Analyst Perspective: RFID and the Agile Enterprise

Radio frequency technologies are just one piece of the puzzle in building agility into your company's supply chain

Radio frequency technologies are just one piece of the puzzle in building agility into your company's supply chain

Natick, MA  August 19, 2005  Relative to radio frequency identification (RFID), enterprise agility is a requirement. Early RFID pilots have shown that systems must be able to scale up in order to handle increased data volume and manage devices. RFID systems will be linked to core user applications and business processes. The real returns on investment (ROI) are expected to be realized when users seamlessly integrate RFID with existing enterprise applications tied to bar code, wireless local-area networks (WLANs), enterprise resource planning (ERP), and supply chain execution (SCE) systems.

As users move closer to deploying the technology on a wider scale, networking and integrating RFID with enterprise backend systems is central to the creation of an agile enterprise. On one hand, the successful implementation of an return on investment (ROI)-rich RFID solution requires the enterprise to be agile; and, on the other, an agile enterprise requires an RFID deployment to be ROI-rich.

RFID holds the promise of revolutionizing global supply chain operations and the way many companies do business. The far-reaching potential benefits range from reducing manual operations associated with data collection to cutting down shrink and counterfeiting. While those needing to comply with mandates or willing to invest in RFID are moving ahead, they are still investigating the real value and ROI RFID can bring to their enterprise.

The reality of supply chain RFID today is that users are in a discovery process, determining how RFID fits into their enterprise and assessing the value proposition. Integrating RFID with backend systems and business processes is where cost and complexity sharply increase. Companies must link RFID systems to their core supply chain applications. They must fit into it; and, fitting into it is the key challenge. As users migrate from compliance to internal supply chain improvements to external supply chain improvements, the real value is when users can integrate RFID data into their back-office applications. That is a major investment  but one that may yield major return possibilities.

Networking Considerations

The most overwhelming stage in wider RFID deployment is building the networking infrastructure. RFID adds another wireless data stream to networks that are already carrying data from laptops, mobile phones, PDAs and other devices. Many anticipate that current networks and their data pipes are not wide enough to handle the amount of incoming RFID data. The key to enabling businesses today is proper networking.

According to VDC's RFID research, primary user considerations around proper RFID networking include the following:

  • RFID applications require a networking solution that provides reliable connectivity. Proper connectivity for an RFID system is two-fold: between (1) the hundreds of readers and the event manager and (2) between the event manager and enterprise applications. Regardless of data volume, data traffic must not be slowed or stopped when using RFID. Data needs to be delivered reliably and securely. Loss of network connectivity would be highly disruptive in many RFID applications, especially within an open-loop supply chain;

  • Systems must be based on globally harmonized standards to enable higher security. With the deployment of standards-compliant solutions, network vendors can add RFID content intelligence to routing and switching products. This will make data more secure and enable systems to better route information across a network. The result is "load balancing" across servers to provide for increased reliability and security. Additional reader and reader-to-network standards are a near-term market requirement; and,

  • RFID and WLANs are highly synergistic and compatible. Whether RFID readers are stationary, mobile, or embedded in other devices, they can leverage the attributes of WLANs. This may be in the form of distributed access points (APs); wireless mesh networks that do not require Ethernet connectivity to each AP; or Power over Ethernet (PoE) wired connectivity to the network. WLANs do not need to be dedicated to the RFID application, but are expected to support a range of data and voice applications. Users would like to leverage existing WLAN systems as they are quality of service enabled, secure, centrally managed and scalable.
The Influx of Data

Network equipment vendors, hardware suppliers, integrators and enterprise users are all voicing concerns that RFID threatens to overwhelm networks with data. To cut down on network traffic and reduce the load on enterprise applications (which run on costly servers) it is important to move data processing to the edge of the network. The philosophy is that the more processing of RFID data you move down the line to lower-cost devices, the better off the user will be.

Data management is hardly a new issue. We have seen it with UPC bar codes and other automatic identification input technologies. Data must be managed, collected, filtered, cleansed and routed. RFID presents a similar set of challenges and opportunities, including determining what data to capture; how often to collect it; where to direct the data; and resolving cross-reference issues. However, in contrast to other technologies and applications, RFID will require data capture and management processes to handle more information at greater speeds.

Furthermore, moving data and establishing business rules between enterprise systems are nothing new. But RFID is expected to place more strain on enterprise system capabilities. Users must evaluate how current systems will handle large transaction flows in a reliable fashion at a higher rate. Users will also need to accurately determine how well current systems are integrated with one another because points at which enterprise systems link are the most vulnerable points in transaction flows.

Creating the Agile Enterprise

So, how do users create an agile enterprise using RFID? The key is to be a sophisticated customer that can leverage lessons learned through the integration of other automatic identification technologies  such as bar codes, passive RFID, active RFID and global positioning systems (GPS)  into enterprise systems. The challenges faced by customers implementing RFID solutions are similar to those found in mobile and remote data collection applications, including the need for continuously available access to information, integration of a variety of data sources, and remotely managing data and devices.

For example, bar code-based AIDC systems in the past were standalone, creating a user's first network environment. Next came wireless LANs. These, too, were standalone systems that were not integrated into an enterprise network. This proved cumbersome and challenging to users struggling to establish a seamlessly integrated IT infrastructure. The market is learning from those experiences and new ones with RFID. It is not only about RFID tags, the challenges inherent to RF as a technology, and the volume of data that is a by-product of RF tagging  it is about the sophisticated customer.

Although it has gotten all the hype, RFID is but one piece of the enterprise puzzle. It is just one component of a fully automated supply chain. Wireless technologies other than RFID can also have a positive bottom-line impact on supply chain management. RFID will not exist as an island. As noted, the enterprise will support other technologies such as Wi-Fi, WLAN, PDAs, cell phones and electronic sensors. The reality is that the combination of these devices will bring the most value to users. While RFID works well in a defined space, such as a port, warehouse or distribution center, it is unable to track items moving out of range. Users are looking to get a comprehensive view of how all their operations are interconnected. The key challenge is how to remotely manage the disparate devices and systems and network them together to create an agile enterprise.

Vendor Approaches

From traditional players to recent start-ups, network vendors are aggressively developing RFID solutions that speak to the agile enterprise concept. Much like the user community, network vendors are becoming more sophisticated. Network vendors contend that while current RFID systems work well for small pilot tests and limited deployments, they cannot be effectively scaled to the enterprise level unless RFID hardware and software can be easily and centrally managed. Regardless of the application, RFID cannot be a special, custom-developed solution. It must be something that fits into the corporate enterprise network.

Although reader-to-network and RFID data access standards do not yet exist, network vendors are leveraging their expertise and experiences with standard-based elements of network design in the RFID market. For example, Reva Systems recently announced the Tag Acquisition Network (TAN), an open architecture built on standardized interfaces between tags, readers, and application software. As reader and data access standards emerge, this architecture is expected to enable users to scale RFID systems more easily.

TAN would link into an enterprise's wired or wireless LAN and individual readers would be administered through an enterprise network manager system or assigned IP addresses (similar to the management of printers and other AIDC devices today). A reader-to-network standard interface would allow a user to remove, add, or troubleshoot problems with remote devices through centralized server software or a piece of equipment such as a router. As a result, data are sent to applications without requiring that those applications be a part of the middleware.

In addition, Reva has also drafted and submitted a protocol called Simple Lightweight RFID Reader Protocol (SLRRP) to EPCglobal and the Internet Engineering Task Force (IETF). SLRRP defines how readers would convey configuration, status, control and transponder data between readers and reader network device managers in an IP-based network. Meanwhile, EPCglobal is working on RP1.0 (Reader Protocol 1.0) which is an application-to-reader interface designed for readers directly tied to a server rather than a network.

At the end of the day, networking companies should care about RFID because the opportunity is real and significant. But, more importantly, RFID network challenges are real, loom large, and require their domain experts to deliver solutions that enable seamless integration within an enterprise. Building an agile enterprise is not an easy undertaking, but a necessary one as users look to gain the highest return on investment and lowest total cost of ownership when deploying RFID across the enterprise.

To view the proposal for VDC's upcoming RFID Business Planning Service, go to

Venture Development Corporation (VDC) is an independent technology market research and strategy consulting firm that specializes in a number of retail automation, RFID, AIDC, embedded, component, industrial, and defense markets. VDC provides support in refining, building and creating solutions, strategies and go-to-market plans for RFID.

Additional Articles of Interest

 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. Read more in the article "Time for RFID: Applying RFID in the Supply Chain."

 For a contrary view of the future of the RFID market, see the article "The O'RFID Factor: A 'No Spin' Look at Where Radio Frequency Identification Is Headed," in the October/November 2004 issue of Supply & Demand Chain Executive.

 For more information on trends relating to radio frequency identification (RFID), follow this link for an extensive listing of articles, featuring the latest research findings on the RFID, including adoption, return on investment and barriers to implementation.