The Hidden Secret of the 5-Cent RFID


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The Hidden Secret of the 5-Cent RFID

  1. 1. The Hidden Secret of the 5-Cent RFID MARKET PRIMER s By Mark Palmer "When will we achieve the 5 cent tag?" is one of most frequently asked questions about Radio Frequency Identification, or RFID, and it seems so simple to answer; but it always trips me up. There seem to be so many subtexts behind this question like: “I think RFID is impractical because it’s too expensive,” “Wal-Mart’s RFID mandate is really an unfair tax on Wal-Mart suppliers,” or even “When will we achieve the mythical tipping Mark Palmer Vice President point for RFID technology when it will be broadly adopted?” These Complex Event Processing concerns and questions can not be addressed without first understanding and RFID Technical Evangelist the basics of RFID. So I’ll start by discussing the basics of RFID technology, then discussing the implications of these basic factors. In the ObjectStore A Division of Progress Software end, debate over timing or tag costs; instead, we wind up talking about 14 Oak Park the interesting business issues of RFID. Bedford, MA 01730 So let’s start with the basic job of RFID: whether it’s tracking a bag you T: +1-781-280-4000 check in at the airport, the car you drive through an EZ-Pass enabled Toll Free: 1-800-477-6473 tollbooth, or a case of Coke in Wal-Mart’s supply chain, RFID has one basic job: the automated tracking of an object via radio frequency (RF) transmissions. An RFID tag is a small silicon chip that is attached to an antenna. The silicon stores data and implements logic, like a tiny computer, and the antenna transmits an RF signal that is received by an RFID reader. In a way, RFID tags act like tiny radio stations. The data is decoded by a reader and forwarded to an application that tracks your bag, bills your account for toll usage, or tracks Wal-Mart’s inventory. And it all happens without human intervention, in real time. Now let’s turn to the types of RFID technology, and the differences among them. At the most basic level, there are two types of RFID tags – passive and active. Passive tags have no power; active tags do. Passive Page 1 of 7
  2. 2. The Hidden Secret of the 5-Cent RFID Tag tags use the radio frequency (RF) field from the reader for power, and can transmit their signal from 1-10 feet, depending on the frequency. Active tags use their on-board power to transmit their signal hundreds of feet, depending on the tag’s power. The simplest passive tags have their data burned permanently into the tag when they are made; some passive tags can have their data re-written many times. The simplest passive tags don’t carry much data: Wal-Mart’s mandate, for example, calls for 12 byte tag codes. Active tags, on the other hand, can power random access memory (RAM), and typical tags store 32,000 bytes of data. Since passive tags don’t have power, they can’t power other stuff; active tags can power sensors that detect things like temperature or humidity. And there’s yet another type of tag: semi-active tags, which are a cross between active and passive tags. They transmit their signal by reflecting the reader’s RF field, but have their own power to drive its circuitry. Figure 1: The greater the capability requirement, the greater the cost per tag. In addition to the different tags, there are other factors that impact all types of tags. The design of the tag itself varies depending on the application: tags can be placed in the chips in casinos, inside golf balls, even in the back of your adopted cat in Massachusetts, or where you live. Just as your radio has AM and FM bands, RFID tags can transmit on ultra-high (UHF), high (HF), and low frequency (LF) bands – the choice of band depends on many factors. For example, UHF has long range, but MARKET PRIMER Page 2 of 7
  3. 3. The Hidden Secret of the 5-Cent RFID Tag is absorbed by water. They better plan for plenty of water interference on those RFID-enabled golf balls if I’m going to use them. And how about just printing your tags? Plan on this, too – conductive ink technology is being developed that will allow you to print antennas for RFID tags. The final factor for our discussion is security. The cheapest and most prevalent tags, such as the kind Wal-Mart mandates, lack the power to perform even basic security functions like symmetric-key encryption and challenge-response identification protocols, which can ensure, for example, that only trusted readers can decode the data on the tag. These types of advanced encryption require more intelligence in the RFID “computer chip”, comprised of gates that implement logic. For example, advanced encryption requires about 30,000 gates just to encrypt data on the tag; by contrast, simple Wal-Mart tags need only 500-5,000 gates to do their whole job. And secure tags need more storage capacity as well – about 12 bytes to store cryptographic keys. Complexity, gates and data add up to – you guessed it – added cost. So we can see a tangled web of factors that contribute to the cost and capability of RFID. Today, the simplest, passive, non-encrypted RFID tags, with a 10-foot read range and no sensors, that have a basic numbering scheme pre-written during manufacturing, cost about 22 cents each at quantities of about 100,000. These are the tags many are focused on, and many hope they might cost 5 cents each in a few years. Some really smart and honest people at the biggest RFID hardware companies predict with bold confidence that these simple tags will cost about 5 cents by 2008. Although I won’t hazard my guess on which bold prediction I believe, I hope that, at the very least, I helped clarify what these two groups mean by a 5-cent tag. Depending on the level of sophistication, active tags can cost from a few dollars each to a few hundred dollars each. Have I confused you even more? Regardless of this, the hidden secret of the 5-cent RFID tag is that it represents the tip of the iceberg of RFID understanding. Now that we have uncovered more of that iceberg, we can discuss some implications and guidelines. Here are a few guidelines to start you on your way: 1. Recycle as Much as You Can. Sure, recycling is a good idea, but when it comes to RFID, it’s a great idea. RFID tag reuse is one of the best ways to reduce the long term cost of RFID tags. Active tags are a MARKET PRIMER Page 3 of 7
  4. 4. The Hidden Secret of the 5-Cent RFID Tag great way to achieve reuse, because the tag’s data can be changed dynamically. Although passive tags are cheaper, if you throw them away, your cost accumulates over time; tag reuse can cap your long term cost. These factors are shown in the graph, below. Figure 2: Without reuse, even the cost of a 5 cent tag will accumulate over time. Tag reuse helped Scottish & Newcastle, manufacturers of beer in the UK, achieve a good return on RFID. They use active tags to track the nearly 2 million beer kegs they ship to distributors, retailers, bars, and restaurants. Their problem was that kegs are expensive, and they are often lost in transit or not returned by customers. By reducing this loss, Scottish & Newcastle is saving $25 million a year out of what it previously spent to replace lost kegs. 2. Don’t Rule Out Expensive Tags. Don’t rule out active tags because they are expensive; their cost comes with benefit. I met with a warehouse management company last month that makes custom doors and windows. Managing these custom items is made easier by storing data about the item on an RFID tag affixed to the item. At any time, the item can transmit that information, reducing the need for wireless access to enterprise applications, or the distribution of data from those applications to a handheld device. Furthermore, these active tags are used to help locate an individual order among thousands of items in the warehouse at any given time – this helps decrease the time and increase the accuracy of order fulfillment. MARKET PRIMER Page 4 of 7
  5. 5. The Hidden Secret of the 5-Cent RFID Tag 3. Count Every Byte and Chew Slowly. We didn’t explore the data capacity issue for fun – data capacity directly, and dramatically, impacts RFID cost. And just as chewing slowly helps us appreciate our food, deeply understanding the qualitative issues in your RFID implementation will inform the cost and benefit of your potential RFID use. That is, the environment, materials and security required by your application will impact the current and future cost of RFID for you. So chew on these issues slowly before jumping in. 4. Play the Wal-Mart Granularity Game. Yes, RFID has been understandably labeled a “tax” on Wal-Mart suppliers because the tags aren’t recycled, but that’s one reason why their mandate begins with case and pallet-level, not item level, tagging. You can play the same game and ride cost down by tagging higher-value, or larger groups of items now, working out your business processes, and then, later, tag at a lower level of granularity once you prove return on investment. 5. Think Beyond Tags & Readers. With the basics under your belt, next to consider is whether this stuff can fit in your current buildings; will you need to re-train the people that manage the processes, maybe even change packaging for your products or goods? These factors add cost and present opportunity and should be considered together. 6. Consider Second-Order RFID Value. The warehouse management company found that location services added value beyond data tracking for their custom items. And Scottish & Newcastle looked past the obvious to find second-order value in RFID: beyond just tracking lost or stolen kegs, they found that the active tags on the kegs could detect when they are filled, delivered, returned, and washed. Next they decided to track product freshness and calculate how much unconsumed beer is returned by customers in exported kegs, information that may result in even greater financial savings – they are asking the UK customs department to refund export taxes paid on unconsumed beer. The second order benefits of RFID sometimes outweigh the originally envisioned benefits. The recent flurry of baggage handling projects will clearly provide benefits to the airlines and airports by reducing lost baggage. MARKET PRIMER Page 5 of 7
  6. 6. The Hidden Secret of the 5-Cent RFID Tag Related Resources: ObjectStore RFID Resource Center Look here for recorded webcasts, articles, white papers, and more on RFID. ObjectStore RFID Accelerator The RFID solution from ObjectStore that delivers an in-memory data caching architecture and persistent data store that captures RFID event streams, thus enabling event-based queries and other processing operations to transform RFID data into business information that can be leveraged by supply chain, retail, manufacturing, and other enterprise applications. About the Author Mark Palmer is RFID technical evangelist with ObjectStore, an operating company of Progress Software. He has 15 years of experience in the operational data management and middleware industry as a chief technology officer at Youth Stream Media Networks and director of product strategy at IONA Technologies. You can contact Mark Palmer at MARKET PRIMER Page 6 of 7
  7. 7. The Hidden Secret of the 5-Cent RFID Tag About ObjectStore ObjectStore is a global provider of real-time data management products. Its products enable corporate data caching and complex event processing, and its leading object database is renowned for performance and scalability. ObjectStore(R) products are supporting RFID implementations, and are deployed in industries such as finance, telecommunications and travel, where companies rely on them to complement their corporate data management infrastructure. ObjectStore is an operating company of Progress Software Corporation (Nasdaq: PRGS), a $300+ million global software industry leader. Headquartered in Bedford, Mass., ObjectStore can be reached on the Web at or by phone at +1-781-280-4000. Worldwide and North American Headquarters ObjectStore, A Division of Progress Software Corporation, 14 Oak Park, Bedford, MA 01730 USA Tel: +1 781 280 4000 UK Office ObjectStore, A Division of Progress Software Limited, 210 Bath Road, Slough, Berkshire, SL1 3XE England Tel: +44 1753 216 300 Central Europe ObjectStore, A Division of Progress Software GmbH, Konrad-Adenauer-Str. 13, 50996 Köln, Germany Tel: +49 6171 981 127 © 2005 Progress Software Corporation. All rights reserved. Progress and ObjectStore are trademarks or registered trademarks of Progress Software Corporation, or any of its affiliates or subsidiaries, in the U.S. and other countries. Any other trademarks or service marks contained herein are the property of their respective owners. Specifications subject to change without notice. MARKET PRIMER Page 7 of 7