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RFID is a simple, low-cost solution that allows tracking from factory to warehouse to store shelf, and even to the consumer's credit card. In addition to replacing traditional barcode technology, the uses of RFID tags are nearly endless.

A logistics manager at an auto parts supplier recently told me that once a dashboard leaves his factory floor, he has no idea where that individual component is ­ a huge problem if one of his OEM customers has a pressing question about its whereabouts.

This anecdote is just one of many disturbing stories I've heard as I meet with retailers, distributors, and logistics executives whose firms are unable to track everything from dashboards to razor blades to wing assemblies to precious stones.

Does this need to happen? No. Not any more. Not if organizations smartly deploy radio frequency identification, or RFID technology.

We're hearing more and more about this technology, but what exactly is RFID? RFID is an emerging, advanced wireless technology for item tagging that enables end-to-end asset awareness. At its core, RFID uses tags, or transponders that, unlike bar code labels, have the ability to store information that can be transmitted wirelessly in an automated fashion to specialized RFID readers, or interrogators.

This stored information may be written and rewritten to an embedded chip in the RFID tag. When affixed to various objects, tags can be read when they detect a radio frequency signal from a reader over a range of distances and do not require line-of-sight orientation. The reader then sends the tag information over the enterprise network to back-end systems for processing. RFID tags can be introduced to goods during the manufacturing process, to an individual item, or at a pack, box, or pallet level.

RFID systems are also distinguished by their frequency ranges. Low-frequency (30KHz to 500KHz) systems have short reading ranges and lower system costs. They are most commonly used in security access, asset tracking, and animal identification applications. High-frequency (850MHz­950MHz and 2.4GHz­2.5GHz) systems, offering long read ranges (greater than 90 feet) and high reading speeds, are used for such applications as railroad car tracking and automated toll collection.

Think about the implications in health care, pharmaceuticals, the food industry, the military, and numerous other areas. The uses of RFID tags are endless: animal identification, security access, anti-theft retail systems, asset and inventory tracking, automatic toll collection, wildlife and livestock tracking, house-arrest monitoring systems, manufacturing work-in-process data, shipping, container and air cargo tracking, fleet maintenance, etc.

Fact is, RFID is a very simple solution whose time has come. As the costs go from dollars to pennies per tag, there is no reason that a pair of slacks ­ even down to the fabric from which they're made ­ isn't tracked from factory to warehouse to store shelf and to the consumer's credit card. In essence, RFID tags will replace traditional barcode technology due to several intrinsic disadvantages of barcodes, including:

  • Loss/damage: Barcodes are prone to loss or damage because they are stuck to the outside of packages and so can easily be damaged
  • Human interaction: Barcodes require human intervention to operate the barcode scanner
  • Limited information: Barcodes cannot be programmed or reprogrammed and can provide only the most basic product number information
  • Stock storage space constraints: Barcodes require line-of-sight to be read

    But even with all of this potential to replace barcode technology, if there were not a promise of real return on investment, organizations ­ whether manufacturers, retailers, or others ­ would not be adopting RFID as aggressively as they are.

    For the manufacturer, RFID drives labor savings and operational efficiencies that return top-line benefit across production lines and through distribution. Manufacturers can track products through all points of production on and off the line, around the "yard," and even through a product's life cycle ­ potentially driving "real" dump fees at the end of a product's life cycle.

    ROI can be measured in terms of impact to labor costs, as well as in reduction of errors via automation, such as reductions in misshipments, lost inventory, and errors in redundant data reads. Productivity gains are also generated by RFID, which enables better management of skilled resources through automation.

    For the retailer, the vision of a consumer-driven supply network means real-time demand, signal-sanctioned inventory controls, and management through to their vendor "partners." Empty shelves are lost sales ­ and self-aware products from RFID can enable the efficient management of product through the back door of the store and all the way to the selling floor.

    The premise of this ROI model is inexpensive tags and readers able to identify and track each individual object. This enables visibility across the supply chain, from manufacturer to distributor, which increases efficiency throughout. This is accomplished as a result of RFID technology's ability to collect real-time information (where, when, condition) and store that information online, allowing for request-based online access by all value-chain players.

    The real focus for RFID, however, is its fundamental impact on enterprise data strategies. RFID has the potential to determine how far a product has travelled through the manufacturing cycle, determining how far downstream it is, and offering true product visibility. This generates tremendous benefits, instantly detailing when a product was manufactured, if a retailer has received it, and where it is now. In this way, RFID ensures consistency of data throughout a business.

    In the longer term, the increased data granularity afforded by RFID will allow companies to create, manipulate, and manage transaction data across the enterprise. Furthermore, this data can be shared across cooperative networks that feed the whole supply chain ­ manufacturer, distributor, broker, retailer, and end consumer. The increased data volumes, speed, and "reality" of data will impact storage strategies and storage infrastructure. RFID applications will demand software, hardware, data storage, and security solutions along with core technology implementations.

    To illustrate the promise of RFID, let's consider one organization that's beginning to deploy RFID with great effectiveness.

    Extra Stores, part of the Metro retail chain in Germany, is utilizing RFID tags for inventory management as part of its "store of the future" initiative. While the effort is designed in part to accustom grocery shoppers to the idea of electronic store management, the primary goal remains cost reduction. The Extra Stores will feature RFID checkout lanes, as well as "smart shelves" that generate real-time information for Metro about how much inventory is left on a shelf. The RFID initiative is helping Metro to alter the method by which inventory is managed, transforming it from a manual chore to an automated one.

    Airlines are also considering the use of RFID tags. It is estimated that lost luggage costs the airline industry in excess of $100 million annually. By tracking luggage with RFID tags, airlines anticipate a significant reduction in lost baggage. Any improvements in this area not only reduce the cost of compensation payments to customers, but also significantly improve customer service.

    Figure 1

    Yet, the airline example aside, the most widespread and common use of the traditional barcodes is within the retail and supply chain industries. It is here that RFID is expected to make its greatest impact.

    During the past decade, supply chain management has seen a complete overhaul of traditional logistics procedures as tight integration between warehouses, distribution, and retail has smoothed out duplication and improved time-to-market. Supply chain efficiencies are being driven by improvements in information accuracy and availability. However, further improvements have been constrained by the technology used to track goods through the supply chain. The use of RFID wireless technology changes that, providing organizations with an opportunity to significantly enhance supply chain processes as well as deliver improvements in customer service.

    Clearly, RFID presents an extraordinary opportunity for organizations. The technology drives benefits throughout the supply chain, with great dividends for manufacturers, retailers, and ultimately, consumers.

    About Norm Korey
    Norm Korey is vice president, wireless e-business, Americas, IBM Global
    Services, overseeing the marketplace's broadest portfolio of wireless
    services for the enterprise. His focus is creating wireless infrastructure
    across a number of technologies that will allow enterprises to exploit
    wireless data capabilities for customer benefit and competitive advantage.

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