As Hype Becomes Reality, a Radio Frequency Identification Ecosystem Emerges Part Three: Radio Frequency Identification Opportunities Abound and Summary

  • Written By: Michael Bittner
  • Published: January 25 2006



Radio Frequency Identification Opportunities to Date

As the radio frequency (RFID) ecosystem continues to evolve, so will the opportunities for innovative applications of RFID technology that will have a positive impact on our everyday lives. The decreasing costs of tags, transponders, antennae, and sensory network equipment will also have a profound impact on the potentially ubiquitous nature of RFID technology. As far as implementation costs are concerned, practice makes perfect; so as more and more RFID implementations are completed by experienced systems integrators and as the ecosystem of service providers grows, competition should drive implementation costs downward. In addition, while maintenance contracts for RFID services can generate substantial service revenues, the cost of supporting such contracts should also decrease. Today, most RFID implementations are in some fashion "custom" projects, but the degree of customization should diminish over time, thus reducing costs.

Out of the gate, we have witnessed the early adoption of RFID technology primarily in five lines of business: manufacturing, distribution and warehousing, retail, health care, and government. An early Massachusetts Institute of Technology (MIT) study of RFID innovation demonstrates this, as indicated in the following breakdown of end user respondents by primary line of business and by application (see table 1 and table 2).

Table 1. RFID User Respondents by Line of Business

Line of Business Percent
Manufacturing 32.90
Distribution and warehousing 13.30
Retail 11.80
Government 6.60
Health Care 6.60
Professional services 5.30
Consulting 3.90
Transportation 3.90
Commercial services 2.60
Education 2.50
Mail or parcel delivery 1.30
Other 9.20

Table 2. RFID User Respondents by Application

Application Percent
Supply chain management 91.10
Asset tracking 82.30
Transportation 58.80
Security and access control 44.10
Point of sale 41.20
Retail item tracking 25.40
Miscellaneous 49.90

Multiple responses per respondent

It is worth noting that since this analysis was conducted, the RFID systems adopted by transportation, distribution, and warehousing organizations appear to be using higher cost RFID systems. These systems frequently incorporate higher frequency, active, read-write tags and associated hardware to support applications such as materials management, yard management, rail car identification, and container tracking. Technology Evaluation Centers Inc. (TEC) expects considerable change in these metrics over time as new industries put RFID to use.

In general, increased usage of RFID technology should be expected as enterprises invest in supply chain management (SCM) and logistics applications to automate processes, such as automobile assembly and final product distribution. There is clearly an upward trend regarding the number of surveyed enterprises reporting current and active evaluation of RFID applications and projects. Such future applications of RFID technology will be influenced by the nature of the object needing identification and the environment in which the object resides. In this regard, various frequency ranges are available for different RFID applications. For example, high frequency (13.56 MHz) hardware is adoptable worldwide and is more tolerant of harsh environments, so supply chain applications are trending toward smart labels at high frequency.

Current and Future RFID Opportunities

If variety is the spice of life, there will be no lack of spice when it comes to the innovative adoption of RFID technology by industries. Analysts expect that we will routinely find RFID tags associated with common products in our homes and places of work in a just few short years. Horizontal applications areas include the following.

  • Improved manufacturing processes
  • Supply chain performance
  • Asset tracking and status change
  • Product safety and serviceability
  • Security and anti-counterfeiting
  • Quality control
  • Access control

There is also a great variety of vertical RFID applications. The following is a sampling of the various applications of RFID technology across different verticals. The list is based on current RFID projects, as well as on responses to recent analyst firm surveys regarding future RFID usage.

Consumer Packaged Goods Applications

  • Tracking of product through the supply chain from the manufacturer, through distribution and the retailer stock room, to the sales floor to improve supply chain visibility

  • Supply chain efficiency improvements that streamline move and shipment activities

  • Compliance with retailer mandates, in many cases via a "slap-and-ship" approach

  • Anti-counterfeiting protection, along with supply chain visibility

  • Inventory control applications that improve the accuracy and timeliness of material transactions within a distribution environment

Examples

  • Gillette tracking of product sold through Wal-Mart

  • Hewlett Packard tracking of product sold through Wal-Mart

  • Thomasville Furniture retailer (Wal-Mart and Target) compliance

  • Goldwin Sportswear (a Japanese company) program that not only provides better visibility into the supply chain for apparel products that are manufactured in China and distributed in Europe, but also provides a means of verifying authenticity to deter counterfeiters

  • Unilever smart pallet system that improves inventory control within warehousing and distribution operations

Retail Applications

  • Supply chain visibility and improved transaction accuracy and efficiency that enable smoother receiving, reduced shipping errors, and reduced inventories

  • Inventory control applications that employ smart shelves to monitor the whereabouts of items such as digital versatile discs (DVD) within a retail store

  • Improved returns management that enables identification of specific item purchased (or not) at a specific price

  • Retail visibility at the shelf level that reduces rates of shelf stock outs

  • Potential for streamlined self-checkout when RFID tagging becomes predominant at the item level

Examples

  • Wal-Mart and Target programs to deploy RFID, which include mandates to suppliers

  • Tesco and Metro RFID programs

  • Best Buy program to deploy RFID

  • Piggly Wiggly program to integrate RFID into its supply chain

  • The Gap pilot program to boost merchandise sales by improving in-stock through the use of automated restock notifications

Automotive Applications

  • Tagging of aftermarket parts for retailer compliance, potentially increasing visibility through the supply chain

  • Inventory control applications (35 percent of survey respondents used RFID for material management)

  • Tire manufacturer compliance with Transportation Recall Enhancement, Accountability, and Documentation (TREAD) Act mandates to support recalls

  • Manufacturing efficiency improvement that is used to identify the next manufacturing process operation (such as "paint this vehicle forest green")

  • Tracking of finished goods to improve visibility and reduce shrinkage

  • Anti-theft immobilization integral to key operation

  • Asset tracking—tool crib check-in, check-out automation, and tool tracking

Examples

  • Goodyear RFID tagging of individual tires to comply with the TREAD Act and Wal-Mart mandates

  • Goodyear's work on a "smart tire" RFID sensor to alert drivers to low tire pressure

  • Daimler Chrysler's RFID routing ticket

  • Ford Motor Co. deployment of an RFID yard system and vehicle track and management system

Pharmaceutical Applications

  • Anti-counterfeit solution that assures the authenticity of pharmaceutical products through the supply chain to the pharmacy

  • Compliance with current and anticipated pedigree mandates without the need to file reams of paper

  • Product quality assurance through the supply chain by monitoring storage conditions for temperature sensitive products

  • Improved inventory management by facilitating individualized expiration date tracking

  • Improved recalls management by better tracking the specific locations of all product subject to recall

  • Reduction in product diversion by tracking cross-market movement of drug shipments from low price to high price regions

Examples

  • Pfizer's Viagra tagging program to fight counterfeiting

  • Purdue Pharma's tagging of bottles of the painkiller OxyContin to fight counterfeiting

  • US-based wholesaler HD Smith's program to track the distribution of controlled substances

Logistics Applications

  • Inventory visibility application that enables rapid and accurate location of specific vehicles within a large terminal facility, thus contributing to improved throughput, quality, and customer service

  • Supply chain visibility applications, such as tracking trailers

  • RFID capabilities for third-party logistics companies, which are needed in order for the increasing numbers of manufacturers who outsource their logistics operations to meet customer requirements

Examples

  • Broekman Group deployment of WhereNet system to track vehicles at the Port of Rotterdam

  • UPS use of RFID tags to track trailers

Summary

TEC will continue to follow the RFID saga and the many solution providers who participate in the RFID ecosystem over the next few years as the RFID technology "hype" continues to become reality. Considerable mainstream and industry media attention has been dedicated to RFID technology over the last couple of years, with mostly positive speculation on a new world order when it comes to SCM. The reality, however, is that suppliers of RFID technology have found it difficult to articulate a business case and early adopters have spent the minimum amounts possible to meet retailer mandates. RFID technology adoption is by no means slowing down, but in 20052006 the hype will dissipate and a more reasonable pace for adoption will be set, especially across the manufacturing and distribution sectors.

In order for RFID to achieve its full potential, RFID technology players must close the gap between the vision of RFID and the current realities of RFID. That vision in a supply chain context includes the identification of objects or products at the lowest saleable unit level, the visibility of said unit across the entire supply chain, and process and productivity gains in the manufacturing and distribution of that product. The reality of today's RFID world is characterized by the tagging of products at the pallet or case level (not the unit level, for the most part), limitations on the existing supply chain infrastructure, a lack of global data standards, read errors and equipment failures, and environmental interference.

From a supply chain perspective, the real challenge of RFID technology and ultimately the true value of its adoption lie in the ability to transform RFID data into specific knowledge that leads to an actionable and intelligent response within the interdependent supply network, a response that will impact a company's decision making in a positive way. Otherwise, all we have is a huge repository of data that can congest the interdependent supply network and cause more confusion than vision.

 
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