

The list of potential RFID benefits is seemingly endless: greater visibility and product velocity across the supply chain, better inventory management, automatic replenishment, reduced invoice reconciliation and labour costs on the receiving dock, easier product tracing and recalls, and reduced product tampering, theft, and counterfeiting. But to get these benefits, industries will have to navigate a host of thorny challenges involving hardware and software, standards, and even business models.

The physics test

The first set of issues facing RFID deployments is the physics of getting RFID readers to read tags accurately in real-world environments such as warehouses. Current success rates for tag readings run as low as 80 per cent, explains Kara Romanow, a research director at AMR Research. "The tags just fail. The quality's just not there yet," she says. RFID readers have a hard time detecting the tags through interference from metal, liquid, nylon conveyor belts, and dense materials such as frozen meat and chicken parts.

Furthermore, as with other wireless technologies, the devil is in the details of reader infrastructure layouts and potential conflicts with other sources of wireless transmissions. "Every site's a little different. You can't just throw up antennae; there's a tuning aspect," says Tig Gilliam, a partner at IBM Business Consulting Services. "This is dirty fingernail stuff."

To further complicate matters, there are two types of tags: active tags, which contain a battery and can transmit further but have a shorter life span; and passive, which draw power from the reader and so have a shorter range but can live forever. And there are also two competing standards for transmission protocols, 13.56MHz and UHF, each regulated differently and with different effective ranges and abilities to avoid interference.

To pass the RFID physics test, experts recommend putting time and engineering resources into testing which RFID configurations will work best for your specific application.

"This is not a science; it's still an art," says Tony Sabetti, RFID products business manager at Texas Instruments, one of the largest tag producers. And it's a good idea to get cross-functional teams, including product, manufacturing, and supply chain experts involved in RFID planning, especially when RFID tags will be affixed to a product during the manufacturing process.

The software challenge

On the software side, the challenges to RFID deployment include getting the right data onto the tags in the first place, and then leveraging the data the tags generate as they navigate the supply chain across multiple enterprise systems. "Software is a huge issue," AMR Research's Romanow says. "Everyone's underestimating it."

Romanow says that for manufacturers, getting the data onto the RFID tags in the first place requires that existing order processing and fulfilment systems be capable of operating at the pallet, case, carton, or item levels, which many currently are not. For item-level RFID tracking, these systems also need to be able to handle sequential data (sequential serial numbers for a whole carton of otherwise identical products, for instance), but most existing applications are oriented toward classes of objects rather than sequences.

Once the tags are loaded with data, the real software challenges begin, starting with managing the reader infrastructure. Today's RFID readers are simple devices that typically lack an operating system, upgradable firmware, standardised drivers, or communication protocols -- although this is starting to change. "There are no consistent mechanisms to manage them, check their health, do software upgrades, and turn them on and off," says Javed Sikander, Microsoft's program manager for industry solutions enablement. "There's no standard interface across all the readers."

Next comes the middleware challenge of managing how the readers filter data coming from the tags as they move through the supply chain. "If I put a tag within the read field of an antenna, the reader reads it a couple hundred times a second," VeriSign's Brendsel explains. "You need a middleware layer which knows that the first time it sees it, it's an event, and the next 10,000 times its just garbage."

Once the data has been acquired and filtered, the work of feeding it to the appropriate applications begins. Most companies have multiple applications that need access to the RFID data, notes IBM's Gilliam, including warehouse management systems, inbound supply chain systems, planning systems, order management systems, and data warehouse and analytics systems. "You've got an enormous amount of data that has to be moved around the network among applications," Gilliam says.

And that data must be moved quickly and assigned accurately to the appropriate business process. "Just dealing with that volume of information coming in is going to test the limits for a lot of the real-time software out there," Microsoft's Sikander says. "The software pipes in between the devices and the host need to be able to pump data at a very high pace."

Although most of the largest software vendors have made announcements about supporting RFID, very few have actually released products, although that is expected to change this year. "I'd give the (large ERP vendors) a C -. Some have done next to nothing" in deploying RFID-enabled applications, AMR Research's Romanow says, though she points to exceptions such as SAP and middleware vendors OATSystems and ACSIS, and warehouse management vendors Manhattan Associates and RedPrairie.

For the foreseeable future, RFID deployments will require a lot of customer integration. "The consultants especially in the early going will play a huge role; this is a huge opportunity for the systems integrators," Romanow says.

Collaboration and data issues

To maximise the benefits of RFID, data generated by the tags must be sharable by business partners and with all companies along the supply chain that are using the same tag. Two potential standards have emerged to facilitate this maximisation: the EPC (Electronic Product Code) standard managed by the EPCglobal consortium and supported by Wal-Mart and many large retailers and vendors, and an alternate standard developed by ISO (International Organisation for Standardisation) and supported by numerous European companies and the US Department of Defence.

Most analysts expect the two competing standards to merge quickly, probably before Wal-Mart's mandated January 2005 deadline for its top 100 suppliers to support RFID. The larger issue is how uniformly the resulting standard will actually be implemented, and how much collaboration it will ultimately enable.

The EPC standard works on the concept that each RFID tag acts as a "licence plate”. Rather than try to load today's capacity-constrained 64- or 96-bit tags with lots of data about the specific item or shipment, the idea is to simply store a unique identifier that will refer to detailed information stored elsewhere on a global network. This identifier would include a “manager ID” (to identify the manufacturer), an “object ID” (to identify the class of object), and a serial number for that individual item, as provided by the manufacturer. The EPCglobal consortium envisions a federated network of providers of value-added services based on the licence plate, similar in architecture to the Internet itself.

But there are challenges. "How closely can we align that very thin (licence plate) representation with the keys that already exist in databases like VINs (Vehicle Identification Numbers) or GTINs (Global Trade Item Numbers)?" asks Sue Hutchinson, EPCglobal product manager. "How do we control access so it's appropriate to the business relationship; how does Toys R Us make sure Mattel doesn't see what Hasbro's sending?"

The business case

A final and crucial hurdle for most RFID deployments is coming up with a business case to support the required investment. Although in theory the cost-saving and strategic benefits from RFID are huge, getting those benefits requires many trading partners to participate, as well as significant investments in hardware, software, and human resources, an investment AMR Research's Romanow claims can reach as high as $US13 million to $24 million in the first year for a typical large consumer products manufacturer.

"The problem is, no one cares about the total business case, they only care what their share of it is," IBM's Gilliam points out. "The big hitch is, when do you sort of get critical mass?"

Gilliam says given the lack of immediate ROI and uncertainty about standards and the specific details of compliance requirements from large buyers like Wal-Mart and the Department of Defence, most companies are taking one of two approaches.

The first is the so-called ”slap and ship” approach, or doing the minimum level of investment to slap tags onto a subset of outgoing shipments to comply with the current mandates. A second, smaller group is making bigger investments in deployments further upstream, in an effort to both comply with mandates and wring out some internal operational efficiencies from the technology.

"Some companies think 'Gosh, can I just wait a little longer? What's the minimum thing I have to do to comply?'" Gilliam explains, whereas others "have done a business case and know which products (if tagged) can offer a return”.

But even the slap-and-shippers may have to get more involved than they thought, sooner than they thought, EPCglobal's Hutchinson warns. "Even with a slap and ship approach, there's still a good deal of (work) involved to make sure you have your tags programmed correctly and that you're tracking the goods for this RFID pilot implementation versus the rest of your supply chain" she says. "I think people are coming to the realisation that they're going to be looking at communication to their back-office systems and middleware challenges sooner than they thought."

[sidebar]

UPS pilots an RFID rollout

By David Margulius

How is United Parcel Service, one of the world's largest logistics companies, approaching RFID? Like many companies, it's launching pilot deployments to better understand the business case for a wider rollout.

"Understanding how RFID can impact our business processes through efficiencies or faster, better information is the challenge we face today," says Bob Nonneman, an industrial engineering manager at UPS.

The company recently began a series of RFID pilot tests both in its package delivery business and its supply chain solutions business, which serve many customers who must comply with upcoming RFID mandates.

In one pilot, Nonneman says, passive RFID tags are replacing barcodes on reusable fibreboard tote boxes used to shuttle packages through UPS's automated facilities. The goal is to extend the life of the tote boxes and to reduce the read-failure rates of the barcodes, which tend to wear off over time. In another pilot, RFID tags have been attached to UPS trucks in an effort to cost-effectively monitor vehicle activity moving on and off the property at three different locations. "The goal is to eventually automate our arrival and departure process," Nonneman says, "through an integration of RFID technology, wireless technology and potential electronic lock technology."

Much of the work to date has involved tinkering with the details of specific applications to achieve the right cost and performance trade-offs, Nonneman explains. For example, UPS has tried to balance the longevity of the tote box with the life of the tag, or to balance distance from the reader with the speed of the truck. Another challenge has been reducing the high rate of reader failures.

"The manufacturers have quite a ways to go. We've had quite a few failures out of the box," Nonneman says. But he notes that reader manufacturers are constantly leapfrogging one another and recently have come out with so-called "agile" readers, which are software upgradeable and can support multiple protocols. He also says reader performance has been highly application-dependent, and choosing the right reader for an application is a key success factor.

Integrating RFID with UPS's software systems has not been difficult because unlike most enterprise software applications, UPS's code is already designed to uniquely identify and track individual items and capture all the data associated with them. "Moving information along with the goods is nothing new to us," he says.

Based on the successes so far, Nonneman sees many opportunities for UPS to expand its use of RFID; for example, in the handling of hazardous materials and high value items, which currently require more human involvement. "RFID can provide double-checks without a lot of human intervention," he says.

Nonneman's advice for companies thinking about RFID? "Just get started," he says. "Choose a pilot that's small and manageable. Once that snowball starts rolling, it'll pick up speed on its own."

[sidebar]

Transforming data to business logic

By Ephraim Schwartz

The proliferation of RFID readers and tags has only just begun, but some analysts are already predicting that when fully operational, RFID will generate upwards of 5TB of data at a company's warehouse and distribution centre on a daily basis.

There is no doubt that a great deal of that RFID data will be useful for tracking products, in time and space, at the local warehouse or distribution centre. Simply tracking the number of times a pallet is moved and routed around a warehouse can help improve internal processes.

But on the back end, after shielding enterprise applications from most of that low-level data, the long-term goal will be to turn the more critical RFID data into business logic that enterprise systems can use for executive decision-making.

For the most part, filtering, translating and finally integrating the right RFID into the enterprise applications is handled by middleware.

Forward-thinking hardware manufacturers such as Intermec Technologies, for example, are putting software intelligence into their tags and readers, according to Mike Fisher, RFID business development manager at Intermec.

"You have a group-select feature in these intelligent readers. With a read-write RFID tag, you can designate that only certain tags on pallets or on cases be read as it comes through the dock door," Fisher says.

Upstream, a supply-chain management system might leverage the programmable capabilities of the intelligent readers to monitor deliveries and send an alert to a supply-chain management portal if a designated supplier is not living up to schedules.

Steve Banker, service director of supply-chain management at ARC Advisory Group, says the real issue is integrating data from a variety of sources in order to lean out processes.

"By integrating data across the supply chain, you can get a much clearer picture of what your lead times are and variability around lead times," Banker says.

More traditional supply-chain middleware vendors like i2 Technologies are also tackling the problem of RFID data integration.

"The problem is there is no standard representation of what the data model should be," says Pallab Chatterjee, president of solutions operations at i2.

i2 is using the concept of master data management, a file where the different formats and protocols from all the leading suppliers and manufacturers for naming and categorising the very same products are stored and synchronised with one another.

"It is like a thesaurus," Chatterjee says.

IBM, SAP, Oracle and ObjectStore are also planning to support RFID systems. Companies will need to think about the new kinds of business processes the addition of RFID data creates.

From real-time alerts when perishable goods arrive at the dock door to a system that can convert a purchase order into an alert that tells the fork-lift operator to move a just-delivered pallet to the shipping dock rather than the stock room, RFID will eliminate tasks, save time, and add new dimensions of value to a company that uses the data strategically rather than tactically.