Time for RFID: Applying RFID in the Supply Chain

RFID technology has the potential to change the way supply chains are managed, but in order to be effective businesses need to take a holistic look at the deployment.


The second difference between RFID and traditional bar codes is in what is being tracked. A bar code uniquely identifies each type of item, but not each item within that type. For example, two different types of cereals will have different bar codes, but two boxes of the same cereal will have the same bar code. With more capacity to store data in an on-board chip, RFID tags can uniquely identify each item so that two boxes of cereal will have different identification numbers. While this may seem like overkill at first, it can have tremendous benefits. Recall the recent scare over mad cow disease several months back, and imagine meat producers having the ability, with RFID, to be able to track the affected meat down to a specific package on a grocery store shelf. The peace of mind with RFID from the consumer's point of view, as well as the reduced liability from the producer's standpoint, alone can justify such an investment.

The third difference pertains to tracking. Bar codes tell you about an item only when you physically bring it to the scanner. With radio frequency flooding the air around us on a continuous basis, RFID tags can, to an extent, provide active tracking. For instance, when a package tagged with RFID leaves a warehouse it can be detected automatically by one of the readers positioned at key locations in the warehouse. In a slightly different situation, an RFID-enabled package can broadcast its presence continuously, permitting a stock person searching a warehouse to know for sure that a certain package is still in the warehouse and be able to locate its whereabouts, which is useful when you consider how massive a warehouse can be and how many thousands of items it holds.

So what should a supplier do? While RFID technology has the potential to increase the efficiency of your company's supply chain and unleash new innovations, it is important to understand the issues that affect a successful deployment of RFID. Besides the technical aspects, companies should consider standards, cost, business process re-engineering and privacy concerns in order to realize the full potential of an RFID deployment.

A Deeper Look into Standards, Technology and Business Process Re-engineering

The Role of Standards
While RFID is an old technology and RFID tags have been around for several decades, most of the applications have been built on proprietary technology. As a result, readers made by one company have not been able read the tags made by a different company. Obviously, this hasn't been conducive to widespread adoption of the technology.

This started changing in 1999 with establishment of the Auto-ID Center at the Cambridge-based Massachusetts Institute of Technology. The Center started developing industry specifications for RFID systems. These specifications, known as Auto-ID, are driving standardization in the industry. Since October 2003, a consortium named EPC-Global (a joint venture of the Uniform Code Council (UCC) and EAN International) has taken over the responsibility to bring these specifications to the market. Many industry players, including tag and reader providers and retailers, are members.

However, the standards are still being defined, and different players are adopting different versions of the standards. For example, Wal-Mart has mandated the use of EPC Class 0 and 1 tags, initially, and may eventually move to Class 1 Generation 2 tags (Source: IDC). On the other hand, the Department of Defense (DoD) wants the tags its suppliers use to be ISO 18000-6 compliant, which is likely to happen some time in future. Therefore, a supplier embarking on Auto-ID deployment should make sure that the technology it has selected can provide an upgrade path, or understand the cost of a hard upgrade in case of incompatible systems.

The Role of Technology
The technology issues can be broken down into three areas: size, cost and accuracy. With technological advances, the size of the tag is becoming smaller and, as such, the possible types of applications are increasing. Tags that are smaller than 1 inch by 1 inch are now available. One drawback, however, is that the detection range of a tag deteriorates with a smaller antenna, going from several feet to several inches. But continuous advancement in this area promises significant improvement.

The second issue — cost — is a function of size, better manufacturing processes, and volume. Some companies are using processes such as fluidic assembly to make tags faster and cheaper. Additionally, as the tags are embedded in more objects, the resulting volumes are also expected to drive prices down from today's 50 cents to $1 per tag to only a few cents in future. The cheaper pricing is further likely to make the technology more attractive to retailers and their suppliers, many of whom deal with razor-thin margins on the products they sell.

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