Craig Lennard

In 2004, the analyst house Yankee Group predicted that by 2007 the expanding RFID industry would affect four million jobs in the US alone. Other analysts have estimated that around £2.3 billion would be spent on RFID technologies by 2008. The US Food and Drug Administration (FDA) predicted that most cases and pallets of prescription drugs would contain RFID tags by 2007, while our own study suggested that big European retailers such as Tesco in Britain and Mwwetro in Germany would have completed large-scale RFID implementations by 2007.

Two barriers have stood in the way of progress: the applications intended for RFID, and the standards that underpin it. However, these problems can be successfully negotiated and the logistics industry has made significant progress in bringing RFID to the point where the technology is ready for mass deployment.

The tower of Babel: RFID standards
There is no emerging standard that has yet become as universal as the barcode that RFID is often touted as replacing. The ratification at the end of 2004 of a global ‘Gen2’ standard for UHF RFID tags defined a much-needed common language for the industry, but much later than expected.

Even with the new standard in place, regional and industry-specific variations have meant that getting all RFID devices to communicate with each other has proved very difficult. In 2006 the European Union specified that member countries should make UHF the spectrum of choice for RFID, but its definition of UHF is different from the one in America, which in turn differs from the standard in Japan.

Consequently a global RFID solution that works anywhere in the world is extremely difficult to develop. Furthermore, RFID, like any other technology, is subject to the laws of physics. Metals and liquids can cause interference that prevents tags from being read properly in some situations.

Show me the ROI: RFID business cases and applications
A fundamental obstacle to the development of RFID is the lack of clear business cases and applications. For large retailers or organisations that have to coordinate the movement of huge amounts of goods, there is a very obvious and immediate benefit of improved visibility that could significantly increase sales.

But for suppliers, the benefits are less clear-cut. Facing already thin profit margins, supplier companies have been hesitant to make the large capital investment needed (and this is despite the drastic drop in the cost of RFID tags). This is not just a cost in terms of tags and readers. The storage of data associated with tracking items will require many terabytes of storage.

So-called edgeware to filtering and categorise RFID data is also needed, in order to separate and deliver useful information from the bulk of data. It seems unlikely that suppliers will be able to pass those costs on to the retailers and their customers – until that happens, suppliers will oppose any RFID tagging at item level.

Consequently, within logistics and many supplier organisations, the attitude that RFI is simply an expensive barcode persists and, as with spending on security, businesses are reluctant to commit unless compelled to do so. A recent report from IDC found that while the hype around RFID continues, there are also “more visible negative comments” as companies try RFID without clear applications or business cases, often simply to meet the minimum requirements of their customers.

Until a set of clear benefits can be demonstrated, open-loop RFID applications, in which several organisations use the technology to coordinate their operations, are unlikely to have the support of these suppliers. More credible business cases are emerging for ‘closed-loop’ RFID, in which a company uses the technology to track goods within its own warehouses and factories. These applications are smaller in scale and, because they deal with only one company, they can be more accurately specified and more tightly controlled.

Catalysts for change: RFID in the future
So what will the future bring for RFID and, crucially, at what speed? It is clear that the catalyst to drive RFID uptake and use will have to come from the retail sector and that it is likely that this will then drive the logistics industry uptake. How will this work? Firstly, retailers will need to be assured that RFID can work with 100 per cent accuracy and reliability beyond the case / pallet level and deliver the benefits of RFID at item level throughout the supply chain.

The promise of these benefits will be enough for retailers to mandate the use of RFID and to interact with their logistics partners to ensure that early pilots and first stages of adoption deliver results. The item-level use of RFID will evolve from there, probably requiring a further investment in infrastructure and improved security as well.

There is already evidence that this partnership approach will develop as Walmart is now getting more involved with the RFID implementations of its partners to ensure they have an incentive to adopt the technology.

In these open-loop applications, the focus is already beginning to shift beyond simple stocktaking and inventory control. RFID tags can, for example, be connected to external sensors in order to relay valuable information about sensitive cargo in transit, such as temperature and humidity. This provides not only visibility to the retailer but advance information to the logistics provider, to ensure the service they are offering to both the supplier and retailer is up to scratch. Other sensors that have been married with this active RFID include humidity, shock/vibration, light, radiation, temperature, and atmospherics like ethylene.

Within logistics, RFID has begun to show what it can do over and above existing barcode technology. RFID tags are more resilient to dirt and there have been some developments in moving away from the necessity of line-of-sight for readers. Both of these developments would help make RFID more attractive to suppliers as they place fewer operational demands on them.

However, the big possibility for bringing suppliers into the RFID supporters’ camp is that RFID enables the data to be modified. The ability to update and change RFID data offers a range of benefits directly to the suppliers involved in the chain of getting their produce to retailers and consumers.

Firstly, there is the impending legal compulsion for traceability – especially important for suppliers of food or perishable goods. Being able to track and trace goods is one thing, but RFID would enable suppliers to identify who had access to what goods, where and when. In the case of a food tampering incident this could possibly save a supplier from severe financial penalties and loss of business.

Secondly, it means more accurate pricing for the supplier. RFID tags can carry pricing information for premium variations on a product and the automation would remove the margin of human error that often sees premium products sold at a lower price, especially in mixed pallets / cages.

RFID can also deliver maximum process efficiency by reducing the need for manual labour in warehouse processes. RFID has also been used to reduce both theft and counterfeiting goods within the supply chain and one supplier has used the technology to move to a more efficient rolling service schedule delivering large annual savings.

Lastly, supplier organisations and those logistics firms they work with need to address RFID now, in order to maximise the potential beneficial changes to processes once RFID has been adopted and mandated by their largest retail clients.

RFID analyst Robert Baird and Co. predicts a US$8 billion market for RFID by 2010, with the services to make RFID a success second only to the value of the tags themselves. In order for this to be realised, logistics and supplier companies will have to be brought on board as strong supporters of RFID, accelerating the slow dawn of the technology. Until then, many organisations will continue to monitor the situation and deploy small, tactical pilots of RFID, delivering limited returns but falling short of the real change the technology can bring.

Craig Lennard is the managing director, industry, distribution and transportation, at Logica.

  HOT PRODUCTS

Toyota Material Handling Australia Toyota Material Handling Australia (TMHA) is poised to launch a new range of 1.5 to 3 tonne rated capacity at 500mm load centre four-wheel counter-balance battery electric forklifts.  more»

Internal Combustion Pneumatic Tyres Forklifts - 4.0 - 5.5 Tonnes Mitsubishi GRENDIA Series Forklift, the Next generation, higher performance machine Outstanding performance...exceptional value for money.  more»

Involved in Logistics or Supply Chain Management? If you are involved in logistics or supply chain management, and looking to advance your career, this internationally recognised qualification can provide you with the relevant skills for your future.  more»

Future Proof your Logistics Career Today What does the future hold?  more»

Exquisitely Orchestrated Execution Infor10 Supply Chain Execution – a single solution with one version of the truth so that everyone is moving in the same direction at the same time.  more»

Oracle Live Webcast: Effective HR in Manufacturing Turn Strategy into Action in Manufacturing with Effective HR  more»

2012 National Challenge - Start Date: 16th APRIL, 2012 The Fresh Connection is an advanced web-based business simulation that challenges participants to work together as a team to demonstrate and improve their knowledge of the Value Chain.  more»

100% Error-Free Picking with KiSoft Vision KiSoft Vision combined with the corresponding processes, ensures 100% error-free order picking. By using augmented reality technology KiSoft Vision visualizes information at the exact time and location the operator needs it, through a head mounted display  more»

Click here to view more Hot Products

Looking for a particular product?   Advanced Search.

  T&L PUBLICATIONS

	MHD Supply Chain Solutions Has been the industry leader for more than 30 years. It is the reference guide for professionals striving for effective end-to-end supply chain management...
	Diesel A bi-monthly magazine that has shaken up the Australian road transport magazine sector with sharp news stories and bold feature articles on the diverse character of the Australian trucking market...