Radio Frequency Identification - Rfid Coming Of Age

June 2004

Radio Frequency Identification RFID...Coming of Age

What is Radio Frequency Identification Radio Frequency Identification (RFID) is a system that facilitates the tracking of objects, primarily for inventory tracking, via a threepart technology comprised of a reader, a transceiver with decoder and a transponder (RF tag). RFID is a wireless system that works in conjunction with an organization’s information technology infrastructure to improve business processes such as inventory management and efficiency in supply chain management.1

chain. The EPC is stored on a RFID tag, which combines a silicon chip and a reader. Once the EPC is retrieved from the tag, it can be associated with dynamic data such as the origin of an item or the date of its production. Much like a Global Trade Item Number (GTIN) or Vehicle Identification Number (VIN), the EPC is the key that unlocks the power of the information systems that are part of the EPCglobal Network3.

History

EPCglobal and RFID

The development of RFID was spurred by the need to enhance tracking and access applications in the 1980’s in manufacturing and other hostile environments. This noncontact means of gathering and tracking information proved to be resilient. RFID is now an established part of specific business processes in a variety of markets2.

How RFID works The reader emits a radio signal that activates the tag and reads and writes data to it. As products are shipped, received or stored, the information (encoded on a bar codelike tag) can be read and received by the reader, which is attached to a computer. RFID has been integrated into the EPCglobal network and uses the EPC (Electronic Product Code). The EPC is a unique number that identifies a specific item in the supply

EPCglobal is a joint venture between EAN International and the Uniform Code Council (UCC). It is a not-for-profit organization entrusted by industry to establish and support the EPC Network as the global standard for immediate, automatic, and accurate identification of any item in the supply chain of any company, in any industry, anywhere in the world. EPCglobal’s objective is to drive global adoption of the EPCglobal Network. EPCglobal is also an organization that is leading the development of industry-driven standards for the Electronic Product Code Network. This network supports the use of RFID in today’s “fast-moving, information rich trading networks. EPCglobal is a member driven organization of industry participants that is creating global standards towards providing efficiency gains in supply chains and relationships with trading partners.

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The EPCglobal Network was developed by the Auto-ID Center, an academic research project headquartered at the Massachusetts Institute of Technology (M.I.T.) with labs at five leading research universities around the globe. The EPCglobal Network is a set of technologies that enable immediate, automatic identification and sharing of information on items in the supply chain. In that way, the EPCglobal Network will make organizations more effective by enabling true visibility of information about items in the supply chain. 4

Recent Developments in RFID Wal-Mart, the world’s second largest company, is deploying RFID technology in its stores. “Wal-Mart is positioning itself at the front of an inevitable technological revolution, even if it means dragging others into a future they’re not sure they want,” said Dillman, Chief Information Officer, Wal-Mart.5 Furthermore, Dillman states, “I had no idea we’d get a reaction like this. But the fact that this is happening in public doesn’t change our focus on making sure it happens.” Dillman is referring to some resistance from consumer advocates who are concerned about privacy issues and suppliers who are concerned about the fair cost for their end of the technology – the RFID tags. The Department of Defense is embracing this emerging technology as well. “The Defense Department recently announced it would require its suppliers to use wireless

tags based on radio frequency identification (RFID) technology by January 2005. The policy calls for Defense Department suppliers to put RFID tags on the ’lowest possible piece‘ - each part, case or pallet, for example - and pertains to all items except bulk commodities such as gravel. The goal is better inventory management through faster, hands-off processing.” The Department of Defense purchases not only just multi-million dollar military equipment, but over $20 billion dollars in consumer products and is seeking to make the supply chain more efficient.6 Companies like Microsoft, IBM, and Philips Electronics, which recently made product enhancement announcements in this area, are also participants in the industry. “IBM, in Armonk, New York, and Philips, in Amsterdam, will team on RFID for supply chain management, retail and asset management, as well as smart card technology for finance, e-government, transportation and event ticketing.” the company said. “As part of the joint effort, IBM Global Services will build an RFID system for use in for Phillips’ semiconductors facilities for manufacturing and distribution in Taiwan and Hong Kong.”7

Efficiency Gains from RFID As mentioned above, large organizations, such as the Department of Defense, are looking to improve their supply chain management and reduce labor, errors, and handling costs.

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According to the RFID Journal, “RFID promises to profoundly improve key operational areas for manufacturers in many industries.” Operationally some of the issues that surround supply chain management are questions about the quantity of goods to be produced, when they should be made, where they need to be shipped, and what is the location of the inventory currently manufactured. “With timely and accurate answers, manufacturers can run much more efficient forecasting, production, and distribution operations. In fact, by deploying RFID, just-in-time manufacturing can give way to real-time manufacturing. “This will touch every part of a manufacturer’s business,” says Lyle Ginsburg, managing partner for technology innovation in Accenture’s products operating group. He says that RFID technology will have a positive impact on the management of raw materials, reusable assets, warehouse inventory, shipments, returns processing, logistics, and many other aspects of manufacturing.”8 RFID promises to reduce the need for many manual processes, such as hand counting of items to keep track of inventory. The prices of RFID technology are forecasted to fall, similar to the introduction of previous new technologies.

just 23 percent of consumers had heard of RFID technology, and that among those who recognized the term, perceptions were mixed. For example, when those who had heard of the technology were asked whether they perceived RFID as favorable or as unfavorable, 48 percent answered they didn’t know or had no opinion about it, while 42 percent indicated they had a favorable perception, and just 10 percent had an unfavorable perception.”9 In August 2003, technology and consumer advocates testified at a California Senate hearing and called for regulation of RFID – the hearing was presided over by state Senator Debra Bowen. According to CNet, “Privacy activists worry, however, that the unchecked use of RFID could end up trampling consumer privacy by allowing retailers to gather unprecedented amounts of information about activity in their stores and link it to customer information databases. They also worry about the possibility that companies, governments and would-be thieves might be able to monitor people’s personal belongings, embedded with tiny RFID microchips, after they are purchased.”10

Regulatory and Privacy Issues

Some privacy advocacy groups have identified several categories of concern regarding RFID. While they acknowledge that there are beneficial uses of RFID, they suggest some attributes of the technology could be deployed in ways that threaten privacy and civil liberties:11

Consumer concerns could become the main impetus for RFID regulation. Cap Gemini, Ernst & Young, with assistance from SmartRevenue, a Ridgefield, Connecticut based research firm, polled 1,000 U.S. adults, 18 years of age or older, in an Internet survey. “The survey found that

Hidden placement of tags. RFID tags could be embedded into/onto objects and documents without the knowledge of the individual who obtains those items. As radio waves travel easily and silently through fabric, plastic, and other materials, it is possible 4

to read RFID tags sewn into clothing or affixed to objects contained in purses, shopping bags, suitcases, and more. Unique identifiers for all objects worldwide. The Electronic Product Code potentially enables every object on earth to have its own unique ID. The use of unique ID numbers could lead to the creation of a global item registration system in which every physical object is identified and linked to its purchaser or owner at the point of sale or transfer. Massive data aggregation. RFID deployment can lead to the creation of massive databases containing unique tag data. These records could be linked with personal identifying data, especially as computer memory and processing capacities expand. Hidden readers. Tags could be read from a extended distance, not restricted to line of sight, by readers that can be incorporated invisibly into nearly any environment where human beings or items congregate. RFID readers have already been experimentally embedded into floor tiles, woven into carpeting and floor mats, hidden in doorways, and seamlessly incorporated into retail shelving and counters, making it virtually impossible for a consumer to know when or if he or she was being “scanned.” Individual tracking and profiling. If personal identity were linked with unique RFID tag numbers, individuals could be profiled and tracked without their knowledge or consent. For example, a tag embedded in a shoe could serve as a de facto identifier for the person wearing it. Even if item-level information remains generic, identifying items people wear or carry could associate them with, for example, particular events like

political rallies.

The Future of RFID RFID technologies are expected to grow quickly over the next few years as companies seek to improve their supply chain operations, and as the price of RFID drops. According to an analysis from Venture Development Corporation (VDC), “Global shipments of RFID systems (including transponders, readers, software, and services) reached $890 million in 2000.”12 The forecast from VDC’s market study entitled “Global Markets and Applications for Radio Frequency Identification Equipment and Systems” predicts shipments of RFID to increase by approximately by 24% annually to reach $2.65 billion by 2005. The applications for RFID in 2000 reached most economic sectors although the most use was in industrial/manufacturing, transportation, distribution, and warehousing industries. Smart label applications as well as high-speed processing will fuel growth in these sectors. Other growth sectors include health care, commercial, and retail services. For example RFID could be used as a tool against product counterfeiting by permitting more precise identification and verification of the sources of shipments. According to VDC, “Virtually every economic sector and industry where data need to be collected contains potential applications for RFID technology.” VDC’s research reveals that RFID hardware shipments were concentrated among industrial/manufacturing and transportation, distribution, and 5

warehousing organizations in 2000 (see Exhibit 1). Future revenue growth within these economic sectors will primarily be driven by the development of the smart label market, particularly to support growing applications such as baggage handling and high-speed processing. In addition, these two economic sectors are expected to account for the largest percentages of RFID hardware revenues in the near and long term; however, their annual growth will be slower in comparison to the annual growth of the emerging health care, commercial, and retail services sectors.

· Adoption of RFID systems in retail environments has been limited and con centrated primarily in security/access control applications. Future develop ments in the retail sector are largely focused on creating smarter EAS (elec tronic article surveillance) transponders to support, for example, the storage of pertinent product information within a retail item, such as warranty information.” Top Three Fastest Growing RFID Economic Sectors (In Descending Order) 1. Retail Services 2. Commercial Services 3. Health Care Services

In terms of the future growth of the health care, commercial, and retail services sectors, the following points are relevant: · Interest is increasing among healtcare organizations to support applications such as waste management, high-value asset tracking, record/document tracking, and real-time location systems.

“While the potential for viable RFID applications within economic sectors appears virtually limitless, few applications have translated into consistent and profitable opportunities, with price often being the decisive barrier. Of the current applications, the majority of RFID shipments are attributed to the well-established, traditional security/access control and transportation applications where RFID has proven success (see Exhibit 2). By 2005, supply chain management applications are expected to join these applications in holding the lion’s share

· The commercial services segment is expected to grow rapidly through the emergence of consumer applications such as automated payment systems, m-commerce (mobile commerce), libraries, rental item tracking, and reusable media. 6

of RFID market revenues, especially as the market for smart labels grows. “Over the next five years, point of sale (POS), rental item tracking, and baggage handling applications are anticipated to exhibit the fastest annual growth. Given the growth forecasts of these application segments, it is not surprising that current and potential RFID end users seem most interested in these applications’ possibilities. However, potential end users are evaluating RFID for use in virtually every application segment to improve efficiency, especially in supply chain management. Widely used and established applications such as security/access control and asset management are still being evaluated and will continue to grow, but perhaps not at the rate of the emerging applications.”13 Top Five Fastest Growing RFID Application (In Descending Order) 1. 2. 3. 4. 5.

Point of Sale Rental Item Tracking Baggage Handling Real-Time Location Systems Supply Chain Management

RFID Challenges Before RFID deployment resumes its growth, several obstacles need to be overcome. Will Cappelli, an Analyst of the Meta Group has summarized some of the issues: 14

First, the market will require standardization and stabilization, with regard to both the actual technology and functionality deployed within the various RFID chips and the syntax and semantics of the RFID signals themselves. At present, global organizations face the prospect of having to monitor, manage, and translate between two different signal grammars depending on how their intelligent objects are distributed among the regions of Europe and the rest of the world Second, RFID technology’s potential ability to enable automated gathering of information about post-sale product usage has already stirred up privacy anxieties. Legislation limiting or even preventing the deployment of RFID has begun to wend its way through both national and regional legislative bodies. Third, RFID signal and reader technology taking into account some of the more recent enhancements previously mentioned - operates at a low semantic level. At the same time, the volume of signals generated is large. To actually make use of much of the information contained within the signals, vendors will need to develop (and organizations will need to implement) a rich twodimensional infrastructure. In order for the potential benefits of RFID to be realized by the economy, these challenges will need to be effectively addressed by industry.

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Notes

About ITAA

1 This ITAA white paper was prepared by Tristram Carlisle,

With 380 member companies, the Information Technology Association of America (ITAA) is the leading trade association serving the information technology industry. Founded as the Association of Data Processing Service Organizations (ADAPSO) in 1961, ITAA has expanded its constituency over the years to include companies in every facet of the IT industry, including computer hardware, software, telecommunications, Internet, ebusiness, eeducation, outsourcing, computer services and more. ITAA seeks to foster an environment that is conducive to the health, prosperity and competitive nature of the information technology industry and to help its members succeed in delivering the benefits of IT to their customers. The Association’s industry development programs include advocacy on legislative and regulatory issues, studies and statistics, domestic and international market development and industry promotion. ITAA also provides extensive opportunities for business development, particularly for firms seeking to build market credibility, brand awareness, customer access and strategic partnerships.

Innovation At-The Edge Program Manager. The Innovation At-The-Edge program’s mission is to educate, inform and organize opinion around the value proposition of emerging “edge of the network” applications. 2 http://www.aimglobal.org/technologies/rfid/ 3 http://www.epcglobalinc.com/about/faqs.html#7 4 ibid 5 http://www.nyjournalnews.com/newsroom/012204/ d0122rfid.html 6 http://www.nwfusion.com, by Ann Bednarz 7 www.infoworld.com, by Laura Rohde, IDG News Service 8 http://www.rfidjournal.com/article/articleview/421 9 http://www.rfidjournal.com/article/articleview/780/1/1, by Jonathan Collins 10 http://news.com.com/2100-1029_3-5065388.html by Alorie Gilbert 11 http://www.eff.org/Privacy/Surveillance/RFID/rfid_position_statement.php 12 http://www.vdc-corp.com/autoid/press/ archives/01/ pr01-44.html 13 Venture Development Corporation, VDC, “Global Markets and Applications for Radio Frequency Identification Equipment and Systems 14 http://www.metagroup.com/us/display Article.do?oid=47313; http://searchcio.techtarget.com/originalContent/0,289142,si d19_gci950614,00.html

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