Cutter says radio frequency identification may come sooner than previously thought, offers steps to guide decision-making process
Arlington, MA September 3, 2003 The lack of accurate and real-time data about the way in which products flow through supply chains makes it difficult for IT executives to support corporate strategies and operations as efficiently and effectively as they otherwise might, according to an Executive Update recently released by the Cutter Consortium.
However, the analyst firm said, radio frequency identification (RFID) picks up where bar codes leave off by promising exhaustive control of supply chain data, streamlining of product delivery and pinpointing of product planning.
Robert Gardner, a Cutter Consortium senior consultant, remarked, "RFID uses the new Electronic Product Code (EPC), which includes a unique serial number. It also allows you to read those numbers with a reader that is not dependent on line-of-sight, and you can scan multiple items virtually simultaneously. The key to such magic is a minuscule chip with an antenna and circuitry that responds to select radio frequencies, which can be attached, or tagged, to almost any 'thing'. We are truly now a systems society, and we are operationalizing 'systems thinking' around the globe."
Gardner continued, saying that this chip and its associated identification and location information, coupled with the coordinating power of the Internet and the appropriate supply chain analysis software, will lead to what RFID experts call an "Internet of Things." He added that such pervasive use of RFIDs may become a reality sooner than once thought; that is, once the unit costs of volume tag production render RFID economical for tagging an item of interest, whether it is a new necktie or a bottle of shampoo.
Complete supply chain visibility is possible when every item has the equivalent of an Internet provider (IP) address. Some of the benefits of this include a reduction in stockouts, continued movement toward real-time point-of-sale information, higher inventory turns, optimized inventory from raw materials through finished goods, counterfeit control, improved productivity, and automated shipping/picking/receiving and checkout.
Gardner commented: "As with most emerging technologies, technical and organizational issues require resolution before RFID can achieve widespread adoption." He said there are also collateral considerations, such as how is it done now? How will bar code technology respond to the RFID challenge? How will RFID affect the broader collection of players (the economic "spillover" problem), such as proponents of consumer privacy?
Gardner said most analysts agree that RFID will come to pass, probably at a pace that allows bugs to be shaken out while it's still on a small scale. "RFID likely will reach a considerable scale one way or another before a final fork in the road deciding its mass adoption," he said.
Steps Gardner suggests companies take to move toward the RFID decision point include:
1. Conduct a business study of RFID for your organization.
2. Craft an implementation plan, beginning with immediate collaborative partners.
3. Launch a pilot to test RFID and include business partners.
4. Steadily scale up RFID as it proves its worthiness.
"This recipe is simple" said Gardner, "but it could become expensive if RFID reaches critical mass before you're ready to adopt it. In that case, companies will need to implement on the fly. By failing to invest in RFID early, you risk being outdistanced by your competitors and of holding up your supply chain partners."