Get ready: RFID is coming

Whether IT and network managers like it or want it or not, RFID (radio frequency identification), the wireless technology for identifying, tracking and monitoring people and things, will likely be a big part of their future – if it’s not already part of their present. RFID in fact must be part of their future if they hope to keep their companies competitive, proponents argue. Indeed, the benefits appear incontrovertible, especially in supply chain management and related applications. And with heavy hitters such as Wal-Mart and the US Department of Defense insisting that suppliers put RFID tags on boxes and pallets to help them track shipments and inventory, many companies will have no choice. All of this means that IT managers need to be thinking now about how RFID could impact them. In particular, what will be involved in integrating RFID with existing systems and applications. It won’t necessarily be an onerous impact, but it will likely be substantial and far reaching. According to a 2008 report from ABI Research, the RFID market – hardware (tags or transponders and readers or interrogators), plus RFID specific software and services – will grow at a compound annual rate of 15% over the next five years. By 2013, RFID will be a $9.7-billion industry worldwide, ABI says.But IDTechEx, a UK-based consulting and research firm specializing in RFID and related technologies, predicts the market will grow much faster and bigger – $5.29 billion in 2008, up from $4.93 billion last year, and topping $25 billion by 2018. IDTechEx says 2.16 billion tags will be sold in 2008 alone. Supply chain management remains the big application. Others are growing in importance, including retail inventory control. Tagging animals in agribusiness operations is becoming a regulatory requirement in many jurisdictions. More and more manufacturers are using RFID in factory process control applications. The health care industry is using it in materials management and purchasing, and to track assets and people. Libraries use it to enable self-checkout and automated book sorting systems. The list goes on, with lots of niche applications, including smart ticketing for sports and entertainment venues. “It’s a little bit like the Internet in the early 1990s,” says Bob Moroz, president, of Toronto-based solution provider RFID Canada. “RFID is an enabling technology that’s going to drive a lot of other applications. There is certainly a lack of understanding , but in the next few years, will be pretty well everywhere.” Canada plays catch-upCanada lags the U.S. in adopting RFID, says John Keogh, senior vice president at EPCglobal Canada and Traceability, part of the global not-for-profit GS1 organization which promotes best practices in supply chain management, including the use of RFID. And North America lags Europe and Asia, although it’s catching up.“We have to do a better job of educating the community ,” Keogh says. “We are working now with federal and provincial business leaders to encourage companies to adopt this technology to help them improve their competitiveness.”The case for RFID is not difficult to make, Keogh argues. The upfront capital expense may hold some companies back, especially small and medium-size businesses. That’s one reason Canadian companies lag on deploying RFID, he says – 95% fall into the SMB category. Too bad, because return on the investment can be impressive. Keogh claims that each 15-cent investment in an RFID tag – that’s near the current low-end of the broad price range for tags – can result in benefits of anywhere from 40 to 60 cents. Benefits include operational cost savings, increased revenue and reduced risk.The University of Arkansas has been conducting controlled studies of Wal-Mart’s pioneering use of RFID in the retail industry for several years. One recent finding: using RFID reduced inaccurate inventory counts – a major factor in costly over-stocking – by 13% compared to stores with manual barcode-based systems. Keeping store shelves stocked so products are there when customers shop for them can increase revenues. Another U of A study commissioned by Wal-Mart showed that using RFID – to automatically alert managers when shelves were bare – reduced the number of stock-out situations by 16%. Keogh stresses that barcode technology will not go away anytime soon and that it’s important that companies understand which technology makes best sense for their application. But the fact is that in many places RFID is replacing barcoding because the business case for doing so is a no-brainer.Glaxo Smith Kline, Canadian subsidiary of the multi-national pharmaceutical giant, is a case in point. When Glaxo was in the process last year of updating 14-year-old factory floor technology at its Toronto-area pill manufacturing plant, it initially considered sticking with the barcoding it had been using to identify and track pallets and their contents. But not only did RFID offer important reliability advantages over barcoding – resulting in reduced factory down time – it was also significantly cheaper. In the vertically-oriented five-storey factory, a giant crane moves aluminum pallets stacked with raw materials, partly manufactured product and finished product to and from various stations: staging, cleaning, manufacturing processes, warehousing, shipping. In the tightly regulated pharmaceutical industry, companies must be able to prove that the right materials were delivered to the right place at the right time at every step in the process. To log and control movement of pallets, Glaxo used barcode readers at each station to scan codes stamped on anodized aluminum labels attached to all four sides of the pallets. But if the scanners couldn’t read the codes – because they were scratched, obstructed or had been knocked off – the crane would grind to a halt, and with it all activity in the plant. Workers were idled, production schedules missed. In the event of long outages, product might spoil and have to be discarded.“And each production run can be worth hundreds of thousands or even millions of dollars,” says Ray Jarvis, project manager in the company’s global manufacturing systems IT department. Now the plant has switched to RFID, these problems have largely disappeared. “RFID, because it doesn’t rely on line of sight, is just a lot more reliable,” Jarvis says.The RFID cost advantage was a clincher. New barcode readers for each of 122 stations would have cost $2,000 apiece. The unit cost for RFID readers: $700. Because Glaxo had to use more expensive low-frequency RFID technology to accommodate the noisy factory environment, tags for the 4,000-plus pallets cost $3 each, considerably more than tags at the low end of the range. But it was still a significant saving.Per-unit tag costs, which vary by technology used and volume ordered, can be crucial to an RFID business case – especially where tags will be discarded. Grocery retailers, for example, are hoping it will eventually be possible to get the cost per disposable tag down to one cent, making it feasible to tag every product on their shelves. But at Glaxo the cost of the tags was not a critical factor because they will be reused for years. RFID is not always about saving or making more money. As Keogh explains, risk reduction can be a key benefit in some sectors. One banking official told him recently about a situation in which a backup tape with personal information about 100,000 customers went missing. The cost to the company just to mail out explanatory letters to the customers was $4 million. A fairly simple RFID tracking system, of a kind that many organizations are deploying to protect valuable assets, could have prevented the situation occurring in the first place by showing where the tape was at all times, and sounding alarms if it left a secured area, Keogh says.RFID moves into unlikely areasCathexis, a St. John’s, Newfoundland company with a unique mobile Bluetooth-based RFID reader, is finding markets in some unlikely application areas. One is security companies that need to be able to prove to clients they’re fulfilling contractual obligations. In the past, unsupervised security guards might manually log that they had visited checkpoints when in fact they were sleeping in their vans. Now they have to prove they did their rounds by going to each position and using the Cathexis IDBlue reader to scan the RFID tag there. It sends a time-stamped log of activity to a back-end system. The application can provide a competitive advantage, says Cathexis president Steven Taylor. The security agency is able to provide quality assurance that rivals cannot. Indeed, use of RFID may become a common customer requirement in future. The other part of the business case, Taylor says, is reduced billing time. Because the RFID transactions are being sent wirelessly from the reader to a handheld device and then over a cellular or Wi-Fi network to a back-office server, the system reduces time to generate an invoice by 15 days or more – which means the company gets paid faster.Other business cases for RFID rely less on bottom-line benefits than process improvements and increased effectiveness. At Toronto’s Sick Kids Hospital, for example, the purchasing department implemented a “two-bin” RFID system to automate re-order of commonly used supplies.When the first bin of a particular item is empty, a nurse simply hangs its RFID tag on a reader board, which communicates with purchasing systems to automatically generate and act on a requisition, without any human intervention. It saves nurses the time they once spent manually filling out requisition forms, originally on paper, later electronically. Wayne Coros, the hospital’s director of materials management and purchasing stresses that cost savings was not the main objective. “The big key is that it lets nurses do what they do best – nurse patients – and spend less time doing materials management,” Coros says. Integration is keyThe Cathexis and Sick Kids business cases illustrate a fundamental point about RFID. To deliver the benefits, it will almost always need to be integrated with existing systems and applications – most commonly, inventory control, supply chain management or ERP (enterprise resource planning), and increasingly, business intelligence.“Integration is not overly challenging,” Moroz contends. “It’s like integrating any peripheral. You have to program certain commands.” But his company focuses almost exclusively on the RFID infrastructure, leaving integration to clients or software partners. At Glaxo, one of Moroz’s customers, integration with the existing Crane Operating System (COS), was decidedly a challenge, Jarvis says. The COS is a custom-developed server-based application that governs interaction between the crane and program logic controllers (PLCs) – automated factory equipment – at each station. The decision to go with a centralized open standards OPC (OLE for process control) server simplified the integration task somewhat. The server translates conversations between PLCs using various protocols and the COS and between the COS and the RFID system. But it was no cakewalk, Jarvis says. “The OPC server has 1,000 ways to configure it – and maybe three that work,” he says, only half joking. “So it was fairly challenging to get all the pieces to work together – and then to keep track of all the data. A PLC could have 30 tags, there are 120 stations. So you’ve got thousands of tags to keep track of. And one little character in the wrong place means it doesn’t work.” Taylor, whose company does get involved with integration as an RFID solutions developer and professional services firm, says, “Integration with back-end systems can be very, very complex. Some clients try to handle it on their own, but we encourage them to embed one of our people as a team member, someone who understands the implications of using RFID.”The challenge is often integrating data flowing from RFID systems into existing database structures. The sheer volume of data can overwhelm legacy systems. In some scenarios, for example, an interrogator might simultaneously be reading the tag on a pallet, on each box on the pallet and each product in each box. It’s critical to put the right filters in place so that the application grabs only relevant RFID data.For projects in which Cathexis is responsible for the integration, it has standardized on BizTalk Server RFID, a specialized version of Microsoft’s market-leading integration server software. BizTalk saves development time and dollars by eliminating one-to-one interfaces between systems in complex computing environments. Each system interfaces with BizTalk, which then translates and manages transactions among them.Cathexis can and does custom develop one-to-one interfaces to clients’ legacy applications, Taylor says, but in many cases, the extra cost involved would make a project economically unfeasible. “Using BizTalk RFID for us often takes fringe opportunities and puts them in the black,” he adds.Microsoft is not the only provider of middleware. IBM’s WebSphere Premises Server offers similar benefits. “Most software being deployed today either has or is now looking at adding an RFID component,” Moroz says. Middleware solutions can help mitigate many of the integration challenges, which leaves only the decidedly non-trivial challenges of deploying RFID itself. Like any RF technology, it’s subject to the vagaries of wave propagation and the effects of interference. More projects go awry, Moroz and Taylor say, because companies pay too little attention to the physics of radio networks, or choose the wrong RFID technology. “If deployed properly, it can drive tremendous benefits,” Moroz says of RFID. “But it’s a challenging technology.”

Get ready: RFID is coming

News | 08/21/2008 12:54 am EDT

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