7 16 05 RFID Questions answered and examples Jerry Banks

7/16/05 RFID: Questions answered and examples Jerry Banks Atlanta, Georgia USA

7/16/05 Appreciation is given to the RFID Journal from which the original version of this presentation borrowed much material. Some of that material on the basics of RFID is retained in this version of the presentation.

Warning! Despite recent developments, the future of radio frequency identification in the supply chain is not entirely clear, but its potential impact is too big to be ignored. Tom Singer, “RFID 101, ” Logistics Today, Nov. , 2004.

From RFID Update, June 21, 2005 Our research shows RFID will have strong growth. But some expectations are unrealistic. Recently, we were asked if RFID could sustain a 400% compound annual growth rate for several years. If you make modest assumptions about the RFID market in 2004, then a decade of 400% compound annual growth would exceed the US GDP. So it seems unlikely, regardless of the definition of the RFID market.

From RFID Update, June 21, 2005 “RFID is a complex and still relatively immature technology for which expertise is absolutely required to be successful. ”

What is RFID? • RFID = Radio Frequency Identification – Used to identify objects (including people) – RFID tag (or transponder) • Stores information on a microchip • Has an antenna – Radio waves are reflected to a reader – Reader passes information to a computer

Gemplus Gem. Wave™ Series

How does the system work? • The reader sends out electromagnetic waves • The tag antenna receives these waves • The microchips circuits are powered by the field created by the reader • The microchip modulates the waves that are sent back to the reader • The waves are converted to digital data

RFID tags are being placed in Euro notes

Is RFID better than bar codes? • They are different technologies that have different applications, sometimes overlapping • Bar codes are “line-of-sight” – Scanner must be properly oriented • Bar codes can be read if they are within range

Is RFID better than bar codes? • If a bar code is ripped or dirt covered, it can’t be scanned • Bar codes usually contain less information than an RFID tag – Manufacturer and product, but not the unique item

Will RFID replace bar codes? • Doubtful • Bar codes are inexpensive and work well for certain tasks

Alien Squiggle ‘T’: Low cost, general purpose Alien M Antenna: Low environmental dependence, general purpose Alien 2 x 2: Low cost, airplane baggage

Is RFID new? • Originated in the 1970 s • But, it has been too expensive for widespread application • If the price comes down enough they have lots of advantages – Radio waves travel though non-metallic materials – Unique serial numbers can be stored

What problems have existed? • All RFID systems use proprietary technology – If Company A puts an RFID tag on a product, it can’t be read by Company B unless they use the same RFID system – Unless they use the same RFID system from the same vendor – That is, a lack of a standard

“Trends, ” Inbound Logistics January, 2005 • Report of a survey of 669 supply chain and information technology executives – 75% say it is “important” or “very important” to have an effective advanced infrastructure in place to support RFID mandates – 33% have already implemented these effective advanced infrastructures

“Trends, ” Inbound Logistics January, 2005 • Report of a survey of 669 supply chain and information technology executives – 66% say they are installing RFID because of customer mandates such as Wal-Mart or Do. D – 60% believe RFID system deployment will reduce labor costs and boost process efficiency – ultimately making them more competitive

The cost of readers is currently US$300 to US$1000 each. Expected to shrink to less than half that by the beginning of 2007.

What about the cost? • Readers cost US$1000 or more • Tags cost US$0. 20 or more – If an item costs US$2. 00, a US$0. 20 tag is 10% of the cost Flash: Buy 1, 000 tags and Alien Technology will sell them for less than $0. 20 each See: http: //www. alientechnology. com/products/rfid-tags/

The latest prediction on RFID tag price, a widely derided but nonetheless commonly used benchmark of all things RFID, came from Alien CEO Stavro Prodromou at last week's RFID World. Prodromou expects tag prices to fall to only 10 cents by 2007, and that assumes substantial production levels of 100 million tags per month. That's a far cry from 5 -cent tags by 2008, an aggressive but plausible prediction often heard in industry circles. March 7, 2005

Want to buy an RFID reader? Active Wave RFID Wizards

Costs of RFID implementation • Source: Accenture as reported in Logistics Today, January, 2005 – Tag prices are 2% to 8% of the total cost – Readers and controllers typically are 7% to 10% of the total cost – Software and software integration are typically 52% to 80% of the total cost

“RFID hardware shrinking in size” • Inbound Logistics, December, 2004 • Readers have shrunk from large units the size of a dictionary to the footprint of a credit card • Over time it is predicted that reader modules will shrink into chips • By 2007, RFID reader functionality will be in PDA’s and cell phones

What frequency do the tags use? • Actually, there are several frequencies – Low is @ 125 -135 KHz – High is at 13. 56 MHz and 433 MHz – Ultra-high is in the range 860 -960 MHz – Microwave is at 2. 45 and 5. 8 GHz • Radio waves behave differently at different frequencies, so it matters which is chosen

Which frequency is right? • 13. 56 MHz is cheaper than UHF – Uses less power – Better able to penetrate non-metallic substances – Ideal for scanning objects with high-water content at close range • Example, fruit

Which frequency is right? • UHF tags offer better range and can transfer data faster – But, they use more power • But, they require a clear path between the tag and the reader • Better for scanning boxes passing through a bay door into a warehouse

Are these frequencies standard? • Most countries have assigned the 125 k. Hz area of the radio spectrum for lowfrequency systems • 13. 56 MHz is used around the world for high-frequency systems • Countries have not agreed on the UHF spectrum – It will take years to work this out

What’s the problem with metal and water? • Radio waves bounce off metal and are absorbed by water at UHF – That makes tracking metal products or those with high water content a problem – System design and engineering can overcome these problems • Low- and high-frequency tags work better – Low-frequency RFID tags are even embedded in metal auto parts to track them

Passive or active tags? • Active RFID tags have a power source…a battery…to run the microchip’s circuitry and to broadcast a signal to a reader • Passive tags draw their power from the reader which sends out electromagnetic waves that induce a current in the tag’s antenna

Passive or active tags? • Current interest is on passive tags which are less costly by far • Their read range is about 6 meters • Active tags can be read for more than 30 meters

What is an EPC? • EPC = Electronic Product Code = RFID – Developed by the Auto-ID Center as a successor to the bar code – A numbering scheme that is used to identify products as they move through a global supply chain

China Eying RFID China Tech News, October 21, 2004 China, Japan and South Korea are making joint efforts to develop RFID standards. They are following a similar alliance that was formed to develop standards for the Linux operating system. The United States and Europe are working on their own standards, which they hope will become the global standard. http: //www. chinatechnews. com/index. php? action=show&type=news&id=2006, Accessed November 26, 2004

Three ‘standards’ • EPC – Businesses in the USA and Europe • ISO 18000 – Favored by the USA military establishment • Asian version – Avoiding the payment of royalties – Generation 2 standards will be royalty free! • Announced December 16, 2004 • Actually, only the most basic version!!! – Clarified on February 3, 2005

The race to ship GEN 2 product is heating up, and it will only accelerate as 2005 progresses. Since GEN 2's ratification last December, the RFID tag and chip manufacturers have been hurriedly ramping up to begin production. Given that many would-be customers will not purchase RFID hardware, knowing that whatever they might buy now will be made obsolete by GEN 2 releases later this year (Quarter 3) the industry is stalled in an awkward paradox of pent-up demand decreased spending. Information Week, April 4, 2005

Gartner: “Get Ready, GEN 2 Has Arrived” April 11, 2005

The U. S. Department of Defense has released the Defense Federal Acquisition Regulations Supplement (DFARS), which outlines the regulations that suppliers must follow with respect to shipping the Do. D RFID-tagged goods. Published in yesterday's Federal Register, the document represents an important step in the Do. D's RFID initiative to introduce track-and-trace functionality across its supply chain. The document was originally due at the end of last May, which represents a delay of almost one year. Those suppliers affected by the DFARS have until June 30 to submit comments about its proposed regulations. April 22, 2005

Global acceptance? • While Wal-Mart has worked closely with EPS Global to promote open standards, those standards are still far from being globally accepted • The ISO has been involved in the process, so the momentum of the world’s largest retailer and other global companies could carry the EPC Global initiatives into accepted standards worldwide Source: Logistics Today, January, 2005

How much information can a tag store? • Typically, 2 KB – Companies are now looking at a simple “license plate” tag that contains only a 96 -bit serial number – Cheaper

Slap-and-Ship Wal-Mart Venture Research’s belt-driven Slap and Ship workstation

A 3 -phased approach • Pilot projects operating in parallel, but could be in series – Slap-and-ship with a portable station in the shipping area – Print-and-apply systems in the manufacturing line • Producing both RFID-compliant and non-compliant cases and pallets • Meeting the needs of the customer – Warehouse management system integrating RFID Beaver Street Fisheries in Jacksonville, FL

Return on Investment • It will be tough to generate a ROI with slap-andship • Most organizations are a long way from achieving ROI on RFID – Because they are aligned in silos of automation – There is a receiving system, a production system, a QA system, … – And, they won’t share information – Another silo will be constructed for RFID Source: Logistics Today, January, 2005

Acronyms • US Do. D – United States Department of Defense • WMS – Warehouse management system • ERP – Enterprise resource planning • ASN – Advanced shipping notice

Wal-Mart • Wal-Mart and the US Do. D RFID mandates have sparked a new software market for RFID compliance solutions • These applications are typically designed to work with existing WMS and ERP systems • The result is an ASN that is transmitted to the trading partner

Wal-Mart • Unless the supplier ships exclusively to Wal-Mart or the Do. D, a decision in advance needs to be made concerning a tag or no tag • One approach is to tag every shipment – Slap-and-ship – There is an extra cost for attaching tags when not needed

But! "Rapid growth rates predicted for RFID based on the Wal-Mart compliance deadline of January 2005 did not come true. " Marketstat, May 27, 2005

Can reader collision occur? • The signal from one reader can interfere with the signal from another reader if the coverage overlaps • TDMA = Time Division Multiple Access – Technique that is used to overcome the problem

Can tag collision occur? • If a lot of chips are being read in the same field, it’s possible that more than one chip reflects a signal at the same time – This confuses the reader • Vendors have developed techniques to overcome this problem

What are some common applications? • The most common are tracking goods in the supply chain, reusable containers, high value tools, and parts moving in a production line • Applications are limited only by the imagination!

Controlling access to buildings

Announcement for a course in Atlanta, July 19, 2005 US$495

Tracking cattle

Tracking legal files

Tracking baggage Halted!

RFID applications according to Marketstat: 29% 20% 12% 10% 8% 8% 6% 4% 3% Supply Chain Management Access Control Asset Management Point-of-Sale Baggage Control Other Vehicle Identification Animal Tracking Tire Tracking May 27, 2005

Will RFID lead to massive layoffs? • RFID is a labor-saving technology, so some workers will lose their jobs – Because fewer workers will be needed to scan bar codes • But, the transition from bar codes to RFID tags will take 10 years or more – So, there will be ample time to make changes – The technology will create new jobs

Port of LA/Long Beach Container ships

Port of LA/Long Beach From autos to zinc (shown here)

Port of LA/Long Beach Cruise ships

Port of LA/Long Beach Intermodal

Port of LA/Long Beach • Port of LA/Long Beach is a 70 -acre yard and transload facility encompassing 1100 parking slots and 250 dock doors • Can track and trace the comings and goings of each of the containers and trailers in its yard

Port of LA/Long Beach • Attached RFID tags (small, active radio transmitters) via a clamp to every container and trailer that enters the yard • Also, a real-time locating system as well as its rule-based yard management system software

Port of LA/Long Beach • While consumer goods companies continue their elusive search for ROI from their RFID investments, very significant savings are being accomplished for companies using the less-publicized but more robust active RFID technology • An example from Logistics Today, September, 2004

Port of LA/Long Beach • Previously relied on traditional data entry to capture location of the containers and trailers into PCs on a batch basis – Very labor intensive • Was hands on • Now totally live and accurate

Port of LA/Long Beach • How the old system worked: – “In a traditional yard, the driver comes in, gets a gate pass from a guard, is told to drop off the container at a specific location. Then, the driver goes to another window to get the paperwork signed. If the driver is making a double transaction, he/she then goes to another location, picks up the container, goes to the gate, shows the paperwork, shows it to the guard, and leaves”

Port of LA/Long Beach • How the new system works – “When a container comes to the gate, the driver knows that he/she is there for a double transaction. An operator standing in the lanes at the gate has a handheld device tethered to a printer. The drivers don’t have to stop at the window and leave their cabs any more. ”

Port of LA/Long Beach • Time to complete a double transaction decreased by 66% • Eliminated 100% of costs associated with manual search • Improved gate personnel productivity by 50% • Increased daily throughput of the yard by 38%

Big players in RFID IBM I B M TI HP SAP Sun Intermec

Technology adoption curve

Ultimately, each firm and supply chain must determine their position on the RFID adoption curve…a company that moves too quickly or slowly can risk its competitive position. Some should be early adopters while others should wait until the technology fully matures. Most will fall somewhere in between. Tom Singer, “RFID 101, ” Logistics Today, Nov. , 2004.

RFID adoption is "stuck in neutral. " The industry is plagued by the contradiction that while RFID first movers are repetitively insisting that others join them in deploying RFID, they remain unwilling to substantively share their findings on RFID's benefits. Thus the wave of would-be fast followers remains hesitant, still unsure of a path to ROI and Increasingly hardened to the "Get Started Now“ mantra coming from the chorus of first movers. AMR Research, April 20, 2005

Sequel to the Wal-Mart Story • “Despite Wal-Mart’s edict radio tags will take time, ” NY Times, 27 Dec 2004 – RFID is not ready to meet the needs of either Wal-Mart or its suppliers • • Sub-100% read rates High cost Difficulty of data integration Only 40 of the 100 mandated Wal-Mart suppliers will be tagging everything shipped to the retailer

The other side of the story As of the end of January, all systems accountable to the mandate are in place. 104 Wal-Marts, 35 Sam's Clubs, and 3 distribution centers have RFID systems installed. Roughly half of the 100 mandated suppliers completed the deployment without outsourcing to consultants or integrators. RFID data reads are made available within 30 minutes on Wal-Mart's Retail Link site for its suppliers. As of March 1 st, Wal-Mart has received an aggregate total of more than 23, 500 tagged pallets and 660, 000 tagged cases, comprising more than 5 million RFID data reads.

How to start • Get an education on market basics – Attend conferences – Collect marketing materials – Make phone calls – Visit test centers From “Questions form experts, ” Inbound Logistics, January, 2005

Indiana University's Kelley School of Business in Bloomington, Indiana, has been tapped to receive $150, 000 from Proctor & Gamble's charitable arm to develop and offer coursework in RFID. March 31, 2005

RFID should ultimately be a successful technology, but the market evolution and implementation will take time From “Questions form experts, ” Inbound Logistics, January, 2005

Some challenges that must be faced • High price tags – $0. 25 to $0. 35 in large quantities and $0. 50 to $0. 70 in small quantities • Too high to be absorbed into the item cost • Tag performance – 10% to 12% are dead-on-arrival – Only 80% to 90% that pass inspection can be read

Some challenges that must be faced • The laws of physics – RF does not easily pass through metal or liquid • Global standard still does not exist • No ROI seems to be forthcoming – $13 million to $23 million investment – Must find alternative benefits • Theft prevention, counterfeit prevention, labor reduction, …

How long can we get along? • Indefinitely, if sales are to smaller retailers • If Wal-Mart is a key customer, late 2005 for most vendors, and early 2007 for all vendors

Euro RFID Market to Hit EUR 5 Billion in 2007 According to a press release from research firm Frost & Sullivan, the market for RFID hardware, software, and services will exceed EUR 5 billion in 2007. The growth will result from the decreasing cost of RFID technology, specifically that of tags. "Further price decreases are likely to positively impact manufacturers‘ unit shipments and encourage them to attempt more large-scale projects, " the report notes. May 17, 2005

On the contrary! • According to a recent survey by BEA Systems of 150 information technology and logistics executives from the UK and Finland, a whopping 70 percent of respondents claim the need for "a lot more information" before making a decision one way or the other about deploying RFID. – Reported in RFID Update on July 12, 2005

Three RFID pitfalls: Consumer Goods Technology, March 10, 2005 The first is believing the hype. RFID presents magical opportunities to control and monitor business operations, but it still must be weighed against the on-the-ground needs of each particular organization. Not all companies need the magic that RFID professes to offer. Some could do with simpler and cheaper technologies

Three RFID pitfalls: Consumer Goods Technology, March 10, 2005 The second commonly-made mistakes the flipside to this thinking: if you find your company beholden to a mandate, approaching the RFID deployment grudgingly and conservatively will virtually guarantee that your organization doesn't realize the technology's benefits. Since you're going to have to implement RFID anyway, seize the opportunity to do so intelligently and creatively.

Three RFID pitfalls: Consumer Goods Technology, March 10, 2005 Finally, many consider RFID alone, without stepping back and questioning how complementary technologies might also be used. RFID doesn't exist in a technological vacuum.

“Taking a Pragmatic Approach to RFID Deployments” Anyone who has followed the market for RFID technology over the last few years has seen some pretty dramatic highs and lows. This is to be expected with any emerging technology; it happened with wireless and the internet before that. The mandates from large retailers and the US Department of Defense have altered the market maturation for RFID when compared to other emerging markets, effectively accelerating the natural evolution of technologies and standards. AMR Research, June 13, 2005

“Taking a Pragmatic Approach to RFID Deployments” A lot of the early approaches to RFID deployments and certainly all the initial hype surrounding the technology were about the transformational nature of RFID technology. The application of RFID tags to goods as they moved through the supply chain would bring unprecedented visibility and allow companies to respond in real time. This broad, transformational application of RFID may ultimately be the deployment model but it will likely be 8 -10 years before the majority of companies have reached this scale of implementation. AMR Research, June 13, 2005

“Taking a Pragmatic Approach to RFID Deployments” The current state of technology has made this grand vision for RFID unrealistic today and companies across all industries are looking at taking a more targeted, pragmatic approach to identifying potential RFID uses and limiting the scope of deployment. Feedback from many consumer goods companies is that retailers are becoming much more open to discussing the right application of the technology for both parties; a very encouraging sign. AMR Research, June 13, 2005

“Lessons learned from RFID training” RFID Update, June 24, 2005 • RFID technology is finicky (demanding, picky) – The technology behaves differently based on any number of factors, including orientation, the type of products being tagged, and an infinite array of environmental characteristics. • There is much to learn – Successfully deploying RFID technology requires knowledge of: radio frequency engineering and design, supply chain management, logistics, warehouse management, and familiarity with RFID products and brands…

“Lessons learned from RFID training” RFID Update, June 24, 2005 • Experience is necessary – Given the overall shortage of RFID expertise, many people take some training classes or work with a few products whereupon they consider themselves qualified to do a deployment. While such individuals or companies certainly do have more knowledge than the average person with respect to RFID, that hardly means they are ready for prime time.

“Lessons learned from RFID training” RFID Update, June 24, 2005 • Every deployment is different – While the fundamentals of an RFID implementation are of course similar, the devil is in the details. Each company's products, processes, and physical environment are different, and these idiosyncrasies conspire to ensure that no two implementations are alike.

“Lessons learned from RFID training” RFID Update, June 24, 2005 • Expect problems and delays – Because each environment is so different, there will be unpredictable variables that rear their heads and must be dealt with.

RFID Update Conference Boston, June 14, 2005 • More than 100 attendees • The overriding message from the speakers was that there is no substitute for experience

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