RFID comes in handy in supply chains

Mention RFID, and most people think of Wal-Mart, “spy chips,” or both. They’re missing a lot of the story.

RFID is radio frequency identification. It’s not new — it was first used during the Second World War to identify approaching aircraft — but it has emerged from the shadows in the last few years thanks to an upsurge in new ways of using it.

One of the uses people are talking about is in the supply chain — identifying products on their journey from the factory through the distribution system to the store shelf and the checkout. People associate RFID with Wal-Mart because the Bentonville, Ark.-based discount retailer requires many of its suppliers to attach RFID tags to goods shipped to some of its distribution centres. Several other major retailers, such as British retailer Tesco PLC and Minneapolis-based retail chain Target Corp., are doing similar things.

The “spy chip” label comes partly from the fact that RFID chips attached to merchandise could go home with buyers and then subsequently be read when they pass within range of RFID readers. So a clothing retailer might be able to detect that a customer is wearing clothes bought from a rival. There’s more to the privacy fears surrounding RFID than that, though. A recent book, “Spychips: How Major Corporations and Government Plan to Track Your Every Move With RFID”, suggests RFID could be used to monitor people’s movements. In May, Scott Silverman, chairman and chief executive of New York-based implantable RFID chip maker Applied Digital, suggested in television interviews that the U.S. government could implant his company’s chips in immigrants and guest workers in the U.S.

Several different standards
While RFID chips can only be read from quite close up, such suggestions have raised understandable concerns among privacy advocates and civil libertarians. RFID actually has many more uses than these, though. If your dog or cat has been “microchipped” so it can be identified if lost, that’s RFID. If you use a Dexit card — accepted for small transactions by a number of Toronto merchants and recently launched in Ottawa — that’s RFID. If you have an employee pass that opens doors at your workplace without having to be swiped through a magnetic card reader, that’s RFID. If your key fob unlocks your car when you press a button, that’s RFID.

And new applications continue to emerge. “Everybody has a business idea for RFID,” says Erik Michielsen, director of RFID research at ABI Research in Oyster Bay, N.Y.

Thinking up possible ways of using RFID is generally more fun than making them work, though.

There are two contradictory myths about RFID, says Paul Heino, chief executive of Sundex Information Systems Inc., a Toronto firm that helps companies with RFID and wireless data collection. One is that RFID is simple to implement. The other is that it is like black magic. The truth, according to Heino: “It’s kind of in the middle.”

In retail and some other uses, RFID may replace bar codes. But don’t assume the transition will be simple, Heino warns. “It’s more complicated than just replacing laser scanners with RFID scanners, because radio waves behave completely different than light.” But, he adds, “it’s not black magic.”

Positioning tags and scanners properly and choosing appropriate technology for the purpose are keys to success with RFID, Heino says.

RFID is not highly standardized today. Several different frequency bands are used for RFID applications. Each has different pros and cons.

For instance, Heino says, the 125-KHz band has very short range — the scanner needs to get within about an inch of the RFID tag to read it, but liquids cause less interference than with other frequencies. That’s why the identification tags implanted in animals generally use this frequency. The 13.56-MHz band has about 12-inch range and is popular in clinical environments and baggage handling.

Interference sometimes a problem
The 915-MHz or Ultra High Frequency (UHF) band has a range of about 12 feet, so it’s popular for tagging pallets and vehicles and anything that needs to be scanned on a conveyor belt. There is also a little-used 2.4-GHz band offering even longer range. Both the 915-MHz and the 2.4-GHz bands are subject to interference from certain devices like cordless telephones and garage door openers, Reed says.

Fluorescent light ballasts can also interfere with RFID if they are too close to the readers, Heino notes. But in general, radio frequency interference is not a major concern with RFID, says Shaun Ricci, co-chief executive of N4 Systems Inc., a Toronto-based systems integrator that focuses on RFID. However, he adds, a site survey is always a good idea when implementing RFID, and “definitely something that we do right out of the gate.”

The greatest obstacles to successfully reading RFID tags are often the goods being tagged.

Metal reflects radio waves, playing havoc with readers especially when the goal is to read many tags at once — for instance, to identify all the cases on a pallet. Liquids also cause problems. Many people think RFID makes it possible to identify every item in a crate going out the door, says Ricci, and that may be true if there is no metal or liquid in the crate and no extremes of temperature involved. As soon as metal or liquids are involved, says Ricci, “you can still use RFID, but you’re not in a situation where you can read 100 products at once.”

“It’s an ongoing challenge,” Michielsen says – “one that has been addressed in the last couple of years and will continue to be addressed in future innovations.”

As if these issues weren’t tricky enough, there is also a shortage of people with relevant skills, according to a recent survey by to the Computing Technology Industry Association (CompTIA), an information technology industry group. According to survey results that CompTIA released at the RFID World 2006 conference in February, 75 per cent of companies surveyed believe there is not a sufficient pool of RFID talent from which to hire.

This is an issue both for vendors and integrators and for companies seeking to use RFID, says David Sommer, vice-president of electronic commerce at CompTIA. CompTIA is trying to address the problem by creating a certification program in RFID skills, called CompTIA RFID+.

To make the most of RFID, businesses need to use it for more than just satisfying the demands of big retailers like Wal-Mart. Early business cases were largely focused on the supply chain, says Rich Beaver, director of global RFID strategy at NCR Corp., and businesses need to move beyond that. But this means going from “slap-and-ship” approaches to integrating RFID with back-end systems such as inventory.

“RFID per se is just the enabler,” says Carla Reed, vice-president of global logistics at Chainlink Research, Inc., in Cambridge, Mass. “It’s what you do with the information that gives you the value.”

“In Canada, there’s not a whole lot of integration going on,” Ricci admits. He says U.S. companies are just beginning to integrate RFID technology with back-end systems after a period of mostly implementing “slap-and-ship” technology to meet the demands of large retailers such as Wal-Mart. But “in Canada we’re definitely behind,” he says.

In fact there is relatively little RFID activity in Canada today. Vancouver-based retailer London Drugs, for instance, is keeping an eye on the technology but has no plans. “RFID has not yet risen to the must-have level for operational logistics efficiencies,” says Scott Riddell, manager of solutions information technology at London Drugs. John Melodysta, vice-president of information technology at office supplies retailer Grand & Toy in Toronto, also says his company has no near-term plans for RFID.

Staples Business Depot, a subsidiary of Framingham, Mass.-based Staples Inc., is participating in the Supply Chain Network project, an initiative backed by consulting firm PricewaterhouseCoopers to explore RFID and other emerging supply chain technology.

Joe Soares, the office supplies chain’s director of retail processes, says it is too early to discuss anything Staples has learned about RFID technology. The company says it will proceed with RFID implementation “if it makes financial sense to our business.” Expected benefits include fewer receiving problems, faster product turnaround, reduced handling and a better handle on inventory.

A key obstacle to item-level RFID tagging is the cost of tags, which starts at around 20 cents today, according to the RFID Journal, a specialized publication in Melville, N.Y. That cost continues to decline, Michielsen says, but it will need to fall further — talk in the industry often mentions the figure of five cents a tag — before item-level tagging becomes widespread in the retail sector. But Michielsen advises against waiting for prices to fall before starting to explore RFID. “If companies are waiting for costs to drop to a certain level before starting RFID research and development activities,” he says, “I would bet against them.”

As costs decline and pioneers’ experiments determine where the benefits of RFID lie and how to address the technical problems, RFID will probably become more widespread in retail and distribution. But don’t expect a revolution. “Still today, I do not believe that we will ever replace the bar code with the RFID tag,” Reed says. “It’s not an either/or — it’s an also.”

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