The Ultimate RFID Tag
RFID technology has recently achieved both performance and price levels that begin to make the automatic identification and tracking of items feasible. Thus, for many applications and industries it is a new technology and in the early stages of potentially wide adoption. Initial successes with some RFID trials have led to a great deal of interest in this technology, resulting in a frenzy of activities and developments. Industry pundits have proclaimed grand visions of how RFID will improve our lives. Privacy advocates paint bleak pictures of how RFID will be used to limit our personal freedoms. The accuracy of any such predictions remains to be seen, but it is clear that meaningful efficiencies can be gained with RFID technology.
The RFID application that is receiving the most attention is the automated tracking of items in supply chains. RFID can provide real benefits in several areas that appear to provide a return on investment. However, as with many new technologies, debates about standards dominate discussions, and they can be more ideological than practical. With the range of potential applications for RFID in supply chain environments, there remains a great deal of confusion around RFID standards and to which applications they are relevant.
Standards and Mandates
In an open supply chain environment where suppliers, distributors, logistics providers, retailers, and others are required to read RFID tags in order to obtain benefits such as increased visibility or improved efficiency, common standards that all parties adopt are clearly necessary. EPCglobal, a joint venture between EAN International and the Uniform Code Council (UCC), has taken up the task to create such a standard for the industry that will extend, and eventually replace, the ubiquitous universal product code (UPC). Taking over from the early work done by MITs Auto-ID Center, EPCglobal is in the process of establishing its electronic product code (EPC) as a standard based on the consensus of its members, which span a wide range of interested parties. EPC defines not just the code to identify products, but also the protocols to communicate that code between RFID tags and readers.
Bringing together diverse companies to agree on a standard is both a noble goal and a difficult task. The initial EPC Version 1 specification will be replaced by Generation 2 (G2), which is estimated to be ready to begin ISO certification by the fall of 2004.
In the meantime, Wal-Mart has decided to forge ahead with its RFID plans and, being one of the pioneers of EPC, has selected EPC G2 as the standard that it will require its suppliers to support. Where Wal-Mart leads, others follow; and we have already seen announcements from Target and Albertsons indicating similar paths to EPC. Other RFID mandates have been issued by institutions such as the Department of Defense and Tesco, though perhaps without the firm commitments to EPC of the above U.S.-based retailers.
These requirements to proceed with EPC while the final EPC standard is not yet set has created a situation that is clearly not ideal for the many enterprises that must commit significant resources to making this new application of technology work and pay for itself. As the tag cost directly adds to the product cost and becomes an ongoing expense, suppliers are extremely sensitive to tag price. While the Auto-ID Center proposed some compelling arguments describing how finished EPC tag costs could drop below 5 cents, they were based on theoretical assumptions of technical improvements that have not yet occurred, and will likely not be realized for several more years.
Beyond the technical improvements required, there are several basic business reasons for delays in obtaining inexpensive tags. The lack of a certified specification means that chipmakers cannot significantly invest in developing the necessary RFID chips without assuming substantial risk. The resulting lack of commitments from various chip suppliers could potentially lead to initial chip supply constraints and have the predictable effect of raising prices. Finally, the explicit creation of a commodity market in EPC chips is at odds with most chipmakers desires to differentiate themselves on more than just price, and that continues to manifest itself in less enthusiasm to enter this market than perhaps EPCglobal had hoped. Thus, we have arrived at a situation where the mandates of some of the largest retailers have fueled a great deal of interest in EPC, but perhaps a bit prematurely for both the technology and its associated costs. This clearly affects the business case to proceed, particularly because infrastructure costs are incurred at the beginning.
One Tag Standard Fits All?
RFID technology enables a wide variety of distinct applications, and such a new technology platform is often the impetus for extensive experimentation and innovation, triggering great excitement, not unlike the Internet in the late 1990s. The Auto-ID Center and EPCglobal have been two of the most visible proponents of this technology, and in the course of their marketing, they have succeeded in establishing a connection between EPC and RFID to the point that the terms are often used interchangeably. While it is clear that EPCglobal has a vested interest in drawing as much attention to its emerging standard as possible, that connection has resulted in some of the confusion that is evident in the market. Utilizing EPC tags for applications in which EPC is not suitable can be problematic, both for the eventual adopters of RFID for those applications and for the EPC community in the long run.
It is important to distinguish a standard, particularly a proposed standard, EPC, from the underlying technology itself, RFID. Most generally, a standard restricts a given technology platform to make it suitable for certain applications. This has two key corollaries: only a subset of applications will be well served by a particular standard, and different standards are required to serve different needs. More specifically, EPC is designed to make it easy to identify and track items within a supply chain, and it cannot possibly meet the needs of all RFID applications. The requirements for tracking pallets differ significantly from proving authenticity, identifying diversion, locating shipping containers in real time, or indicating tampering. One tag standard simply cannot meet all of the needs of the variety of applications enabled by RFID, even if we simply consider supply chain applications.
Additional Standards Will Emerge
Setting standards is usually a thorny issue, and there seems to be no single method to produce a good standard. In some cases, such as with EPC, standards are defined in advance, usually by a knowledgeable committee assembled for that purpose. The more traditional approach is for a standard to emerge based on broad acceptance of a particular technology or scheme. There are examples where both of these methods have succeeded brilliantly or failed miserably. Furthermore, the writable DVD saga remains a testimony that multiple groups can advocate their standards and battle for dominance.
As RFID is such a new area of technological innovation, the most appropriate solutions for various applications are often based on proprietary protocols. Outside of general ISO RFID standards in certain frequency bands, open standards that support specific uses of RFID technology do not yet exist. While this is a source of frustration for companies seeking to utilize the technology, it is also a reality that must be embraced until clearer, proven standards do materialize.
We should assume that multiple standards will be defined, driven by the specific needs of various applications. Of course, it is still unclear how and when these standards will emerge. Undoubtedly, some will be formed by committees to address specific requirements, while others will emerge as de facto standards, essentially selected by the market based on suitability for a particular purpose. However, with RFID technology, the overall standards picture is neither complete nor predictable, and determining which proprietary standards will dominate requires a great deal of luck, an exceptional crystal ball, or both.
So, should you wait until the standards picture becomes clearer? We suggest it is better to select the most appropriate available RFID technology for a given application than to try to predict the future. If done correctly, a prudent RFID investment to solve a specific problem will pay for itself long before the market becomes mature and appropriate standards are defined.
Choosing the Right Solution
The choices for RFID tags vary in frequency, capacity, speed, physical size, features, read range, and of course, cost. As we have been discussing, some tags adhere to proposed standard specifications while others remain proprietary. How does one choose among the various options and possibilities? There are really only two items to consider: the business case, and the technical requirements.
While often considered after the technical requirements, it is usually the business case that determines whether a technology-based project proceeds or not. Ensuring a successful project means paying attention to the business case from the outset; and this is especially true in RFID where the technology choices are still relatively limited and untested. The worlds business stage is littered with examples of great technologies that were not backed by economic realities.
Another obvious, but often ignored, point is that the business case needs to take into account all aspects of the project, and not just the RFID tag cost. There is a natural tendency to focus too heavily on tag cost, but readers, back-end systems, implementation, integration, maintenance, and operating costs can all be significant; and they vary based on technology choices.
RFID projects need to solve specific problems or fill particular needs. In other words, the solution scope must address problems that are worth solving, but not remain so broad that it tries to address every problem at once. The latter is a particular danger because RFID in general can apply to a wide variety of applications, and it is tempting to try to address many problems at once. Whether such an approach is wise depends on the applications and the compatibility of their corresponding technical requirements. Since low cost RFID technology is relatively young, finding a solution that meets the demands of multiple requirements within a given budget can be challenging, if not impossible. Not only does it take more time, but it could involve compromises that cripple the solution effectiveness and the corresponding return on investment. For example, a manufacturing line might benefit from a large-capacity writable tag to improve efficiency. However, this tag would likely not be suitable to track the finished items to the end customer or to use as an anticounterfeiting measure.
At the heart of the issue is that different RFID solutions are suited for different needs, and they are always more expensive than one would like. Clearly identifying the need and selecting the technology to meet this specific need in a way that supports the business case is critical. EPC tags are designed for a specific application: tracking items through a supply chain. They represent the best set of choices, as defined by EPCglobal members, to balance the technical requirements of this application (read range, speed, programmability, capacity for the standardized EPC code) with the associated costs of producing them in the long run. However, a read-only proprietary tag might be a better choice as a solution to control diversion. Clearly, a supplier to Wal-Mart has a very good reason to use EPC tags on the cases and pallets they produce. That same supplier might benefit from a different RFID solution to automate their manufacturing process and trying to combine the two might prove unsuccessful.
Non-EPC Applications
If EPC becomes an adopted standard and some of the underlying cost assumptions are realized, it will have tremendous benefits in open supply chain tracking where multiple parties need to access a single tag in order to achieve the maximum economic benefit. However, we suggest that unless there are requirements to work with a particular standard for a given application, other technical solutions should be considered to determine the best fit. This is perhaps contrary to some of the fervor around EPC that is evident in the marketplace.
An obvious area to consider a wider range of technologies and standards is for applications entirely within the confines of a single organization or small group of organizations. Examples include the use of RFID tags to improve manufacturing efficiency or to manage rental items. If interoperability with unknown or changing outside operations is unnecessary, then paying for this capability might not be in ones best economic interest.
This concept extends to closed loop (situations where there is no need to have outside parties access tag information) supply chains as well. Companies that manufacture, distribute, and retail their own goods would not necessarily benefit from incorporating EPC tags, but they would certainly incur the additional costs due to fees or royalties to use these standardized tags. These fees must be considered with respect to the overall business case, and therefore may have an impact on the ultimate technology selection to solve the problem at hand.
Applications where RFID is used to enhance security or ensure authenticity could actually benefit from using a proprietary solution. After all, using a standard that anyone will be able to read because of widely available readers might be counterproductive to some security applications.
Even for nonsecurity functions, a universally readable tag has consequences in terms of enabling others to read a tag. The group of others could include competitors, analysts, and thieves, just to name a few. Thus, there can also be a cost involved with standardized tags that enable outside parties to easily identify items, and the magnitude of the cost is still unknown.
In some cases multiple RFID tags should be considered. An EPC tag might be the best way to manage product distribution, with a clear business case supporting that technology use. However, a different tag might help control diversion or counterfeiting with an entirely separate supporting business case.
The Bottom Line
The vast potential of RFID for improving the efficiency and security of supply chains has created a tremendous level of interest in this technology. However, significant uncertainty and change accompany the rise of any new technology platform. Technologies are improving. Standards are advancing. New applications are emerging. At this stage, it is far too easy to get distracted in any number of noncritical issues, not the least of which is what specifications will become standards. Many will thrive, but predicting the future of technology is better left to those that do not have a real business to run today.
We maintain that identifying a key problem and selecting the appropriate RFID solution based on a clear business case and relevant technical requirements is the best recipe for success. The specific need should dictate the specific technology choice, and one RFID tag does not fit all needs. The ultimate RFID tag is quite simply the one determined by your bottom line.
