RFID: Just The Facts

             “The Bottom Line: RFID will have a dramatic impact on the operation of
                ...
A Brief History of RFID

The concept of radio frequency identification (RFID) goes back to WWII. Britain pioneered the use...
coupling’. These tags are simpler to produce, and thus less costly, and are well suited to many supply
chain applications ...
There are also many RFID applications that will not use the EPC. For example, the tags placed on
reusable pallets for trac...
These simple functions, enabled through RFID and applied to an estimated 4 billion case receipts a
year will result in dra...
worked out, and the risks reduced, thus staying competitive with the pack, but already forfeiting
competitive advantage to...
placed on the tags, the protocols and frequencies that will be used by the tags and readers to transmit
the data, the secu...
Implementation Scenarios, Timelines and Benefits

The impact of Wal-Mart’s directive on RFID will speed the adoption of RF...
warehouse all at one time. The ensuing chaos would shut down most operations for some time. There
is also the reality that...
information across the enterprise and extended supply network. This will increase supply chain
velocity and productivity w...
About RedPrairie Corporation
RedPrairie delivers superior logistics results by driving out more logistics costs than anyon...
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RFID: Just The Facts

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RFID: Just The Facts

  1. 1. RFID: Just The Facts “The Bottom Line: RFID will have a dramatic impact on the operation of global supply chains over the next 10 years.” Scott Lundstrom, Chief Technology Officer, AMR Research1 Executive Summary Radio Frequency Identification (RFID) is a hot topic today due to the announcement made in June by Wal-Mart that they would require their top 100 suppliers to provide RFID tags on pallets and cases by January 1, 2005, and extend this requirement to all suppliers by 2006. That has sent many CPG executives scurrying for information on what RFID is all about and what it might mean for their organizations. Beyond Wal-Mart, many firms are investigating RFID as a high ROI alternative to other automated identification and data collection (AIDC) technologies such as barcodes. Unfortunately, today’s market hype masks the fact that RFID technology has been in commercial use for over twenty years with a consistent track record of success. We utilize RFID at the gas pump, in our toll way systems and for numerous other applications without recognizing RFID is the technology powering these products and services. However, the widespread adoption of RFID for retail and supplier product identification is just beginning. There is little doubt that RFID will have a major impact on supply chain operations over the next few years. Research firm Gartner, Inc. states: “The use of RFID to capitalize on data flow in global supply chains could be one of the most-significant developments since enterprises first explicitly recognized the importance of information flow in the supply chain.”2 Likewise, AMR Research predicts that RFID will be a $20 billion market by 2013.3 So how should companies reconcile Wal-Mart’s demands and the long-term benefits of RFID with the current risks and limitations of the technology? This paper will address these issues and provide a phased implementation roadmap that is consistent with current requirements and technology. It will examine briefly the history of RFID technology, review the various types of tag and reader technologies and their uses, discuss the potential benefits as well as the challenges for its adoption, and then provide recommendations on implementation strategies that make sense today. While there is no question that RFID will transform supply chain management over the next ten years, the impact, costs and results will vary considerably between industries and companies. Despite the current hype and retail pressures, RedPrairie believes that RFID should be viewed as a long term investment that must be closely examined to determine the appropriate technology, processes, and timelines best suited for each company based on their expected requirements, benefits and ROI. However, it is also clear that companies must start investing today if they are to remain competitive as the supply chain industry transforms. December 2003
  2. 2. A Brief History of RFID The concept of radio frequency identification (RFID) goes back to WWII. Britain pioneered the use of radio wave-based navigation and the identification of friend or foe aircraft for night operations by the Royal Air Force (RAF). The military has continued to use more advanced versions of this technology for many applications. In these cases trading technology for lives or battle success made the high cost of early systems irrelevant. More recently, commercial businesses have begun using RFID technology for manufacturing and supply chain applications. In the 1980s Compaq Computer started using RFID tags to trace components through the production process. The railroad industry has used RFID to track virtually every rail car in North America, while the agricultural industry has used tags to track livestock. In recent years, the tracking of returnable pallets and containers using RFID for asset identification has grown substantially. Marks & Spencer in the United Kingdom is tracking over 3.5 million plastic trays. In the Gulf War, intermodal freight containers were tagged with advanced active tags with embedded electronic content manifests. In these and other specialized applications, the high cost of the technology is offset by the potential loss from lost, misplaced or stolen goods. RFID technology is also in use today for consumer applications. When you use a Mobil Speed Pass or a Smart Card issued by your bank, you are benefiting from RFID technology. If your car has the OnStar vehicle tracking and communications system, you are also using a form of RFID technology. Implanting tags under the skin of pets has been used for several years by a national pet identification and tracking program. The auto rental industry is considering the use of RFID tags in tires to reduce the high rate of theft from rental cars. And if you have a device in your car that allows you to speed through the automatic toll lanes on bridges and expressways, you are also using RFID technology. So if RFID has been around for over 60 years and has already been used in so many applications, why is the topic so hot today? We will answer that question shortly, but first let’s define what we are talking about when discussing RFID technology. RFID Technology – Types and Uses RFID tags are tiny microchip and antenna units that are capable of storing and transmitting information. Active tags (as described below) also have a tiny battery attached to power them. Tags vary in design and capabilities based on their intended use and the manufacturer. Because there are so many different types of tags, this paper will categorize the various types of tag and reader technology and their most common usage within the supply chain. CHARACTERISTIC ACTIVE PASSIVE Power Source Battery Inductive Memory up to 288 kb up to 288 kb Read Range < 1,500 feet (500 meters) < 15 to 30 feet (10 meters) Class 0 (read only) 0 (read only) 3 (write once, read many) 4 (multi read / write) Frequency Low (125, 134 KHz) Not applicable High (13.56 MHz) 303, 433 MHz Ultra High (868 to 930 MHz) Microwave (2.4 GHz) Data Transfer Rate Variable Variable The first distinction between types of tags is whether they are passive or active. Passive tags have no power source of their own and only become activated, that is, able to transmit data, when they are energized by the electromagnetic field (radio frequency waves) of the reader, termed ‘inductive Copyright © 2003 RedPrairie Corporation. All rights reserved. This publication contains proprietary information of RedPrairie Corporation. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written permission of RedPrairie Corporation. RFID - Just the Facts WP_2003, Page 2 of 11
  3. 3. coupling’. These tags are simpler to produce, and thus less costly, and are well suited to many supply chain applications for product or asset identification. Active tags have a tiny battery for their power source, allowing them to periodically transmit data. This gives them longer read ranges, making them suitable for longer-range applications such as pinpoint asset locating (termed real-time locating systems or RTLS). The management of trailers in a yard or containers in a port are typically handled through RTLS with active tags. The battery and added circuitry make them more expensive than passive tags. The second distinction in types of tags is their read / write capabilities. This functional view of tags has been stratified by tag class and the class designation is commonly used to discuss capabilities. Class 0 = Passive, Read Only Class 1 = Passive, Write Once, Read Many Class 2 = Passive, Multi Write / Read Class 3 = Active, Multi Write / Read Class 4 = Active, Networking Tags The simplest, and least expensive, tags are read only, meaning the data they contain is fixed. The data is encoded only once at production of the tag or by the distributor. They are good for product or container identification and location, but the data on the tag cannot be augmented with additional information as it flows through the supply chain. Nor can it be reused. Read / Write tags are programmable. They can have the data to be stored on them encoded, augmented or changed at any time. This is very useful when information concerning the product’s journey through the supply chain is required for security, quality control or theft deterrence. These tags are also reusable. The tradeoff is that the cost of this technology is much higher. There is a hybrid of the read / write tag that is more affordable. These “write once” tags allow additional data to be written to the tag one time only. An example of the use of this type of tag is Wal- Mart’s desire to write limited distribution information to the tags sent by suppliers. These tags permit greater flexibility in use downstream in the supply chain, but are not reusable nor provide most of the supply chain tracking capabilities of full read / write tags. As might be expected, their cost falls between those for read only and read / write tags. A third distinguishing characteristic between tags is their effective read ranges. Passive tags tend to have the shortest range, currently 25 feet or less. This is likely to increase as the technology matures. This limits their use to applications where readers will be in close proximity to the object to be identified. Longer range read capabilities are available with active tags. The range can vary from a few feet all the way to satellite-based applications. The advantage of longer range is that fewer readers are needed to identify products across a given area. For example, if you want immediate knowledge of exactly where a particular product is within a distribution center or where a given trailer is in the yard, longer range tags and readers can provide this information with fewer readers and less cost. However, these tags are more expensive, with a sliding scale leading up to very expensive options for satellite tracking. So the hype about tracking inventory “anywhere around the globe” will not be realistic for all but the most expensive items for many years to come. A final distinction between tags is based on their content and intended use. It is generally accepted that the EPC being defined by EPCglobal, the successor organization to the Auto-ID Center, will be the coding standard for products in the supply chain. Although the complete set of standards for the EPC have not been finalized, enough is known about the basic structure and content requirements that it can now be safely used for RFID pilot projects. Copyright © 2003 RedPrairie Corporation. All rights reserved. This publication contains proprietary information of RedPrairie Corporation. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written permission of RedPrairie Corporation. RFID - Just the Facts WP_2003, Page 3 of 11
  4. 4. There are also many RFID applications that will not use the EPC. For example, the tags placed on reusable pallets for tracking purposes would not need to be EPC compliant. Other examples of supply chain RFID applications not using the EPC are railroad train car tracking, tracking trailers in the yard or other applications where what is being identified by RFID is not a consumer product. In general, however, RedPrairie feels that the impact of Wal-Mart’s initiatives will result in most supply chain RFID applications using tags that adhere to the EPC standard. But since there are still many competing tag vendors and technologies, RedPrairie believes that application providers must keep their systems “tag neutral,” that is, able to work interchangeably with a variety of tags. Why is RFID Hot Now? In a word, Wal-Mart. Like so many other aspects of the business world, the enormous impact of Wal- Mart’s buying power will dictate how and when consumer goods companies adopt RFID technology. Wal-Mart had a similar impact when they began using barcodes in the 1980s. But Wal-Mart could not have made their decree if many other factors were not already in place. First of all, most of the back-end infrastructure, such as the information processing systems needed to record, store, transmit and act upon the data captured through RFID are already in use by most CPG companies. These include enterprise resource planning (ERP), supply chain management (SCM) and related distribution and logistics systems. The communications infrastructure is also largely in place with the Internet and advances in wireless communications. Furthermore, the advances in radio frequency (RF) and barcode technology have already proven the advantages of automated data capture and system-directed workflows. Historically, active tag systems have proven their commercial and military value. Passive RFID technology is also beginning to mature. Challenges with read / write distances, distortion and reflection are starting to be addressed, specialized tag / reader options are being developed and prices are coming down. Perhaps most crucial for wide-spread use, generally accepted standards are being developed for passive tag encoding protocols and content, transmission protocols and frequencies, application usage, hardware conformance, and many other related areas. The Auto-ID Center began this standards development process, which is now being guided under the auspices of the Uniform Code Council (UCC) and EPCglobal. The most visible results of these efforts will be the electronic product code (EPC) that will be at the heart of the Wal-Mart initiative. The convergence of back-end infrastructure, maturing technology, declining costs and accepted standards has created the springboard from which Wal-Mart’s decree could be launched. Although there are many potential applications with considerable value outside of Wal-Mart’s initiative, Wal- Mart’s impact in the marketplace has been the major impetus for the current buzz about RFID and will spur early adoption. Potential Benefits Besides being a requirement for doing business with Wal-Mart, RFID technology has many potential benefits for retailers and manufacturers beyond the immediate compliance issues. Some of these can be gained relatively quickly within the enterprise. Others will come with advances in technology and wider adoption across the supply network. For Wal-Mart and other retailers, the immediate benefits are labor efficiencies and error reduction in receiving. The order detail contained on the advanced shipping notice (ASN) will be matched against the receiving detail that is automatically read at the dock door through RFID to verify receipt and direct the warehouse management system (WMS) to put away or cross-dock the received inventory. Wal- Mart would also like to write branch / store information to the tags to further automate distribution. Copyright © 2003 RedPrairie Corporation. All rights reserved. This publication contains proprietary information of RedPrairie Corporation. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written permission of RedPrairie Corporation. RFID - Just the Facts WP_2003, Page 4 of 11
  5. 5. These simple functions, enabled through RFID and applied to an estimated 4 billion case receipts a year will result in dramatic labor savings. Once retail stores are RFID enabled, through the use of shelf management systems combined with item-level RFID tagging, more far-reaching benefits are possible. Revenue depleting problems like stock-outs can be greatly reduced through automatic replenishment, and the bane of retailers, lost sales from items in stock, but which can’t be located, will be eliminated. Theft will also be significantly reduced, both in the store and in transit from suppliers. Transmittal and use of RFID information between manufacturers and retailers will be a large contributor to current efforts to reduce the impact of bad data in the supply chain. In a study conducted for the Grocery Manufacturers of America, A.T. Kearney Inc. estimates that retailers and manufacturers each lose $2 million for every $1 billion in sales due to bad data. They predict that eliminating bad data could save $10 billion per year.4 Although warehouse management systems have generally brought inventory accuracy into the 99+ percentage range, and ASN transmittals has been in use for years, there is still significant collaboration problems between manufacturers and retailers, particularly in the area of demand and forecasting data. The result of this bad, missing or incomplete data is stock-outs and oversupply of slow-moving products. Benefits similar to those achieved between manufacturers and retailers can be gained by manufacturers and their suppliers and co-packers through the use of RFID to better track materials, components, sub-assemblies and finished goods in production and in transit. By creating a “glass pipeline,” suppliers and co-packers can better adjust output to demand, and manufacturers can reduce expensive downtime due to shortages of supplies. Besides improving demand planning and reducing stock-outs, manufacturers are also trying to prevent counterfeiting. The use of RFID tags on products and packaging can help to better identify valid products from counterfeit substitutes, potentially saving millions of dollars annually. RFID technology can have considerable benefits within distribution centers as well. Automatic tag reading eliminates the need for workers to stop, pick up RF scan guns and shoot the barcode labels on pallets, cases, rack locations and dock doors. Unlike barcodes and scanners, there is no need for line of sight between RFID tags and readers. This streamlines and speeds up operations while improving accuracy, productivity and ergonomics. As RFID technology matures and becomes widely adopted across supply networks, distribution processes will be transformed. Components, inventory and demand will be visible across the network; stock-outs, safety stock, theft and counterfeiting will all be reduced; and many time-consuming tasks such as scanning, cycle counting and searching for misplaced inventory will be eliminated. Supply chains will become faster, more efficient and productive, more secure and better tuned to consumer preferences. Which all translates to lower costs, better customer service and increased profits and brand loyalty. Sounds too good to be true, doesn’t it? So what’s the catch? Challenges The development of RFID, specifically passive systems, as a commercially viable alternative to barcodes is a challenge. Four core issues must be addressed prior to general adoption; technology, standards, costs and privacy. Again, these are salient issues in the passive RFID space but the growth of active RFID solutions is also closely tied to these issues. RFID will go through the same adoption cycle as most other technologies. There will be the early adopters who will prove and improve the technology, gaining significant competitive advantage. There will be the majority who adopt RFID when the technology is already proven, the kinks have been Copyright © 2003 RedPrairie Corporation. All rights reserved. This publication contains proprietary information of RedPrairie Corporation. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written permission of RedPrairie Corporation. RFID - Just the Facts WP_2003, Page 5 of 11
  6. 6. worked out, and the risks reduced, thus staying competitive with the pack, but already forfeiting competitive advantage to early adopters. And then will come the late adopters, those that adopt only when risks and costs are minimal, who will be forced to join the movement in peril of their survival. Many late adopters, however, do not survive, or at a minimum, see major erosion in their market position. RFID will also undergo the same promotional hurdles in its adoption cycle as other new technologies. This will be characterized by a high degree of early hype about the potential benefits of the new technology that ignores the real technical, financial and social challenges that must be overcome. We are in that phase right now. This will be followed by a rationalization of the technology against the original claims. Did it deliver the intended value? Finally, as the challenges are overcome, there will be a steady rise in adoption, benefits achieved and positive perceptions. So what are the challenges that have to be overcome before RFID can achieve the expected benefits? Technology First, there are a number of technical challenges that must be addressed. • Read Range - The effective read / write range of passive RFID readers is currently quite short, about 3 to 15 feet for passive tags. This means that readers must be within a few feet of the object to be identified in order to accurately read the tag data or write to it. This is fine if you are attempting to read cartons on a conveyer, but does not permit identifying the second or third pallet back in three-deep storage or for replacing longer range RF scans. This is also a potential problem for reading large objects whose tags may be on the opposite side from the reader. Active tags allow significantly longer ranges (up to 1,500 feet). • Read Logic - Proximity reads are also an issue. If you want to identify a particular pallet, carton or location, how do you distinguish between the correct one and the two or more objects on either side of it, or cross reads from multiple readers “seeking” the same tag? Sorting through multiple reads and the business logic inherent in data filtering and exception handling must be advanced. • Read Accuracy - The materials that the tag is fixed to or those around it can affect readability as well, negating the advantage of not requiring line of sight for reads. Liquids can distort or absorb signals. Metals may reflect and scatter the signals. Thus objects to be read can be affected not only by their own composition, but also by the materials surrounding the object when (and wherever) they are read. Standards The second major challenge for RFID adoption concerns standards. If you are deploying closed loop systems such as military defense systems or highway toll reading systems, standards are not an issue because you have total control of the technology to be used. These are commonly referred to as “closed loop” systems. This is not true in open commercial systems where there are a number of competing technologies and vendors to choose from. Generally accepted standards are necessary to ensure that the tags applied by ABC company can be read by the readers at X, Y and Z companies. The importance of standards to widespread use of RFID technology has been compared to similar maturation cycles for barcodes and wireless LANs. “The developments that ushered bar codes and WLAN from niche to mainstream technologies are quite clear. In each case, it was the development of open, internationally recognized standards.”5 To date there is no similar comprehensive set of standards covering the plethora of technologies and equipment required for RFID, although the Uniform Code Council and EPCglobal are working on them. There are actually hundreds of standards related to RFID being developed or modified by scores of national and international standards bodies. Examples include the format and content of the codes Copyright © 2003 RedPrairie Corporation. All rights reserved. This publication contains proprietary information of RedPrairie Corporation. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written permission of RedPrairie Corporation. RFID - Just the Facts WP_2003, Page 6 of 11
  7. 7. placed on the tags, the protocols and frequencies that will be used by the tags and readers to transmit the data, the security and tamper-resistance of tags on packaging and freight containers, and applications use standards. Until these standards are finalized, there will be a risk of non-compliance associated with any solution implemented. Cost Although the costs for tags and readers continue to come down, implementing an RFID solution may still be an expensive venture. AMR Research estimates that a typical consumer goods company shipping 50 million cases per year will spend $13 million to $23 million to deploy RFID to meet Wal- Mart’s requirements.6 This cost is particularly alarming because the prima facie evidence of payback from this investment is negligible – it only buys compliance. Additional costs would be incurred to leverage this effort for internal initiatives that may have cost saving benefits. Besides the cost of the tags for every pallet, case or item to be tracked, there are the costs of the readers at every identification point, the software development, integration and implementation costs for use of the information, and the supporting infrastructure costs. The biggest risk at this time, however, is that a company will incur these substantial costs only to find out that the solution deployed does not meet future standards or that the technology or vendor used for the deployment has not survived the inevitable shakeout of early contenders in this emerging field. To protect against this possibility, companies should select technologies and vendors that are adaptable to emerging standards and protocols. Another cost consideration is the fact that companies have already sunk millions of dollars into their existing systems and RF infrastructure. This will not be replaced overnight with RFID technology. In fact, the transition process will likely take 10 to 20 years for most companies. This means that any RFID initiatives will have to be compatible with and run side-by-side existing systems. This will require additional investment in integration and limit the amount of process change that can be implemented to attain the eventual return on investment. Privacy Privacy has always been a strong value and concerns over the perceived invasion of privacy, whether justified or not, is a factor that must be considered in any RFID rollout. As with many technological advances, early concerns often stem from a lack of understanding of the technology and its capabilities. Some consumers fear, for example, that if they wear a piece of clothing with an RFID tag in it, somehow their every movement could be tracked around the globe. The reality is this would only be possible with extremely expensive geo-positioning system (GPS) tags and satellite tracking technology suitable for high threat level military or defense operations. It also begs the question who would want this information and what would be the economic value of having it. The cost / benefit trade-offs are just not there yet, and likely will not be for the foreseeable future. It would far easier and less expensive to track individuals by intercepting their cell phone calls, as was used in the Afghan war. The tags actually planned for the early trials mentioned above are passive, low-cost ones with a read range of about 3 to 5 feet. The companies want to use them for automatic replenishment, theft prevention and item locating within the store. True, they could also be used for recording consumer preferences, but this is already being done with traditional barcodes and scanners. Regardless of the validity of consumer fears, perception is reality in marketing and must be dealt with in any technology rollout. Therefore, RFID applications that might touch consumers must be able to be turned off (“killed” in current vernacular) when an item is purchased, possibly with the option to be turned back on for returns processing. This will add complexity and cost to these applications. Copyright © 2003 RedPrairie Corporation. All rights reserved. This publication contains proprietary information of RedPrairie Corporation. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written permission of RedPrairie Corporation. RFID - Just the Facts WP_2003, Page 7 of 11
  8. 8. Implementation Scenarios, Timelines and Benefits The impact of Wal-Mart’s directive on RFID will speed the adoption of RFID technology not only for their suppliers, but also for the supply chain industry as a whole. To avoid being left behind in an unfavorable competitive position, all supply chain participants must begin planning how RFID should best be deployed for their companies. But because of the current state of the emerging technology, the uncertainty over standards and competing vendor technologies, potential costs and lack of ROI data, RedPrairie recommends a five- phased approach to RFID rollout that better balances risk and reward with market emergence. Business Case Analysis As with adoption of any new technology, RFID projects should begin with a Business Case Analysis (BCA) that defines the project scope, costs, potential application solutions, anticipated ROI, and implementation hurdles and timeframes. Once the solutions with the greatest potential for success are identified, a more thorough ROI analysis should be undertaken in parallel with development of a clear rollout strategy for optimal deployment, including which facilities will be utilized, to which customers will the RFID-tagged products be shipped, etc. The end result should be a solid business case that meets all of the criteria your company requires for investment in new technology. The BCA phase should take 4-12 weeks dependent upon the size of the company and number of application areas identified. Once the business case has been approved by management, the next step is the “Proof of Concept” (PoC) phase. In some companies, a proof of concept may be part of the business case analysis. Proof of Concept Because this is entirely new technology, it is important to conduct a proof of concept analysis to determine the feasibility for your environment before beginning system pilots or rollouts. The objectives of the PoC phase are to: • Prove the concept of RFID as a viable technology within the enterprise • Test the selected technologies and communications to insure they work and will be compatible with the company’s infrastructure • Test the integration of RFID data with trading partners The duration of the PoC phase will depend on the complexity of the PoC application and the amount of resources assigned, but in general should take 1-3 months. However, it is more important to achieve the above objectives with realistic and creditable results than finish within a specific timeframe. If the technologies or communications selected are not giving satisfactory results, don’t be afraid to go back and try other approaches. The success of all subsequent phases will depend on how thorough and realistic the PoC. RedPrairie is currently helping numerous customers through this process. Pilot Phase Piloting the RFID application in a controlled environment is recommended. This will provide two advantages: first, the attention and concerted effort given to a first project will help ensure that this very important application is a success. Second, the “real” time to deploy can be defined and the impact to the organization assessed. Given the amount of revenue many suppliers receive from Wal- Mart business, companies will want to make sure they have the time and resources needed to achieve compliance by the specified deadline. The basic assumption of the pilot phase is that companies have huge investments in systems, equipment and communications that they cannot rip out to start over with RFID. It would be cost prohibitive. Nor would it make sense to introduce entirely new RFID-based processes across the Copyright © 2003 RedPrairie Corporation. All rights reserved. This publication contains proprietary information of RedPrairie Corporation. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written permission of RedPrairie Corporation. RFID - Just the Facts WP_2003, Page 8 of 11
  9. 9. warehouse all at one time. The ensuing chaos would shut down most operations for some time. There is also the reality that RFID technology is not mature enough to accomplish all of the processing envisioned for the future potential benefits. The only logical solution, therefore, is to test RFID technology one step at a time, focusing first on those applications for which the technology is ready and which provide the greatest return on investment. It would also be least disruptive to other operations to concentrate on self-contained functions such as receiving or trailer loading. Changing processes in these areas will have minimal impact on other functions, whereas introducing RFID into picking or other wide-area functions could have significant negative impact on operations. Deployment Because compliance is a condition of doing business rather than a cost saving measure, companies will want to begin extending their RFID applications to take advantage of potential efficiency and productivity gains once they are certain the pilot application is working properly. As with the pilot phase, however, any additional RFID applications will have to work side-by-side with existing applications and infrastructure for an extended period. As each RFID deployment is successfully completed, the next RFID application can be implemented. The plan for which applications are to be implemented and their sequencing will depend on the needs of each organization and the ROI each will produce. The guiding factors for selecting and sequencing applications should be the expected ROI, technology availability, customer requirements, and the least disruption to other operations. RedPrairie estimates that this process will take 5 to 10 years to complete for most large and mid-sized companies. One certainty for this staged RFID deployment, existing systems will need to be modified to permit seamless side-by side operations with existing processes. Warehouse management and labor management systems will be most affected by this. They will have to support concurrent data capture from RFID and RF or manual sources and be able to process this data interchangeably for downstream processing. These systems must also continue to handle compliance processing during this phase. The positive side of this duality of operations is that RFID operations can be easily phased in with traditional RF and manual operations without significant disruption. This allows the investment and risks of new initiatives to be balanced with expected ROI and advances in the technology. The downside is the process change that will ultimately yield the greatest productivity gains will be limited by existing operations. Transformation The ultimate goal for RFID technology is to transform supply chain operations. Often this is defined as replacing current RF processes with more efficient scan free processes and eliminating many manual tasks. However, the real value will come from fundamentally changing the way warehouses and distribution centers receive, store, move and ship product. What RFID has the potential to do is remove the human element from locating, tracking, recording and transmitting information about objects in the warehouse. Those objects could be pallets, cases or individual items, but could also be forklifts, pallet jacks, rack locations or other equipment. RFID readers placed strategically throughout the storage and work areas of warehouses, distribution centers, mixing centers, cross-dock facilities, retail store back rooms, etc. could triangulate the exact location of each object in real time to provide a continuous view of inventory and operations. This takes the concept of real-time locating systems (RTLS) and elevates it to the level of a geo-positioning satellite (GPS) system for within the four walls of the facility. Although similar in concept, this approach would be far lest costly and have fewer variables to control than GPS systems for global RFID based tracking. When coupled with RFID enabled receiving and shipping, this advanced RTLS approach has the potential to take supply chain collaboration to the next level by facilitating the open, immediate flow of Copyright © 2003 RedPrairie Corporation. All rights reserved. This publication contains proprietary information of RedPrairie Corporation. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written permission of RedPrairie Corporation. RFID - Just the Facts WP_2003, Page 9 of 11
  10. 10. information across the enterprise and extended supply network. This will increase supply chain velocity and productivity while simultaneously providing a richer set of information in real-time for enterprise and supply chain decision-making. To achieve this automated, collaborative state will require a whole new set of distribution processes and new software and technology to support them. RFID will need significant advancement before this will be technically and financially viable. Current warehouse management and labor management systems will need to be enhanced or replaced to support these new processes within the enterprise. RFID and upgraded systems will have to be widely implemented across trading partners to achieve the collaborative benefits. Most industry experts predict that this phase will not be reached until 2007 at the earliest, with 2013 being cited as the most likely target. Regardless of the exact date, however, there is little argument that the transformational state is the goal and will be the norm for supply chain operations in the future. Companies must start planning for their own transition now to avoid falling into a position of competitive disadvantage. Summary and Recommendations RFID is a technology that shows great potential for transforming supply chain operations even more than the introduction of barcodes and RF technology did in the 1980s and 1990s. Many executives agree with Terry Morgan, senior vice president of IT and CIO for Food Lion, who states, “RFID appears to have the most significant opportunity to transform our business, both operationally and technically. The logistical and information opportunities from RFID are countless.”7 Wal-Mart’s statement in June 2003 that their top 100 suppliers must begin delivering goods with RFID tags by January 1, 2005, with all suppliers to follow suit by 2006, has raised awareness and interest in RFID deployment. Compliance with Wal-Mart’s mandates and similar requirements from the Department of Defense will be the driving factors for early adoption of RFID technology. Longer term, the improvements in efficiency, productivity and information sharing RFID can enable will provide the ROI that will spur supply chain transformation. But although the potential benefits of RFID are huge, there are substantial technical, financial and psychological challenges that must be addressed before the promise of RFID can be fully realized. This will take time. As a result, companies should neither believe all of the current hype in the marketplace, nor rush to implement applications before the technology and financial justification have been proven. However, neither can companies afford to wait until all risks have been eliminated before joining this supply chain revolution. Those who begin now with prudent investments will gain competitive advantage over those who hold back. For these reasons, RedPrairie recommends that all companies, but especially those who are suppliers to Wal-Mart, start their pilot programs today. Pilot programs will be the test bed for the technology, communications and processes that will be required for compliance, as well as for additional supply chain enhancing applications that can be rolled out during deployment and transformation phases. Few companies have the requisite skills in RFID deployment to begin pilot projects on their own. Companies must therefore rely on the leading technology vendors and integrators to guide them through this important task. RedPrairie recommends that when you select your technology partner, you ignore the ones who are enamored with all the hype, and instead choose those willing to give you just the facts. It will be the difference between being sold and finding a partner, and ultimately, the difference between an expensive wild goose chase and real results. Copyright © 2003 RedPrairie Corporation. All rights reserved. This publication contains proprietary information of RedPrairie Corporation. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written permission of RedPrairie Corporation. RFID - Just the Facts WP_2003, Page 10 of 11
  11. 11. About RedPrairie Corporation RedPrairie delivers superior logistics results by driving out more logistics costs than anyone in the industry, enabling customers to consistently achieve their supply chain objectives. This is accomplished through an integrated suite of supply chain execution solutions (DigitaLogistix®) that provide the industry's leading RFID-enable transportation, productivity, and distribution management capabilities, enhanced with action-oriented components for real-time visibility, control and performance measurement. These solutions are deployed through an end-to-end results delivery system (the RedPrairie Approach) that ensures results achievement. RedPrairie delivers measurable results for customers in many markets, including high tech and electronics, consumer goods, food and beverage, third party logistics, retail and wholesale, service parts, and make-to-order manufacturing. Customers include Hewlett-Packard, Procter & Gamble, Nestle, Panasonic, Georgia-Pacific, Eveready, Unilever, Exel, General Electric, Amazon.com, and many others. For additional information, call 1.877.733.7724, or access www.RedPrairie.com. RedPrairie is a trademark, and DigitaLogistix and DLx are registered trademarks of RedPrairie Corporation. © 2003 RedPrairie Corporation. All Rights Reserved. ### 1 Scott Lundstrom, “RFID Will Be Bigger Than Y2K,” AMR Research, July 31, 2003 2 J. Woods, K. Peterson and C. Hirst, “Maturing Open RFID Applications Will Reshape SCM,” Gartner, Inc., January 30, 2003 3 Scott Lundstrom, “RFID Will Be Bigger Than Y2K,” AMR Research, July 31, 2003 4 Timothy J. Mullaney and Peter Coy, “This Gift Just Keeps On Giving,” BusinessWeek, August 18, 2003 5 John Burnell, “Standard Behavior: RFID Maturation is following well-worn technology development path,” realtime, September 2003 6 Jonathon Collins, “The Cost of Wal-Mart’s RFID Edict,” RFID Journal, September 11, 2003 7 Joe Skorupa, “State of the Store CIO Roundtable,” RIS News, September 2003 Copyright © 2003 RedPrairie Corporation. All rights reserved. This publication contains proprietary information of RedPrairie Corporation. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written permission of RedPrairie Corporation. RFID - Just the Facts WP_2003, Page 11 of 11

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