In theory an RFID tag can be attached to just about anything that moves. If you have an item that needs to be tracked or monitored - whether it’s a tray of apples, an animal, a vehicle or a person – there is an RFID tag to suit the application.

In many ways RFID tags take up where bar codes leave off. Unlike bar codes, RFID tags can be scanned without requiring line-of-sight and they can store more data than a bar code. Much more significantly, all RFID tags can store unique identifiers and the data on some types of tags can be modified as well as read.

According to IBM Asia Pacific RFID leader Will Duckworth the early adopters of RFID will be the in the manufacturing, retail, logistics, security and asset management sectors, but this technology has the power to fundamentally alter almost every area of business.

Asia is the highest growth area in the world for RFID, Duckworth says, partly because governments in the region are pouring money into RFID projects such as traffic control schemes.

iStart’s 2005 IT Investment Intentions Survey certainly suggests RFID is about to take off in New Zealand. The survey of 567 organisations shows that 11% of respondents are intending to invest in RFID technology for the first time this year, which is a large number for what has been regarded as a specialised application.

April 2005

Driving forces
RFID technology has been around for a while, its origins lie in the Identify Friend or Foe (IFF) systems developed for military aircraft in the second World War. The first trials of commercial applications began in the 1970s, but it was only in the late 1990s that RFID started to become viable for widespread business use.

At the moment most RFID applications are focussed on tracking products through the manufacturing cycle and then locating them downstream at warehouses and retailers. When RFID tag data is linked to a central system, each product or batch of products can be identified by physical location, manufacturing history and distribution path.

The world’s big supermarket chains were not slow to realise the benefits of RFID, and a number of trials took place in the US and the UK in the late 1990s. Then in 2003 US supermarket giant Wal-Mart insisted that its top 100 suppliers use RFID tags to identify their shipments, a move the company estimated would save between US$1.3 billion to US$1.5 billion a year.

Wal-Mart’s RFID ‘mandate’ has been likened to its earlier 1984 requirement for its suppliers to use bar codes, which is widely regarded as a turning point in the uptake of that technology, and other large retailers like Target and Albertson’s in the US and Tesco in the UK soon issued similar RFID directives. Closer to home, Australian retailers Coles Myer and Woolworths are encouraging their suppliers to use RFID, and in New Zealand, retailer Progressive Enterprises and meat processing company PPCS have both launched RFID pilots with rollouts expected within the next 12 to 24 months.

Apart from distribution efficiencies, another reason why RFID is taking off now is because of the traceability the tags can provide. A series of food scares based on animal diseases in Europe and contamination in Asia have meant that a raft of government agencies around the world have become concerned that the origin of edible products should be documented in a similar fashion to the way aircraft parts are tracked in the aviation industry.

Together these factors mean that if you supply a big retailer and haven’t yet come under a RFID mandate, you soon will.

Manufacturer benefits
RFID promises big benefits for manufacturers too. Shaving products manufacturer Gillette is a keen proponent of the technology and was one of the first eight manufacturers to take part in RFID trials with Wal-Mart. Bruce Grant at Gillette Australia says Gillette is aiming at a “perfect retail” system in which the optimum amount of goods are always available on the shelves.

Gillette has estimated it loses as much as US$9billion globally every year from sales which are missed when stock is not available where and when it should be.

Grant says research has showed that if a product is not in store, a loyal customer will do without that product for the first time. If it happens a second time the customer will go to another outlet but if it happens a third time the customer is likely to change brand.

RFID tags will eventually allow Gillette to identify and eliminate any potential stock shortfalls by monitoring the goods literally as they leave the stores.

“Gillette has 450 SKUs now supplied to Wal-Mart that are RFID enabled, “ says Grant. “The benefits to Gillette are better productivity, inventory control, and quality of service.”

Gillette gets access to data from Wal-Mart through the retailer’s Retail Link extranet site which allows suppliers to pull off customised data which has been culled from readers at shipping docks and warehouses.

Overcoming barriers
IBM's Duckworth says there are several hurdles to be overcome when implementing an RFID system and one of the first ones is building the business case. The relatively high cost of RFID tags tends to favour projects using tags to track re-usable containers such as trays, dollies and roll cages rather than the actual products themselves, and project are much more viable if the asset is used within a closed system.

A proliferation of standards, especially those concerned with radio transmission, are also causing confusion. There is no single global standards body for RFID and standards developed by the International Standards Organisation can sometimes conflict with European standards for example.

Physics can cause problems at some sites. A moist environment can lead to bad readings and most tags don’t work well on metal, or wood and logs, especially young or non-kiln dried wood.

However one of the greatest barriers to be overcome is the disruption caused by the adoption of new business processes and the integration of the RFID reader data into existing systems.

“It’s much more complex than e-business,” warns Duckworth.

“Masses of data can be developed with RFID, but you don’t want to know that 100 cases of goods have left the factory, you want to know that the order has been fulfilled completely. It’s about turning data into information.”

While a reader at a warehouse door will be able to register any tagged pallets which are passing by, the system needs to discern which are heading onto trucks and which are merely on their way to storage.

Duckworth’s advice is to roll out internally first, after you have identified a discrete point in your process which would benefit from RFID. Once you have implemented that project you can learn from it and then extend from there.

Step two is to share the information with your trading partners before step three, synchronising data with suppliers and customers. Once this has been achieved Duckworth recommends moving to the EPC network (see www.epcglobalinc.org) as the most convenient means of plugging in to the outside world.

The internet of things
The EPC network, sometimes described as the ‘internet of things’ is being developed by EPCglobal, a consortium which has taken over the technical side of the RFID work pioneered by the Auto-ID Centre in the US. This is a partnership of around 100 companies including retailers like Wal-Mart and Tesco, as well as brands such as Nestlé and Pepsi.

Under the EPC network each object - products, cases, pallets, locations – is assigned an Electronic Product Code (EPC), a number that uniquely identifies that object in the supply chain. The EPC number contains a number of fields including:

While additional fields may also be used as part of the EPC number to encode and decode information from different numbering systems the key to the EPC is the unique serial number, field four. Once that is stored on the EPC tag, an infinite amount of dynamic data can be associated with the serial number in the database. The idea is that this will keep the cost of the tag down (as the memory requirement is low) and provide flexibility.

Local relevance
RFID is set to have an important place in New Zealand as a country which largely pays its way through the export of primary produce to the US, Europe and Asia.

While the prospect of end user mandates alone may be enough to prompt many businesses to invest in this technology, the complexities of implementing an RFID system should not be underestimated. There are already reports of overseas manufacturers which are merely tagging their products in order to satisfy the likes of Wal-Mart or Tesco and are leaving it at that. This allows manufacturers to claim they are RFID-enabled but they are turning their backs on what could be a very big opportunity.

As Napoleon said, “Great leaders can be beaten, but they should never be surprised.”

Back to home

Too hot to handle? Consumer & RFID

European clothes manufacturer Benetton is no stranger to controversy - its poster campaigns featuring a wide range of unorthodox subjects including homeless people have attracted condemnation as well as admiration.

But Benetton was not prepared for the consumer backlash which followed soon after it began investigating the possibility of weaving a new type of washable RFID tag into its clothes.

When the news broke in 2003 that Benetton had ordered 15 million tags, the privacy lobby went into overdrive. A Boycott Benetton website was established, and Katherine Albrecht of Caspian (Consumers Against Supermarket Privacy Invasion And Numbering) said she would rather go naked than wear clothes with “spy chips.”

Benetton was forced to back down, saying it had not included RFID tags in any clothes, but it did not rule out using them for stock control applications.

Benetton’s RFID order unleashed a storm of protest

So if Benetton had to back away from a peritem RFID trial because of a consumer backlash, what are the prospects for less courageous companies? Will RFID tags become the next genetically modified food or nuclear power?

A recent study in the US by BIGresearch and Artafact revealed that despite the growing number of American consumers who are aware of RFID tags, less than half think they are a good idea.

The RFID Consumer Buzz study says the number of consumers aware of RFID has risen from 28.2% in Q3 2004 to 35.% in Q4 2004, but only 44% of consumers think RFID is a positive development.

It’s fair to say that much of the anti-RFID sentiment so far is ill-informed. Coverage of RFID in the popular media often focuses on the theoretical potential for privacy abuses without any regard to the economic realities and other barriers that would prevent companies or governments from tracking every single thing that moves.

However from time to time RFID applications are proposed which do raise genuine privacy concerns. For example the European Central Bank has proposed to embed hair-thin RFID tags into Euro bank notes, so the physical currency would record information about its transaction history.

Tax authorities and law enforcement agencies hail this as the beginning of the end for the black market or money laundering but consumer groups say the move could also end the anonymity that cash provides.

Lee Tien, a lawyer at the Electronic Frontier Foundation, a pressure group which promotes individuals’ digital rights, says his organisation has no problems with RFID technology as such.

“RFID is fine when applied to supply chains and may prove valuable in such usage as tracking pharmaceuticals.”

However Tien argues that RFID is “too dangerous to permit beyond the point of sale.”

“RFID should not directly touch consumers unless they can easily opt out and until meaningful privacy and security controls are in place.”