Martin Brewer

Director of Technical Strategy

Wavelink Corporation

We have been here before

Technology offering improved efficiency seems to always be accompanied by a number of headaches. For example, when the wireless local area network (WLAN) standard IEEE 802.11 (commonly known as WiFi) was introduced, it was widely accepted in the supply chain but lacked vendor interoperability and security, which hindered broad adoption. While most of the 802.11 headaches have been remedied and the technology has become widely adopted, the wireless industry now faces the opportunities and challenges of a new technology which promises to improve efficiency: RFID.

The state of RFID today

RFID, specifically EPC RFID, is the technology that advertises efficiency gains and greater accuracy when compared with bar codes and manual data entry. While RFID has been around for several years, until relatively recently, the market hasn't been adequately satisfied with existing RFID technology to support broad adoption.

Specifically, there has not been agreement on areas such as: which data should go into the RFID tag; which air interface should be used to talk to the RFID tag; and what frequency the tags should use. Over time, some of these facets of RFID technology have gained greater momentum than others. Whereas RFID was once a technology with three primary operating bands, the choice (for EPC) has now narrowed to one interoperable standard running in the 900 MHz band (860-960 MHz globally). In fact, EPC Global's new "Generation 2" is now making its way into the broad market of RFID readers and tags.

However, additional issues remain, including practical considerations such as where the tags are positioned in relation to the reader, and  what kind of antenna should be used to yield the highest read rates. While it is likely these technical questions will get addressed more precisely in the near future, one of the primary issues that will affect the adoption of RFID is whether the technology, actually provides a return-on-investment (ROI) to those who implement it.

A paper exercise on RFID ROI

Imagine that a large retailer has successfully implemented an RFID network and has insisted that all of its suppliers tag their pallets and cases with RFID tags. When pallets of product arrive at the retailer's distribution center from suppliers, RFID tags enable the product to be correlated according to when received (as stated in the Advanced Ship Notification), and the quantity of the order to be verified before it is placed on shelves in the warehouse. Once the product is on the warehouse shelves, the retailer can easily build separate store-bound pallets with target location input into the RFID tags. Additionally, the retailer can verify through the RFID tag that the store-bound shipment has actually left the warehouse,

Initially, this provides an immediate, positive return on investment. On paper, a business can largely reduce the check-in and check-out times for all products. While small when taken alone, these cost savings accumulate together over time into real ROI.

RFID ROI -- good, but not perfect

While RFID does reduce costs, it also has flaws that can diminish ultimate ROI expectations.

While mortality rates for RFID tags are getting lower, there is no RFID tag that's guaranteed to make it from the reel, to the carton, through the supply chain and on to the final destination completely intact. In these cases, where the RFID tag fails, there needs to be "Plan B": that's where bar code backup comes in. When considering the ROI of implementing RFID, do not consider a perfect situation - remember that for at least some of the time a company's staff will be performing the effort for "exceptions handling" and will likely continue to use bar codes for the foreseeable future.

Bar codes and RFID: A match that will last

In reality, RFID should coexist with, not replace, bar codes.

Bar codes, for all of their lack of sophistication when compared to the high-tech RFID alternative, have one big advantage. They are practically free -- the cost of a bar code is in the ink and label. Bar codes will always be cheaper than RFID tags and the industry should expect bar codes to continue being used where RFID chips are simply too expensive. For the foreseeable future, expect bar codes and RFID tags to work hand-in-hand. 

ROI where you weren't looking for it

Despite the continuing need for bar code and the occasional flaws of RFID, the technology has a lot of promise. RFID offers ROI gains that cannot be attained through bar code alone.

Let's say a retailer sends an extra pallet of Singing Santas to an outlet that can't absorb the extra product. The outlet can't send them back to the distribution warehouse (where it may be delivered to the right location), because the delivery truck is headed to two other outlets before returning to the warehouse -- the day after Christmas.  The Singing Santas languish in the warehouse and are sold at a bargain-basement price to shoppers after the holidays. If an RFID system had been in place, the entire scenario would have been avoided at the warehouse because the extra pallet wouldn't have made it onto the wrong delivery truck in the first place. So, although few folks would install a world-class RFID system just for this issue, by introducing more checks and measures in the supply chain, including RFID on warehouse dock doors and truck doors, savings from costly mistakes like this one can be quickly realized.

Choosing an RFID partner

Once a company has completed its initial RFID ROI analysis and considered the full breadth of opportunities and challenges of implementing an RFID system, it needs to look for a qualified technology partner or systems integrator. First and foremost, look for partners that understand that, if the company is using bar codes, the expectation is a complete solution where RFID and bar code technologies work in unison. Also, the partner should understand the mobile applications of the company and provide a plan on how to leverage the investments previously made in these applications with your RFID system. If you take these issues into mind, there will be an improved chance of yielding the full benefits of RFID technology with fewer headaches.