Sending out the right signals for RFID
By Gary Hartley, Manager for Strategic Initiatives, GS1 New Zealand
Monday, 06 December, 2004
Seldom has a single announcement from a retailer sent industry into such a spin worldwide. But then again, there is only one Wal-Mart - the largest retailer on the planet. Just over a year ago, Wal-Mart announced that its top 100 suppliers would be required to put radio frequency identification (RFID) tags on cases and pallets by January 2005. Other retailers and buyers quickly followed suit, including the US Department of Defense.
Almost single-handedly, Wal-Mart accelerated the implementation of RFID and the use of electronic product code (EPC). EPC/RFID is creating a whole new way of managing products and ushering in a new era of supply chain efficiencies worldwide. Wal-Mart's announcement was not a benevolent act of generosity for industry-wide progress. Rather, it was a calculated effort to make improvements in the company's supply chain efficiency.
The Auto-ID Center headquartered at Massachusetts Institute of Technology (MIT), working in conjunction with industry leaders and five other academic institutions around the world, designed a system for bringing the benefits of RFID to the global supply chain. That system comprises the RFID technology, EPC, and supporting software based on EPCglobal standards, and is referred to as the EPCglobal Network.
Once EPC technology was developed, it was always the intention to commercialise it through an experienced, standards-making body. EAN International and the Uniform Code Council (UCC) were chosen as implementation partners because of their many years of experience in developing and managing global standards. EAN International and the UCC formed EPCglobal Inc, an open, worldwide, not-for-profit consortium of supply chain partners working to drive global adoption of the EPCglobal Network.
Prior to the development of EPCglobal Inc, there was no neutral body to develop globally recognised standards or methods for collecting and communicating such information.
In addition, prior to the development of the EPCglobal Network, there was no vehicle for data sharing and communications within global supply chains. With the creation of the EPCglobal Network, there is now a medium where information can be collected, utilised and communicated across supply chains, across industry and around the world. As the medium, the EPCglobal Network will provide significant benefits for commerce, security and consumers alike.
So, what exactly is this RFID?
Radio frequency identification (RFID) is a technology that identifies objects using radio frequency technology. In its most basic form, RFID requires two components:
- The first component is a radio signal transponder, or tag, that is attached to an object. The tag consists of a 'chip' that contains identifying information about the object to which it is attached and an antenna to communicate that information via radio waves.
- The second component is a reader, which creates a radio frequency field that detects radio waves. When a tag passes through a radio frequency field generated by a compatible reader, the tag reflects back to the reader the identifying information about the object to which it is attached, thus identifying that object. Consequently, in an RFID system, there is no line-of-sight requirement for product identification because RFID tags do not need to be seen by a scanner to be identified.
Leveraging existing RFID and internet technologies, the EPCglobal Network will convey real-time data about individual items as they move through the supply chain.
It appears that most New Zealand businesses with an interest in technology, including some very large businesses, are keeping a watching brief. Some seem to be looking for an 'off-the-shelf' guide to making a risk-free return on investment. Unfortunately, there isn't one. At EAN's annual conference held in Auckland recently, Gillette VP Global Business Management, Dick Cantwell emphasised the disruptive nature of EPC technology and provided some useful insights into how businesses begin the process of building an EPC/RFID roadmap.
"Businesses need to map out their supply chain to really understand the process by which goods get from the manufacturer to the customer as it occurs today," Cantwell said. "Then, they need to break down each stage of the process to see where EPC compliant tags could be used to replace, change or speed up existing processes. The next stage is to do an 'as is' versus an EPC/RFID pilot to validate assumptions. You've got to have skin in the game."
Before outlining what an EPC/RFID adoption roadmap looks like, a word of clarification. It is important to note that the technology is a business enabler - not a solution in itself. Competitive advantage will go to those businesses that are able to: first, determine where and how they can apply this technology; and second, create new business processes that are EPC/RFID-enabled to achieve sustainable operational improvements.
EPC/RFID adoption roadmap
There are four distinct phases for most companies adopting EPC/RFID.
Most companies will need a few individuals with a foundational understanding of the technology. The first key decision is to appoint the company's EPC/RFID champion - someone who is charged with monitoring developments and advising senior management. The word will spread internally as staff attend seminars and read articles and begin to discuss issues.
This is a critical phase and there are three risks that could produce sub- optimal scenarios for the company:
The initiative stalls through the champion's ambivalence or indifference;
Minimum effort is put in to comply with important traders (the so-called 'slap and ship' approach);
The champion thinks this is the 'silver bullet', thereby making the project's goal overly ambitious.
The turning point is the realisation that in order to move forward, theory must be converted to practice.
The key objective at this stage is to develop a manageable high-level business case and a small technology proof-of-concept pilot confined within the business. In essence, this stage is about the business process and simply 'being comfortable' with the technology. It's an iterative combination of understanding process possibilities and limited trials using the technology.
The experiment stage allows companies to understand more clearly how well suited the technology is to their products and environments. The turning point is reached when the experiments are considered successful, the opportunities are seen as achievable and there is a critical mass of enthusiasm within the business. This is when the business case is taken to board level.
Entering this phase implies that the company is serious about conducting operational trials. Step one is to develop an 'EPC vision' and determine funding and company resource requirements. Advice from companies that are advanced with EPC implementation suggests that finding the right partners to assist in trials is crucial.
These may include: tag suppliers, reader suppliers, EPC/RFID integrators, systems integrators and middleware/software suppliers and, of course, GS1 New Zealand. Experience also indicates that it is easier to pilot with like-minded companies that are at the same point of EPC evolution as your company.
Moving to an operational pilot, companies will scale up the volume of items tagged and advance integration with core systems. The next key decision comes when the decision is made for wider adoption and roll-out.
Deployment strategy considerations include: trading partner adoption, development of management policies, selection of technology partners, systems integration planning, transition planning, and a detailed business case.
The companies 'leading the charge' towards adoption have found that the emphasis on costs will change as the implementation becomes more mature:
- Year one - The most significant costs are in systems integration. Only a small number of tags and readers will be required for operational testing.
- Year two - More tags are required to track product through the supply chain and they will become the largest cost element.
- Year three - Most of the infrastructure is in place and deeper process change takes over with the focus now on detailed design, development, education and continuous process improvement.
This phase of the journey is recognised as uncharted territory since leading players internationally are still largely in the evaluation stage. However, it is expected that the deployment will involve increasing levels of complexity as implementation progresses from initial adoptions.
How industry and companies respond over the next two to three years will determine the eventual success of EPC/RFID and the new era of information sharing. Most companies in New Zealand that are interested in RFID are at the Learn stage, with some starting to 'dip into' the experiment stage. The key thing is for companies to make some commitment to EPC/RFID, starting with an effort to understand the technology, the types of process changes likely to be involved, related capital costs and the value that might be gained in the business.
Remember - this is not about the technology per se, but rather what can be achieved with the technology.
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