Special Edition

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DoD RFID Supplier Summit

Few Surprises But A Novel Approach

There weren't many surprises in the sold-out Department of Defense (DoD) / Defense Logistics Agency (DLA) RFID Supplier Briefing held 2 December 2003 in Fairfax VA. Nor were there any in the phone Press Conference on 3 December 2003. The briefing and press conference, however, did provide an entirely refreshing approach to all the major EPC implementation plans unveiled to date.

First, the Non-News

As expected, DoD/DLA reiterated its support for, and intention to use, EPC TM . Alan Estevez, Assistant Deputy Under Secretary of Defense (Supply Chain Integration) noted, during the press conference, that the 12 October 2003 Memorandum clearly indicated the department's intention in support of EPC (in addition to ongoing use of its active tags).

When questioned about the apparent conflict between EPC and ISO support, he pointed out that the Memorandum never indicated an intent to use ISO standards so that there is no “conflict” between EPC and ISO in the department's position.

This point had caused some confusion in the past. In fact, the reference to “relevant ISO standards” was contained in the background paper provided with the position statement and thus was not actually a part of the official policy statement in the Memorandum.

Further, the DoD fully expects EPC to go through the ISO approval process. Once that is accomplished, any question of “conflict” can be laid to rest.

DoD does want to move to Class I Generation 2 (CIG2) tags when the specification is available but will initially accept, as will Wal-Mart, any EPC tag.

At the same time, Estevez noted that there was still work to be done with EPCglobal to ensure that its requirements are met within the EPC specifications.

One issue the DoD has to work through with EPCglobal is how EPC can accommodate the DoD's requirement for a Unique Identification (UID) number assets that require serialized tracking. (Information on UID can be found at: http://www.acq.osd.mil/uid/ ).

Initial requirements will be for supplier tagging of pallets, cartons and items that requires a UID.

During the briefing, Mr. Michael Wynne, Acting Under Secretary of Defense, Acquisition Technology and Logistics, stated that the DoD is looking for other applications within the department.

Key benefits they have already identified for RFID include:

•  fewer “touches” required to identify and track assets and materiel,

•  increased logistics throughput/cross-docking,

•  better control over expiration dated materials,

•  reduction in storage and maintenance (parts) costs (reduced inventory),

•  better utilization of existing inventory,

•  faster handling of materiel in deployment areas, and

•  improved tracking and history of maintenance and parts.

Beyond that, however, the DoD is open to suggestions.

Now, the Refreshing News

The benefits the DoD has already identified are fairly common to any logistics operation (although with a unique perspective based on DoD's requirements, particularly in deployment situations). However, the DoD is actively seeking suggestions and pilot projects among suppliers and RFID vendors to uncover other benefits and applications. The DoD intends to keep its development and implementation plans open for now.

Estevez noted that the briefing did not spell out a strict implementation schedule nor did it contain a lot of detail or guidance for suppliers. That's because the DoD is looking to its suppliers and RFID vendors to help develop those plans and guidelines (anticipated to be finalized by June 2004).

During the briefing, Dick Cantwell, Vice President, Global Value Chain, the Gillette Company, outlined his company's experience with RFID by way of example. He indicated that their approach was to uncover “breakthrough” applications. He defined “breakthrough” as “A structured innovative approach that produces benefits that could not be predicted ” [Emphasis added – Ed.] This approach was deemed necessary because, when dealing with a new technology, assuming you can predict all the outcomes may limit your thinking or it might lead to promising projects being cancelled because you can't develop a “solid” ROI until you explore further.

The DoD is following a similar model.

Nor does the DoD see this as a one-way street.

“For this [RFID] to work,” Estevez said, “it has to work across the entire supply chain.” The DoD intends to work with suppliers to discover all the benefits of RFID for itself and the supply chain.

Pilot projects during the January to May 2004 time frame will help determine the pace and points of implementation.

And, now the really refreshing news.

Where Wal-Mart “encouraged” its suppliers seek ways to implement RFID internally to reduce costs (meaning that Wal-Mart was not willing to pay more for RFID tagging), Wynne clearly stated, “I'm willing to pay.”

Estevez, during the press conference, supported that statement. He noted that there were many components in the bid/contract process and that labeling was one of them. If RFID tagging increases the cost, that's part of the process.

On the other hand, he also noted that if suppliers can gain benefits from RFID internally, it might help lower procurement costs. And that would be a significant benefit to potential suppliers in the bidding process.

If there was a real surprise in the briefing, it may have been supplier response. Estevez observed that the supplier response was “surprisingly positive. I think we got a great response from them.”

As much as anything, the DoD's willingness to explore options and work with suppliers helped prompt this response. And the fact that the DoD is realistic about potential costs to suppliers who need to comply with RFID tagging requirements certainly didn't hurt.

The EPC Rationale

When asked why the DoD chose EPC formatted tags over current ISO tags, Estevez noted two

key points.

First, DoD and Wal-Mart share many of the same suppliers. Having one standard for suppliers will make it easier for them to comply with a January 2005 sunrise date.

Second, adopting the same tags as Wal-Mart will help leverage their combined supplier bases to help provide the volumes necessary to reduce tag costs.

One point that was made in both the briefing and press conference is that the DoD recognizes that it is an early adopter – and is so for very good reasons.

For the DoD, getting in early means that it can help push both technology and standards development to ensure that the DoD's specific requirements are met. It also recognizes that the DoD's tremendous supplier base of over 43,000 suppliers in all sectors of the economy could help propel RFID past the critical take-off levels needed for economies of scale to kick in.

The Next Step

For RFID vendors, the next step is clearly to get involved with the DoD now. It's more than evident that, not only has the jell-o not yet set in the mold, the shape of the mold is still being refined.

And that's exactly where vendors want to be.

More information on the program, as well as copies of the presentations from the briefings (which will be posted shortly), can be found at: www.dodait.com .