RFID is the hot topic in material handling. Attend a trade show or an industry meeting, or have a discussion with a material handling professional, and conversations will inevitably turn to RFID. Predictions of the rapid adoption of RFID technology are rampant, but as with many forecasts about new technologies, the likelihood of these predictions immediately coming to fruition is slim.

      RFID will potentially see widespread adoption in the longer term, and organizations that have experimented with this technology have already found benefits. Those benefits — improved lead time, accuracy, information flow, and cost savings — will provide competitive advantage to those organizations that have been able to successfully adopt the technology.

      On the other hand, the world will not convert from bar codes to RFID overnight. Not every application in every business will accrue benefits simply by converting to RFID. Hybrid bar code and RFID systems will be the status quo for years to come. As with any new and evolving technology, leaping ahead to the cutting edge is generally not the wisest course of action.

      RFID is an Automatic Identification and Data Capture (AIDC) method. First developed in the 1940s as a way to identify allied and enemy aircraft in World War II, the technology has evolved for use in the railroad industry to track railroad cars, in the automotive industry for automation and tracking processes, in agriculture and wildlife management to track livestock and wildlife, and in retail as an anti-theft device.

      Spurred by mandates from the U.S. Department of Defense and large retailers like Wal-Mart, RFID has come to the forefront as an effective way to track goods through the supply chain. Much of the clamor in the media about RFID has come as a result of these mandates.

      RFID implementation is in a relatively embryonic state, particularly in the warehouse and distribution segment. With considerable hype about its potential cost savings and reach, a dizzying variety of technology vendors and solutions, and an uncertain base of standards set for its use, the near-term future of RFID adoption is still largely uncertain.

      Survey work by AMR Research indicates that the top 100 suppliers required by Wal-Mart to use RFID have invested only $250 million to meet the minimum requirements of the mandate, far short of initial expectations of the investment. The research further indicates that the relatively high cost of hardware, software and RFID tags has caused these companies to patch systems together just enough to meet compliance deadlines. AMR also says that limited and isolated implementations of RFID will be the norm for the immediate future. However, AMR recommends that organizations should look to implement this technology in high-value product areas — consumer electronics, DVDs, pharmaceuticals, high-end apparel and sporting goods — where there is more likelihood of a strong business case.

How RFID works

      RFID systems start with two main components — RFID tags and an RFID reader. RFID tags can be passive or active. Passive tags are energized only when they are in a reader’s RF transmission field, while active tags are battery-operated and constantly emit an RF signal. The operation of an RFID data transmission is basically the same no matter the type of tag. When energized, RFID tags emit a signal several hundred times per second. When they pass within the range of an RFID reader, the tag information is received by the host system. The host system then filters the multiple signals and begins processing the information.                   With readers strategically placed throughout a warehouse or distribution center, the tag and its respective product or item is followed along its journey through the supply chain.

      RFID tags can be read-only or read-writable. Read-writable tags allow the information stored on and emitted by the tag to be modified or rewritten during use. Passive read-only tags are the most affordable tag option available. They are also the most limiting, because their signal reach and data use is constrained.

      An important variant of RFID tags is the Auto-ID tag, which is encoded with an electronic product code, a 96-bit unique naming scheme that can provide vast product detail. EPC is currently the most common encoding scheme for warehouse and distribution applications. EPC tags can be active or passive, read-only or read-writable.

      The first task in considering an implementation of RFID is to evaluate how the new technology compares with current bar coding technology. Bar codes are well understood at this point and their challenges have long been addressed. While bar code labels are inexpensive, widely used, and based on open standards, they present the disadvantages of having a line-of-sight requirement; the constraints of limited, static data; and the problems caused by inconsistent print quality.

      RFID tags do not require a line of sight, which eliminates the need to de-scramble products. They have a longer read range, allow changes to the stored data, provide more information than bar codes about the item or the contents of a package, and outperform bar codes in adverse physical conditions. Also, the volume of data that RFID tags provide can lead to elevated operational awareness and supply chain visibility.

      However, RFID is more expensive than bar code technology; RFID standards are still evolving; and physical limitations, such as interference, can affect RFID performance. Another potential disadvantage is that the volume of data that sets RFID apart from bar codes can become a burden on existing networking and host systems.

      Does RFID need to replace bar code use entirely? Some in the industry believe that the relatively inexpensive cost of retaining a bar code on an RFID-tagged item or container presents a level of backup to RFID systems in the event of lost RFID tags, misreads or errant information. Retaining bar coding also seems to make sense in terms of its minor demands on packaging and container real estate.

      “There will almost always be the need for a printed label that acts as a human-readable backup in a system using RFID,” says Frank Goodfinger, vice president, strategic partnerships, SICK, Inc., a major provider of sensors, safety products, and automatic identification products, and a global leader in bar code technology. “Once you decide that a human-readable label is required, making space for a bar code should have an almost insignificant impact on the label’s cost or design.

      “As an incrementally costless backup that provides an important level of identification assurance, the combination of a bar code and RFID tag would seem to be as perfect of a world as you can get today. That means that until, and most likely after RFID is widely adopted, many environments will need to retain dual bar code-RFID ID.

      “The technological and logistics infrastructure to support end-to-end RFID use is also not presently available in the wider marketplace. In most present-day situations, organizations using RFID will be limited in its use to the four walls of the facilities where they have implemented RFID. Because bar code use is in such wide penetration in the marketplace, for the near future it will be the predominant end-to-end ID technology.”

Cost vs. performance

      The cost versus performance measurement of RFID looks like the prototypical supply–demand curve from economics. As the RFID performance curve climbs to the right, there is a point at which the performance, or benefit, provided by using RFID tags begins to exceed the cost of the tags. It is at this point that adoption of RFID potentially begins to make business sense.

      In today’s warehouse and distribution environment, while many seem to be focusing on the absolute cost of the tag, it is still far more important to study the relative cost of the tag versus the benefit it is providing in any given situation. In many manufacturing applications, for example, a $10 tag is inexpensive when compared to the next best solution or to the cost of the problem that is solved. Still, the market in many instances appears to be looking for a mythical five-cent tag that makes it possible to apply one to each carton or to each product. In either case, the specific situation should dictate the specific tag cost that will allow an implementation to be successful. This is no different than the early stages of adoption of bar coding.

      As RFID is more widely adopted, the cost of tags will fall in typical supply-demand fashion. An RFID implementation that is too expensive today may become affordable in a matter of time.

      All indications are that RFID adoption will eventually grow. It is likely that the next few years will be spent making operational and software changes that will enable the benefits of RFID to impact organizations on a wide scale. Initially, there is likely to be heavy investment in software, services and readers. This investment will decrease as standards are consistently applied and as integrators gain proficiency, and spending will shift to tags. As that happens, the cost of the tag will decrease.

      “You can’t talk about the cost of a tag without mentioning the elusive five-cent tag,” says John Shoemaker, vice president, RFID division, Symbol Technologies, a global leader in enterprise mobility solutions, advanced data capture products, and RFID technology. “But the issue of the cost of an RFID tag depends on how you define a tag. Some people think a tag is a chip attached to an antenna. Some people think a tag is a chip attached to an antenna on a substrate with some printing on it, maybe a bar code. There are others who think that a tag is that whole inlay embedded in an adhesive label.

      “The availability of tags is also going to be a problem in the industry over the next year,” says Shoemaker. “A lot of companies have procrastinated, they waited until the last minute, and they’re just now placing their orders. It’s going to take some time for the industry to ramp up to meet the demand.

      “Nobody is going to wholesale replace bar codes tomorrow; that’s not the intention. There is an intention to transition, to migrate over time to RFID over the next decade or more. Companies like Wal-Mart will not be able to scale to a trillion dollars in revenue using the limited information provided by bar codes. They have to do it with the next generation of technology, and that’s going to be RFID.

      “As an industry, the long-term success of RFID is going to rest with companies that have scale and technology, including technologies that complement RFID, who will be able to offer a complete solution,” adds Shoemaker. “Customers don’t want tags and readers. They want a solution.”