RFID--A New Technology Set to Explode? Part One: RFID Technology




RFID Technology

Supply chain technology has, for some time, been based on the traditional bar-code technology familiar to ordinary shoppers and consumers, but recently the software capability has been expanded to also use radio frequency identification (RFID) technology. While radio ID tag-enabled software is still just a miniscule part of total supply chain management (SCM) providers' revenues, more and more user companies and software vendors are adopting this technology (see SCE Leaders Partner To See Beyond Their Portfolios). This technology, which has been on almost everyone's lips lately, seems to be heading for the mainstream and boardroom priorities, almost directly from scientific labs—its making its way, of course, with a number of caveats due to the technology's current imperfection level.

RFID technology consists of tags or transponders, which transmit electronic product codes (EPCs) and communicate wirelessly to other devices over radio frequency (RF) waves. Attached to physical objects, including the actual product as well as the cartons, pallets and containers in which they are shipped, the tags should uniquely identify the items, as readers communicate with the tag via RF. In a distribution center (DC), once within range of a reader, the data will presumably be captured, accepted, and then executed against by a SCE solution.

Consequently, for retailers and other vertical industries, RFID tags potentially present enormous opportunities to improve supply chain operations, such as:

  • Reduced stock outs due to supplier vendor managed inventory (VMI) and/replenishment

  • Automated proof of delivery

  • Improved security of products

  • Warehouse labor reduction

  • Expedited cross docking

  • Improved physical counts and reconciliation

  • Improved work in process (WIP) inventory and aging/quality control

  • Improved returns processing and credit note handling

  • Complying to legal regulations for tracking and tracing

  • Increasing the speed within the supply chain

This is Part One of a two-part note.

Part Two will discuss early adopters, the challenges they face, and make user recommendations.

RFID Technology Pioneers

Against the backdrop of the ongoing RFID frenzy and the attempt of vendors to jump on the RFID bandwagon, there has naturally been a type of vendors' public relations (PR) war-of-words (as well as of true actions) in their zeal to portray themselves as an RFID thought leader of any sort. However, while customers should be encouraged by the apparent interest of vendors and their commendable moves, which speak volumes about the technology's prospects, customers should note that many vendors' PRs, after cutting through customary hyped-up rhetoric, merely have trial, pilot-stage projects; initial participation in standards-making councils; or laboratory-based simulations of real-life RFID-based scenarios.

SAP, as the recently proclaimed SCM leader in terms of SCM-attributable revenues, claims to have been the first vendor in the market to demonstrate how RFID technology can improve the SCM and enterprise asset management (EAM) operations in real-world operations. Namely, live projects with METRO Group and Procter & Gamble in early 2003 were far ahead of the rest of the SCM pack that was mainly still experimenting and pondering METRO Group and Procter & Gamble brought the technology and the related software to a further degree of stabilization. While those implementations have reached broad visibility throughout the SCM world, the implementation with Frankfurt Airport AG was also innovative, potentially producing the future direction on how assets can be maintained in distributed, "smart" environments.

In addition to its leading supply chain execution (SCE) market share, where Manhattan Associates seems to be spearheading the competition, would be its embracement of RFID technology in terms of the compliance issues. To that end, early in 2003, the vendor announced that it expanded its retail compliance guarantee for the top one hundred global retailers and the top one hundred US retailers to include any new and emerging RFID standards. Meanwhile, the company has also developed several related solutions including:

  • RFID in a Box: provides the necessary software, hardware, and implementation services needed to deploy RFID.

  • Integration Platform for RFID: eases implementation by providing a highly configurable implementation platform and eliminates much of the custom development typically required.

  • RFID-enabled SCE applications: capture and execute on information provided by RFID tags in warehouse and transportation environments.

As the business processes that support this new technology continue to evolve, Manhattan Associates remains committed to developing solutions and the associated domain expertise that will support RFID in its customers' distribution centers (DC) and in the overall retail supply chain.

Manhattan Associates is not the only SCE vendor doing something with regards to SCE. In early in 2002, RedPrairie (then called McHugh Software International, Inc.) announced at its 5th annual Industry Summit the formation of a Center of Excellence to explore the potential applications and benefits of employing RFID technology within consumer goods supply chains. Joining RedPrairie as founding members of the Center of Excellence were Intermec Technologies Corp., Unilever, Georgia-Pacific, Marconi InfoChain, and CHEP International. RedPrairie and the other participants then pledged to work together to define where, within the supply chain process, RFID will have the greatest benefit and will translate these benefits into increased functionality within SCE applications. To that end, the vendor has since conducted over a dozen of educational workshops on RFID around the US last fall and this spring, in addition to providing real-life RFID portal demonstrations at its well-attended booths at tradeshows.

Nonetheless, Manhattan Associates was the first pure-play SCE provider (given the overall enterprise applications leader, SAP, was one of the founders of the Auto ID Center) to join the former Auto-ID Center (now EPCglobal), a not-for-profit research organization headquartered at Massachusetts Institute of Technology (MIT), and which is designing the critical elements and creating global standards for the next generation bar code—called the EPC Network. Through this program, Manhattan Associates will continue to contribute to establishing a future standard where everyday objects with EPC tags can be identified anywhere automatically. The vendor's partnerships with Microsoft, IBM, Alien, Matrics, Printronics, Symbol, Zebra, Dell, HP, and Accenture should also allow for a comprehensive and relatively rapidly deployable RFID pilots and solutions. One should note though that meanwhile many other prominent vendors like RedPrairie have also become EPCglobal members and will sit on the same software, hardware, and user action groups, and will contribute at least equally to those standards.

The Auto-ID Center was established in October 1999 by The Gillette Company, Procter & Gamble and the Uniform Code Council (UCC). Today, more than eighty companies from around the world support the Center's work. The technology system in development at the EPCglobal could help businesses save billions of dollars in lost, stolen or wasted products. For example, EPC tags affixed to packaging could provide manufacturers, distributors, and retailers with the following benefits:

  • Product authenticity—allow distributors and retailers to confirm, with pinpoint accuracy, whether or not the goods on their shelves are authentic. Users will have instant access to information indicating precisely when, where, and by whom a product was made.

  • Product availability—manufacturers will have true "produce-to-demand" capability and will be able to eliminate excess inventory by drawing on the latest data.

  • Greater efficiencies—combining "produce-to-demand" capability, inventory reduction and balance plus reduction in manual stock keeping, the supply chain could recognize cost efficiencies in the range of hundreds of billions of dollars.

  • Enhanced recycling—by coding a package as cardboard, aluminum or plastic, the technology may greatly simplify and improve waste management and recycling efforts.

In a DC, once within range of a reader, the data will be supposedly captured, accepted, and then executed against by a SCE solution like a warehouse management systems (WMS) or a transportation management system (TMS) application suite. With RFID/WMS/TMS integration, it will be possible to have totally automated logistics tracking processes, enabling products to pass through the DC without manual checking and scanning. For example, when an incoming shipment is physically moved into the four walls of the DC, the facility's antennae should capture information from the embedded RFID tags. These antennae then pass the data onto the WMS application, which accepts the information and automatically receives the inventory, thereby eliminating the manual receiving processes of counting and scanning individual items, cartons, or pallets.

Real-time inventory control, tracking, and alerting capabilities would be other very important advantages of RFID. As tagged inventory goes through ports, terminals, freight forwarders, and actually into a DC, the RFID tag provides real-time visibility of an item's whereabouts at all times. With RFID, WMS/TMS suites will be able to track and maintain inventory with minimal supervision in an entire network of DCs in a fraction of the time currently required.

RedPrairie

As a follow up, mid- 2003, RedPrairie further articulated its strategy for helping customers implement and benefit from emerging RFID technology. As part of this strategy, RedPrairie announced availability of RFID Accelerator, a new application that will supposedly enable companies running virtually any distribution technology, including all versions of RedPrairie's DLx Warehouse and other packaged or legacy systems, to become compliant with the RFID information-sharing requirements of major retailers such as Wal-Mart and Target. RedPrairie's RFID strategy addresses the three issues companies are facing today as they plan for inevitable RFID adoption:

  1. how to comply with the dominating retailer's 2005 requirements,

  2. how to transition from current barcode environments, and

  3. how to move to the ultimate scan-free environments that will be possible as RFID technology matures.

Namely, the RFID Accelerator is designed to enable companies to meet the demands of the large retailers without replacing their existing infrastructure. The application provides agents to collect and verify RFID tag information, retrieve related inventory data, and pass this combined information to the retailers in advanced shipping notices (ASNs), which will provide the pallet and case RFID-based information that retailers Wal-Mart and Target will require. Moreover, because taking full advantage of RFID technology will entail a fundamental change to distribution operations, companies will need to transition to this stage over a period of time while continuing to leverage their existing investments in RF and barcode infrastructure. To facilitate this dual mode of operation, RedPrairie has integrated RFID functionality with traditional processing so that distribution operations are independent of the data capture source, which should enable customers to take early advantage of RFID benefits, such as increased inventory visibility and accuracy, reduced labor costs and faster cycle times, without disrupting existing operations.

Finally, as RFID technology matures, it will enable companies to fundamentally redefine distribution operations, which currently require manual scanning to be replaced by scan-free operations that query, collect, store, and transmit inventory information without human intervention. RedPrairie is working with some of its customers and the RFID Center of Excellence to define these new operational requirements and build support for them into its application suite. This, should have a positive impact on warehouse efficiency, labor productivity, transportation turnaround times, and retail in-stock levels.

For most companies, true value from the technology will only come when business applications, such as forecasting, planning or inventory management can reliably and intelligently use information emanating from RFID tags in at least near real-time. However, that will require sophisticated middleware that can translate RFID data into formats that applications can use, and also redesigned applications that will be able to handle the flood of data volumes and share that data with other applications.

Thus, at the end of 2003, RedPrairie announced it has built a fully functional, electronic product code or EPC, compliant RFID laboratory to test RFID technology in a real-world environment. The RFID Lab is driving customer pilot programs, enabling RedPrairie customers and prospects to research RFID tag placement and readability as they prepare for RFID compliance. In addition, using company-specific data and scenarios, the RFID Lab is helping companies determine how RFID will impact their supply chain and how they can achieve maximum value from RFID investments through supply chain process improvements. Possibly the first of a kind in the industry, RedPrairie has established an RFID test lab for clients to do product and environmental testing. The vendor has also been striving to fully integrate RFID processing into its SCE suite rather than just offer "in the box" starter kits, as many of its competitors.

Namely, given many still outstanding unknowns and hurdles to more commercial use of the RFID technology, the idea behind the lab is to help customers test a variety of hardware solutions, tag configurations, and products to understand how the technology applies to their business requirements. RedPrairie's RFID Accelerator, the afore-mentioned middleware compliance application, is at the heart of the RFID Lab, integrating RFID scanned information with WMS data to produce the ASN and shipping documents required by Wal-Mart and the US Department of Defense (DoD). It accepts scanned data from multiple tag manufacturers including, among others: Alien, Matrics, and Intermec. RedPrairie has also developed a mobile lab for client pilot studies and industry events. Additionally, the vendor has entered into a valued-added reseller (VAR) agreement with Metrics to integrate and sell their RFID readers and tags.

Last but not least, on March 30, RedPrairie and RF Code, a world leader in Auto-ID data collection middleware and Active RFID technology systems, announced a Strategic Partnership Agreement. The partnership will enable RedPrairie to introduce RFID-enabled supply chain applications leveraging RF Code's middleware platform and Active RFID systems. In other words, RedPrairie will employ RF Code's TAVIS technology to enable long-range tracking of mobile assets across the supply chain to streamline and secure supply chain processes.

According to the agreement, RedPrairie will become a VAR for RF Code's data collection middleware and active RFID technology. RedPrairie will integrate RF Code's TAVIS data collection system, RFID products and other auto-ID devices to enhance its data capture capabilities for transportation and yard management, labor management, supply chain security, and mobile asset management. The combined applications will enable customers to use active RFID technology to more accurately identify, manage, and track physical assets, information and personnel. This partnership is touted as significant in that it takes RedPrairie beyond its tradition supply chain execution focus while introducing RF Code to RedPrairie's blue-chip customer base.

HighJump

HighJump, now part of 3M, owing to its origin as Data Collection Systems Inc. (DCSI), a provider of bar-code data-collection systems to track labor costs and inventories in manufacturing plants and warehouses, has not been sitting still either. Namely, in November, HighJump announced that it has RFID-enabled its broad SCE offering, Supply Chain Advantage. With enhancements to existing solutions and several new applications, the vendor now claims to provide a broad and flexible collection of RFID-enabled solutions for warehouse management, visibility and tracking, shop floor data collection, and RFID compliance. This is made possible with HighJump's RFID Configurator, a Wizard-like application that should empower user companies to quickly configure specific processes to utilize RFID, bar codes or both, depending on their individual customer requirements, and at multiple points within the supply chain through the following HighJump solutions:

  • Warehouse Advantage: HighJump has extended its warehouse management solution to include RFID compliance as well as workflows that support RFID, so that all HighJump customers now have the option of selecting which activities they want to perform with RFID, bar codes or both.

  • Compliance Advantage: This solution allows suppliers to relatively quickly and easily achieve RFID compliance as mandated by leading retailers such as Wal-Mart as well as the DoD, and it can also be adapted to meet evolving RFID standards and future mandates.

  • Tracking Advantage: This solution provides tracking for returnable containers and other high-value assets in closed-loop environments. In addition to providing hands-free recognition of inbound and outbound containers, this application aims at ensuring total management and visibility of these containers throughout the supply chain.

  • Data Collection Advantage: This solution should enable manufacturers to track WIP and finished goods with RFID technology, which is especially important to the manufacturers that track items in lots or by serial number.

With the introduction of RFID Configurator, HighJump claims to offer a unique and powerful approach to incorporating RFID into existing supply chain processes, as it should allow customers to effectively position their operations to meet RFID mandates from their mighty customers, while preparing for additional RFID utilization and compliance requirements as they evolve. Like the earlier mentioned RedPrairie's offering, this approach too fully supports the co-existence of bar codes and RFID that most industry experts predict will be necessary for many years. For example, because configuration capabilities are available at the trading partner level, truck loading for Wal-Mart could be configured to use RFID processing while bar codes are used for other retail customers. This can be accomplished on a stand-alone basis or by adopting integrated solutions that link the information flow from suppliers all the way to customers.

This concludes Part One of a two-part note.

Part Two will discuss early adopters, the challenges they face, and make user recommendations.

 
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