Radio Frequency Identification

Radio Frequency Identification (RFID) is a form of auto-identification (Auto ID) technology that uses radio waves to exchange information from the tags, also known as transponders, and the read/write devices, also called interrogators or simply readers. In the past, RFID was primarily used for electronic toll collection, fuel dispensing loyalty programs, animal identification applications and within the automotive industry. Then on June 11, 2003, Wal-Mart brought the subject of RFID and the EPC standards to the attention of their suppliers and the retail industry in general, as well as other manufacturing and distribution industries. In order to avoid elimination from Wal-Mart’s vendor list, their top 100 suppliers had to be RFID compliant by 2005 and the remaining suppliers by 2006. The Department of Defense followed suit shortly thereafter with similar directives for their suppliers.

Organizations planning to continue doing business with Wal-Mart and the Department of Defense have no choice but to comply. Due to its many benefits, other companies, not required to use the EPC standards, are also showing an interest in RFID. The two of the most common questions, regarding RFID, these organizations have are; which applications would benefit the most from RFID; and what is the value of moving to RFID today versus later?

The goal of this paper is to provide information that will help answer these and other questions regarding RFID. Knowledge is a valuable commodity in today’s highly competitive environment.

RFID Standards

Presently there are many companies finding various applications for RFID. However, there are two major organizations creating standards for RFID use, ISO and EPC Global. ISO has been developing standards for RFID use in areas such as pallet tracking, seals, item tracking, etc. EPC Global, a combination of EAN International and Universal Code Council (UCC) is developing an emerging standard for the Electronic Product Code (EPC). EPC will not only define the standards for tags, readers, and data formats, but is also defining a worldwide software and network architecture that will allow companies along the supply chain to communicate via the RFID tags.

The EPC standards for RFID will be applying serial numbers to every tag. Although, the current focus is on pallet and case-level tracking, in the near future RFID tags with item-level tracking, will be included. For example, products like Coke cans, which currently all carry the same UPC barcode; will, in the future, carry their own unique serial number. This will allow for more accurate and individualized tracking.

The most ambitious goal of the EPC standard is the implementation of a worldwide network of databases that will allow access to additional data from a scanned item. This caught the eye of Wal-Mart and the Department of Defense. Wal-Mart and the Department of Defense based their decision on the realization that RFID would increase in the accuracy of their inventories and reduce the cost of managing their stock. Consequently, to gain full optimization of their RFID initiative it was necessary to standardize their supply chain, thus the user mandates came into effect. Wal-Mart anticipates their cost savings to be in the range of a billion dollars or more. Besides Target and Metro, it is only a matter of time before the other large retailers also recognize the benefits and convert to RFID.

RFID versus Barcodes

Both barcodes and RFID carry important information about the product. This is where the similarities stop. The major differences are that RFID has the capacity to store larger amounts of information, gathers the information faster than barcodes and is able to do so with less human involvement.

The Barcode System

Typically, various types of labels such as paper, polypropylene, polyester, destructible vinyl and metalized polyester are used for printing barcodes. Placement and choice of labels for cartons, crates, pallets or individual packaged items such as razors depends on the route the product or container will take. The barcode must be able to survive the journey. For example, in the case of a finished product, the label has to be readable long enough to go from the manufacturer to the distributor to the retailer and finally to the end-user. Its purpose is to provide the supply chain with the information they need to run their businesses properly. Once the product has reached its final destination the barcode serves no further purpose.

In some cases, the products themselves carry etched barcodes. A prime example is within the automotive industry, where parts exposed to various manufacturing processes and environmental conditions make paper labeling impractical. In this industry, it is important that the serial number have the same life span as the part. Automotive manufacturers need to have critical information on the design and durability of each of the various components that go into the automobiles. Without it, it would be impossible to locate vehicles when and if a recall becomes necessary.

The RFID System

RFID is the faster method of collecting data without needing human intervention. Unlike barcodes, RFID does not require a direct line of sight in order for the scanners to read the tags. This eliminates the need to have someone scan each individual item, as with barcodes. Nor, is it necessary to have someone make sure each item is properly placed on the conveyor belt, in order for the stationary scanner to read the tag.

The four components of a typical RFID system are the RFID tag, the antennas, the reader/transceiver and the software. The antenna attached to the reader/transceiver reads the RFID tags attached to the tracked assets. Having the tag and reader tuned to the same frequency makes communication between the components possible. The receiver signals the tags that pass through its interrogation field. The tags tuned to the same frequency will respond to the signal by releasing their information. In this way, the receiver will be able to gather data from a number of different tags almost simultaneously and at higher speeds than barcodes. At present readers are able to read 40-50 tags per second. In the future, the expectation is from 1400 to 1500 tags per second.

However, because RFID does not require a direct line of sight to read the tags, placement of the readers/transceivers becomes very important. Certain environmental conditions, such as water and metal, can interfere with the transceiver’s ability to read the RFID tags. Therefore, a thorough analysis of the facilities, that includes the intended placement of the RFID readers and choice of tags and readers, is an important step towards a successful implementation.

Once the receiver has read the data on the tags, it transfers the data to the software on the host computer. Based on the company’s specifications, the software then sends the information to where it needs to go.

RFID Tags

There are different types of RFID tags. Read-only tags are similar to barcode labels in that the scanners only read the information on the tags. But, the RFID tags are superior to barcode labels because they are able to store more information and have a longer shelf life. A common application of read-only tags is the closed-loop inventory systems for tracking returnable containers. In this example, RFID offers savings in container replacement costs.

A Read/Write tag, unlike a barcode label, can have updates written to the tag as the item moves through multiple processes. Typically, the tag has a section for permanent and read only data, for example the pallet ID number. The remaining portion of the tag carries read-write information. This allows the organization to change or update the information as often as required. This is particularly useful for tracking items from raw material, to work in progress and finally to the finished goods stage.

RFID tags can also be active or passive. The active tags are the more expensive of the two because they use batteries to transmit their data. The cost for active tags begins in the range of $5-$7 and goes up from there, depending on the application. The less expensive passive tag receives its power from the reader/transceiver signals, as it travels through the interrogation field. The price for passive tags, today, is approximately 40 cents. Many organizations can satisfy their RFID requirements using passive tags. Although, active tags have a greater reading range, making them a better solution for organizations where reading distance overrides the $7 price tag.

Benefits Of RFID

Group Selection

In addition to the ability of being able to read a number of different tags simultaneously, it is also possible to pick out specific cartons from a large shipment. The RFID scanner will search for the targeted items only, while ignoring the other items within the grouping. This is particularly beneficial for organizations who regularly receive mixed-load shipments.

Security

RFID is difficult to counterfeit. A hacker would require a great deal of experience and skill in engineering, algorithms and encryption. For this reason, the FDA is beginning to tag all their pharmaceutical drugs to safeguard against counterfeiters.

It is also possible to apply different levels of security to the tags. An organization may want to grant tag accessibility to only certain members of their supply chain while excluding other members from being able to read those tags.

Homeland security is a major concern since September 11 and more recently, the vulnerability of American ports has become a hot spot. 90% of the world trade passes through various ports around the world and almost half of the incoming trade arrives in U.S. ports. That represents approximately 7 million cargo containers per year. To inspect each of those containers, for security breaches, would be near to impossible without RFID.

The purpose of the government initiative "Container Security Initiative (CSI) extends the U.S. security beyond its immediate boarders. In January 2002, CSI stated that high-risk maritime cargo containers are to be first identified and examined for weapons of mass destruction at foreign ports, before shipping to the U.S. As of December 2003, 22 foreign countries have implemented the CSI initiative.

In conjunction with CSI another government initiative, "Smart & Secure Tradelanes (SST) is where RFID comes into play. SST is an initiative of the Strategic Council on Security Technology that works with U.S. Customs, Transportation Security Administration, Operation Safe Commerce, Customs Trade Partnership Against Terrorism (C-TPAT) and the Container Security Administration. CSI now includes 11 major ocean tradelanes worldwide and involves approximately 35 partners. Under this initiative, "smart" containers automatically notify authorities when tampering or theft has occurred. The RFID seals go "silent" when the container seal is broken. At present, this requires a system that constantly logs and monitors all container seals, within a specific area, for seals that may suddenly go silent. Organizations that comply with these government initiatives are fast-tracked through customs at point-of-dispatch and point-of-receipt. These companies benefit from avoiding delays in shipping and receiving the containers and minimizing their handling costs.

Asset Management

Organizations can obtain 100% tracking accuracy of their expensive tools or equipment. Staff does not have to waste valuable time looking for equipment when they need it. RFID tags can also alert supervisors when these assets move outside the authorized areas. A study by Auto-ID Center found that consumer good manufacturers reduced shrinkage (employee theft) by approximately 10% after they implemented RFID secure storage areas.

Inventory Control and Production Tracking

The main benefits to implementing RFID are labor savings, improved inventory tracking and availability of accurate real-time information. True visibility of inventory levels enable manufacturers to reduce their overall inventory and safety stock levels. Readers placed strategically along inventory racks can automatically track items during picking and restocking of shelves. Fixed-position readers or workers with mobile computers or RFID scanners can easily locate misplaced items reducing the time and effort needed for manual searches.

The Auto-ID Center study also cited a savings of 2% and 8% in working capital when manufacturers used RFID to give them visibility of work-in-progress tracking and materials inventory. RFID is able to automatically identify and route items, as they move through production, to the appropriate assembly or testing area. By eliminating the human element, manufacturers were able to save on labor costs and increased the accuracy of their complex sequencing and make-to-order production.

Shipping and Receiving

Shipping and receiving is typically the first area that most manufacturers and distributors implement RFID. RFID is particularly advantageous in these areas due to the speed and automatic data collection of the incoming shipment and the ability to locate specific items for immediate turn-around to a waiting customer. The same tags used throughout production can continue to provide the information needed to assemble customer orders or for cross-docking purposes. The tag can also provide automatic advance notice notification for those customers that make this a requirement for all their incoming shipments.

Recalls

By tagging products prior to distribution, an organization will be able to target the recall to specific products/customers. The company can then notify only those customers. Having to make a general recall, otherwise, would be more costly in terms of dollars and cents and to the reputation of the company.

Barriers to RFID Implementation

For the purpose of this paper, we will only touch on the two topics that are the major concerns for the majority of organizations interested in RFID - cost and the evolving standards.

Cost

For many organizations, cost is the major barrier hindering the widespread adoption of RFID using EPC technology. For those companies that will need to purchase thousands of tags the forty-cent price tag (passive and read-only tag) is often a killer for a promising ROI. Many are waiting for the elusive 5-cent tag. Unfortunately, until more companies invest in RFID the 5-cent tag will remain elusive - a definite Catch-22 situation. However, depending on the application, organizations can offset the cost of the tags by the number of times they reuse the same tags.

On the other hand, if the basis of the ROI is solely on plant and warehouse cost savings, there is the danger of not taking into consideration other less obvious costs. Loss of a competitive advantage, for instance. If the competition is already using RFID, they may be in a better strategic position to make informed decisions from the information gathered by RFID. For example, when the entire chain uses RFID, response rates are increased. Any problems, along the chain, can be identified and solutions initiated to help eliminate backlogs and the added costs of delivering the goods to their final destination.

Penalty charges are another cost that will plague many consumer goods manufacturers who fail to comply with the user mandates of the major retail giants. Costs will be even greater if the retailers eventually delete these companies from their list of suppliers.

Other non-consumer goods manufacturers also face penalty charges if they are unable to get their products to their OEM customers, when those customers need them. This is particularly true in the automotive industry.

One of the more elusive costs, not taken into account by wait-and-see organizations, comes from the issue of supply and demand. Implementing RFID is not an overnight process. To get the most benefit from RFID an organization has first to ensure the infrastructure is in place. That includes not only the hardware but also the business systems and procedures. Building an infrastructure will take time and a reliable RFID vendor, who is ready and able to implement, will be hard to come by, when RFID starts to take off. It has become the general opinion of industry leaders that RFID is the next evolutionary step from barcodes and consequently is here to stay. In this scenario, organizations who wait too long, may find that their competition is already ahead of the game.

Evolving Standards

Right now, in the eyes of many organizations, standards compatibility is a major barrier for adopting RFID. To avoid incompatibility between different devices, the EPC standard forces users to buy equipment from one sole source, otherwise, the RFID system becomes inoperable. Incompatibility is further complicated if members of the supply chain use different RFID equipment. However, EPC Global and ISO are working towards remedying these problems. In fact, EPC Global recently announced a Fall 2004 release of a new UHF Generation 2 Foundation Protocol (formerly Class 1 Generation 2) standard that will also incorporate the ISO standards.

Until the standards are finalized many non-suppliers of Wal-Mart or Department of Defense are unnecessarily adopting a wait-and-see position. These organizations, though, can still benefit from RFID while avoiding the EPC standards. Some RFID non-EPC applications include yard management, returnable pallet tracking, asset tracking and any other application that ensures cost-savings and efficiencies. In addition, some of the leading RFID vendors, like Intermec, are offering an immediate solution. They are including future upgrades for their existing RFID equipment that will make the RFID devices compliant to the newly established standards.

In A Nut Shell

RFID Benefits

• Compliance
• Reduction in labor costs – labor efficiency and accuracy (i.e. 60-90% at receiving)
• Increased efficiency transporting inventory
• Reduction in obsolescence and shrinkage
• Reduction in manual handling errors
• Improved ability to perform targeted recalls
• More accurate inventory tracking
• Warranty tracking, asset tracking and theft
• Automate functions like re-ordering

RFID Roadblocks

• Cost
• New standards in development
• Privacy Issues
• Fear of change

Nutech Systems is an authorized reseller of RFID equipment and can help simplify the planning and implementation process. Having supplied serialization inventory tracking for 11 years, Viewpoint by Nutech can help ease the transition from bar coding to RFID, ensuring a data collection system that optimizes the benefits of both technologies. No matter what the requirements, Nutech’s Viewpoint Suite of Auto ID solutions help organizations quickly capitalize on their RFID investment.

Contact Nutech Systems if you are interested in implementing RFID or would like to learn more about the benefits of a data collection system using either RFID or barcode technologies.

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