Executive Memo: The O'RFID Factor

A "no spin" look at where radio frequency identification is headed.

[From Supply & Demand Chain Executive, December 2004/January 2005] The past year, 2004, began and ended with warnings from the analyst community about the dangers of buying into the "hype" surrounding RFID. In February META Group called upon decision-makers at companies affected by RFID mandates to not be seduced by the lure of low-cost tags because, the analyst firm argued, RFID does not lend itself to a "one-size-fits-all" approach. On the other side of 2004, a December report from ABI Research cautioned that RFID technology "has a long way to go to make a measurable difference within its adopters' supply chains."

Much of the RFID-related chatter in 2004 focused on how soon the new technology would replace the bar code. But lost in the all the spin swirling around RFID was any perspective on how companies with decades' worth of investments in bar code technology — and entire supply chains set up to accommodate the venerable UPC symbol — might actually incorporate radio frequency solutions into their IT infrastructure and, more importantly, into their supply chain processes. A few dissident voices, however, have been offering an alternative RFID vision, an auto-identification world in which bar code and RFID peacefully coexist.

Two of those voices belong to Armando Viteri and Nissim Ozer. Viteri is president of RF Code, a seven-year-old provider of RFID solutions, while Ozer is executive vice president and chief technology officer at the Mesa, Ariz.-based company. In spite of their own company's RFID focus, Viteri and Ozer are leading advocates of a "hybrid Auto-ID model" that encompasses bar codes, passive and active RFID technology, sensors and GPS-enabled tracking devices.

As these two see it, the bar code will survive for one simple reason: economics. "If you have a five-cent [RFID] tag — assuming that you can get the cost down to five cents — it would still not make sense to put that tag on a product that costs 29 cents," says Ozer. Instead, in the world according to Viteri and Ozer, the bar code (costing next to nothing) will remain, perhaps indefinitely, the principal identifier for most consumer goods at the item level. Cases of those items could be affixed with passive RFID tags, while containers filled with cases could have attached active tags and, when necessary, a sensor device (to monitor temperature or access, for instance). The trucks, railcars and ships that transport the containers would be trackable using GPS devices connected to carriers' information systems via satellite or cellular networks.

Using this "nesting" approach, CPG companies and retailers could track individual items in plants and stores using the bar code and scanning technology already installed, while manufacturers would track cases and containers of goods as they passed through choke points in the supply chain or in real time through their carriers' information systems while the goods are in transit. This approach would allow companies to (a) avoid read-accuracy issues with RFID and (b) add new layers of RFID-enabled technology over time for increasing control over their goods in motion.

Whence the focus on RFID as a bar code killer? Viteri suggests that the nickel tag has become an idée fixe in the supply chain space because of the MIT Auto-ID Center's emphasis on item-level tagging. "As the MIT group and, in turn, industries backed off that position of bar code being replaced by passive RFID, there really hasn't been a new message," Viteri says. "But I think that as people are gaining real deployment experience, they are coming back to the obvious conclusion, which is, it's a collection of technologies, not a single technology."