News and Notes

RFID: A balanced perspective
by David C. Allais

With so much publicity surrounding radio frequency identification (RFID), you may wonder how it will impact your business, if at all. Like any new emerging technology it’s important to get perspective on what may or may not be relevant for your operation and not be caught up in the wave of propaganda.

An RFID tag is simply a microchip attached to an antenna. This RFID tag is a data carrier analogous to a printed bar code or to the magnetic stripe on your credit card. Unlike bar codes, RFID does not require a line of sight because tags are read by radio waves rather than by reflected light.

From its beginning in the 1970s, RFID has established its value in a broad range of applications including toll collection from moving vehicles, access control, theft prevention (automobiles and retail merchandise), tracking cargo containers, managing returnable assets such as beer kegs and monitoring manufacturing work-in-process.

The catch-all term RFID embraces considerable variety including active or passive tags, read-only or read-write, and four widely separated radio frequencies. Tags can range in size from tiny capsules for injection under an animal’s skin to large active tags for fast-moving rail cars. The distance at which an RFID tag can be read depends on tag type, antenna configuration and RF power. The smallest passive tags require near contact while larger active tags may be read from a distance of over 100 feet.

RFID in logistics and retail
In 1999, the Massachusetts Institute of Technology (MIT) solicited financial support from major corporations for research into future technology applicable to logistics and retail.

The MIT Auto ID Center conducted the research and developed the concept of “The Integrated Item Intelligent World.” The group envisions that, in time, every manufactured item will carry a unique RFID tag. Because the tags are unique, each serialized item can be tracked from the point of manufacture, through distribution, within the retail store, and finally to the consumer. The MIT group also proposed a hierarchy of database servers communicating through the Internet to manage and provide access to the vast amount of information collected from RFID tags.

Wal-Mart has assumed a dominant role in accelerating the MIT concepts. Initially, Wal-Mart intended to have its suppliers place RFID tags directly on retail items, but has since backed off to require only the tagging of pallets and cartons. As of a Jan. 1, 2005 deadline, Wal-Mart’s 100 largest suppliers are tagging shipments to three of its Texas distribution centers. Target Corporation and other major retailers have announced their own RFID initiatives.

The MIT project was handed off to EPCglobal, an organization affiliated with the Uniform Code Council, a not-for-profit standards organization that manages UPC bar codes and numbering. EPC stands for Electronic Product Code and embraces a specific set of RFID specifications and data structures for use in the retail supply chain.

Independently, but sharing characteristics with EPC, the U.S. Department of Defense is developing its own RFID standards, and DOD suppliers are being required to apply RFID tags to goods shipped to military warehouses.

A recent Google search of “RFID” produced 6,940,000 hits. Recent articles featuring RFID have appeared in the Wall Street Journal, Business Week, Fortune, Forbes, Information Week, Computerworld and Modern Materials Handling. Leading bar code equipment suppliers, system integrators and consultants eager to sell RFID products (RFID terminals, tag printers, individual tags, etc.) and services have joined the promotional frenzy.

Reservations and concerns
The MIT group projected that the cost of an RFID tag will drop to five cents in several years. Currently, each EPC tag costs between 20 cents and 80 cents depending on quantity and sub-type. In contrast, bar codes range from free (if part of a pre-printed package) to as much as 2 cents for a large adhesive label. Tag cost is the most often cited impediment to the rapid deployment of RFID.

Wal-Mart has said it will not pay for the cost of RFID tagging, but rather that suppliers should search for internal operational benefits to obtain a return on investment. “Many suppliers to Wal-Mart and The Department of Defense have privately complained that RFID is an added expense with no foreseeable return on investment,” says Steve Halliday, a consultant with High Tech Aid (www.hightechaid.com). As a consequence, most suppliers that must tag shipments have adopted a free-standing slap and ship technique.

There are more subtle and basic reservations about RFID than the cost of tags, equipment and labor. One client of the Gartner Group (a respected business consultancy), considered to be a “best-in-class bar code user” spent considerable time and money piloting RFID technology since the mid-1990s, long before the current hype began. According to Gartner, “This organization has tested RFID in almost every process in its business. It has concluded that there is nothing it can do with RFID that it can’t do faster, and more accurately, with bar coding. It concluded that, for its processes, even if RFID costs the same as bar coding, bar code would still be the superior technology. This doesn’t have anything to do with the cost or maturity of the technology – it involves the suitability of RFID for different data collection processes.”

Linda Dillman, a Wal-Mart vice president, was asked in a mid-2004 interview why Wal-Mart is working with such an experimental technology. She responded, “Because we’re not afraid to test things. Wal-Mart believes that, if it is to stay on the leading edge of logistics and technology, it needs to try technologies that will fail, and the company has no problem with that.” On the other hand, while the Gartner Group believes RFID has significant long-term potential, it has warned its clients to “prepare for disillusionment.”

There are excellent, effective applications for RFID. Will its application to inventory flowing through the supply chain become one of these? If so, how soon? The jury is still out.

How will RFID impact the industrial distributor?
In the near term, the most likely requirement for RFID will come from one of your customers. If you are selling to the Department of Defense, you may be required to affix either an EPC or Unique Identification Number (UID) RFID tag to each carton. Similarly, if one of your customers is a major retailer, you may need to attach EPC tags. These customer mandates involve applying the RFID tag, verifying that the applied tag can be read, and transmitting associated data to your customer via EDI, XML or other specified methodology.

When the need arises to tag shipments to a customer, you could turn to companies that are eager to sell you tags and equipment or consultants who peddle advice. However, I would suggest first contacting your warehouse management system provider (if you have one) or the provider of your enterprise software if you do not. These system partners can evaluate your customer’s RFID requirement and propose a cost-effective solution integrated with your warehouse and shipping systems.

For some industrial distributors, there may be good niche applications for RFID where bar code does not provide the best solution. Consider returnable pallets, totes, containers, or reels on which a bar code label would be subject to handling damage or environmental degradation. Another application might be where valuable tools in a rental or consignment pool are subject to grease, dirt or abrasion. Again, for these potentially beneficial niche applications, I suggest contacting your regular system provider.

As to the broader question of when RFID may be suitable for mainstream inventory tracking in industrial distribution, we may reflect on the history of bar coding. The adoption of the UPC bar code standard by grocery retailers in April 1973 set the stage for broad usage. A good 10 years elapsed before a critical mass of supermarkets was scanning these bar codes and some more years before UPC was used by other types of retail establishments. In 1982, the Department of Defense began requiring its suppliers to apply bar codes. Similarly, in 1984 the Automotive Industry Action Group standardized the bar code and label formats required of automotive component suppliers. These non-retail initiatives forced the spread of bar code beyond the retail store.

It wasn’t until the early 1990s, 20 years after UPC was born, that operational use of bar code in industrial distribution began to provide an acceptable return on investment. Will RFID become justified for primary warehouse tasks of the industrial distributor by 2025? The answer depends on how slowly or how quickly RFID becomes effective in the mass market retail supply chain. c

David C. Allais, Ph.D, is founder and president of PathGuide Technologies Inc., a privately held software developer specializing in real-time warehouse management systems for wholesale distributors. An internationally recognized expert in bar code technology and automatic identification specifications and standards, he serves on the GSC committee of the Uniform Code Council (UCC) and has authored five bar code symbologies. Reach him at PathGuide (888) 627-9797 or davida@pathguide.com.

This article originally appeared in the March 2005 issue of Progressive Distributor. Copyright 2005.

George Goldberg, former editor and publisher of SCAN Newsletter, died on December 10, 2003 at North Shore Hospital in Manhasset, LI from cardiac arrest due to complications from pneumonia.

George was born on March 19, 1925 in Harlem, New York City, the second son of a retail salesman of fabric for women’s dresses. Both his parents had been youngsters from Russia who spoke no English when they arrived in the U.S. by boat from Europe, via Ellis Island, just after the turn of the century. Their poor families had settled in Brooklyn in search of the American dream.

George graduated from Lafayette High School in Brooklyn in January 1942, two months short of his 17th birthday and one month after Pearl Harbor.

After completing a year at City College of NY, he was drafted in May 1943, after he turned 18. He trained for half-a-year in the Army Air Corps to be an officer/navigator, but, after the Battle of the Bulge, he was transferred to the regular Army and served in France and Germany for 14 months as a private in the headquarters unit of the Seventh Army, 63rd Division, 253rd Regiment.

After the war, he graduated from City College of NY in 1948, majoring in statistics, and then received a Masters in business administration from NYU two years later.

His first job, in Manhattan, was project leader for three years with a market research agency specializing in surveys of young people. His next position, also in NYC, was as chief statistician for a newly-formed Department of Defense joint procurement agency.

In 1954, he joined a diversified American Stock Exchange-listed company, Kleer Vu Industries, headquartered in Manhattan, which manufactured and marketed plastic products and microfilm equipment. He was with the firm for 18 years, serving as general manager, executive vice president, and then president/CEO.

In 1975, George and his wife, Teddy, co-founded their own company, GGX Associates, Inc., devoted to products for the just-emerging automatic identification/data capture (AIDC) industry. GGX, based in Great Neck, NY became one of the leading marketers of film masters and pressure sensitive labels for UPC and other bar code applications. The company was sold in 1992.

There were no publications in the mid-1970’s covering the fledgling AIDC industry. To fill this need, George began publishing SCAN Newsletter in September 1977 – at first with fewer than 100 subscribers. At that time, auto ID simply involved bar coding; and bar coding was almost exclusively supermarket checkout scanning. Over the next two decades, the industry grew to include many ADC-related technologies with worldwide applications in retailing, manufacturing, distribution, transportation, healthcare, communications, and federal and local government operations.

SCAN was a unique management and marketing newsletter covering worldwide developments in bar coding, radio frequency (RFID and RFDC), and related AIDC technologies. In 1982, SCAN established the prestigious, annual Percival Award recognizing special contributions to AIDC by individuals or organizations from the user community.

When SCAN Newsletter was sold to Corry Publishing in 1996, it had paid subscribers in twenty-six countries. George remained Contributing Editor of SCAN: The DATA CAPTURE Report.

George conducted seminars on bar coding in the US, Canada, Europe, Russia, and China; he was the technical advisor to the book publishing industry committee on bar coding; he served as a member of the ANSI committees which established standards for package marking; he has written articles on AIDC for numerous publications.

He was particularly proud of his most recent achievement as a co-founder of AIDC 100, an organization of the leading professionals from the AIDC industry. Under his leadership and guidance, the Melville Library at the State University of New York at Stony Brook has established a Special Collection for the AIDC 100 Industry archive.

George is survived by his wife of 55 years and longtime business partner, Teddy. They had two sons and a daughter. Jeff, 53, is an author and TV producer in Washington, DC; Robbi, 49, is an artist in E. Moriches, LI; David, 42, is a music composer, who lives with his wife Nanci in Port Washington, NY and George’s baby grandson, Jonathan.

Article for AIM Connection Newsletter

The AIDC 100 is a non-profit, self-sustaining, non-political association of automatic identification / data capture (AIDC) professionals and others who have significantly contributed to the growth and advancement of the industry. This prestigious group was chartered on May 13, 1997. It should be noted that every past Richard Dilling Award winner is an AIDC 100 member.

The organization is a technical and business resource. It is one whose primary goal is to enlarge the business community’s knowledge and understanding of AIDC. With renewed vigor, it is now working with organizations like AIM in order to highlight industry issues and institute programs that will collectively bring various factions together in a harmonious and mutually beneficial manner.

AIDC 100 is co-hosting the Richard Dilling Award at the AIM meeting in March and is also co-hosting two days of RFID-based educational programs at the same event. In addition, AIDC 100 is making plans for a much needed “Truth in Technologies” forum to be held on October 20, 2004. The emphasis will be placed on the convergence of Bar Coding and RFID. Many significant contentious issues will be discussed with the intention of laying the groundwork for better understanding for both suppliers and users.

AIDC 100 membership is open to the nomination of anyone who has made significant contributions to the enhancement of the automatic identification industry. For more information on this group and its members, go to: www.aidc100.org.