- February 28, 2005, Anthony Miano, SG Hart & Assoc.
For the glossary of RFID-related terms accompanying this article, click here.
Today’s challenge for the converting executive is to build a business case and strategy around meeting customer requirements for automatic identification of inventory and allied assets using radio frequency identification (RFID) technology. This challenge is unique because some suppliers are being required to supply RFID-enabled pallets and cases while others are not.
The business case is simple for those required to meet the mandate…do it or lose the business. On the other hand, for converters not yet being mandated or required to supply RFID-enabled finished goods, the decision to proceed is a bit more ambiguous. Enter the EPCglobal Network (EPC Network), the Internet for RFID.
The challenge for the converting segment that must build an RFID strategy in the absence of a customer mandate can be made easier by understanding the enabling features of the EPC Network. Outside assistance is available to the converting base in framing a strong, initial RFID business case. Nonetheless, the converting executive must be able to articulate more specific benefits beyond the immediate supply chain objectives.
In the end, creating supply-chain efficiencies and value-added services to drive growth within the segment provides the only true business case for moving forward with RFID.
The Business Case for RFID
An on-line survey of more than 350 information technology professionals from a cross section of industries and government was conducted in April 2004 by BearingPoint, the Software & Information Industry Assn., and CIO Magazine. The survey says 69% of IT professionals are "in a discovery and information gathering phase of adopting…RFID technology." The survey also says "only 22% claim a ‘high’ understanding of the technology and less than half have even a ‘moderate’ level of understanding [about RFID] while almost half describe RFID as a revolutionary technology."
While these statistics point to a specific issue, if more than two-thirds of IT professionals are still in a discovery phase, what is the state of understanding at the most senior level of an organization? In the absence of a mandate or an immediate "slap & ship" requirement, thinking strategically about RFID and the EPC Network is immediate and essential.
The business case around RFID has focused on a wide range of supply chain efficiencies, and so it should. Robert Hill of ESYNC, a Toledo, Ohio-based consulting and systems-integration firm, suggests in Logistics Management that companies in general "look for choke points in the current supply chain processes. Take a look at product identification and tracking; storage and cross docking; inventory and location management; order picking, packing, labeling, and consolidation; palletization and containerization; and shipment labeling and tagging." But given the dynamics of the converting marketplace, to truly enable business growth, converters must reach beyond the potential of internal RFID efficiencies and match existing services with RFID specific needs.
One example of using the internal capabilities of the converter is to provide services designing packages more suitable for RFID tag placement. RFID tags come in many shapes and sizes. Similarly, converters already have intimate knowledge about a customer’s packaging requirements and could therefore initiate new package designs that better fit a package solution without the loss of marketing "real estate" on the primary or secondary package.
Another alternative is to become knowledgeable about RFID and offer RFID testing services. RFID is fickle, and environmental conditions often dictate the type of tags and associated RFID hardware required to ensure a failsafe installation. Creating a testing environment that subjects RFID-enabled packaging to interference and actual or simulated warehouse/manufacturing floor conditions is another valuable service.
Without proper testing of the combined RFID/package solution, customers will encounter extended project times and cost overruns and fail to meet their strategic objectives.
Understanding EPCglobal Network
The EPCglobal Network is an infrastructure designed to facilitate the dynamic sharing of EPC (license plate) information across the entire web of the supply chain. The EPCglobal Network conceptually is structured similar to the Internet. EPCglobal, the successor to the Auto-ID Ctr., has given authority for the management of the EPCglobal Network to VeriSign, the same company that protects and secures many of the world’s Web-based e-commerce transactions. But what is the EPCglobal Network? First and foremost, the EPCglobal Network relies on RFID tags capable of transmitting dynamic EPC (electronic product code) information. Secondly, the EPCglobal Network relies on a proven infrastructure to support a standard means of "discovering and sharing the data that describes each identified item" at any point in the supply chain enabled with RFID required hardware. According to VeriSign, "EPCs can be used to uniquely identify up to 268 million unique manufacturers, each with 16 million types of products. Each unique product can include up to 68 billion individual items, meaning the format can be used to identify hundreds of trillions of unique items."
Because the EPCglobal Network is grounded in the same technology that drives the Internet, surge demand, scalability, and network security all have been addressed. What is unique about the EPCglobal Network is its universal ability to act as a medium between a single RFID tag and the unique product’s complete pedigree throughout the supply chain. The EPCglobal Network provides much more than just product or EPC information. It provides a dynamic detailed tracking and tracing framework of uniquely serialized products that does not require line-of-sight or visual inspection. While the system aspect of the EPCglobal Network is highly developed, ensuring tags are registered with the EPCglobal Network is critical before specific product information can be acquired.
By inserting the converter into the value stream between the tag/reader providers and the converter’s customers, new potential for growth is possible with marketing opportunities to manage the registration of RFID tags along with the physical application of tags can provide.
Getting Down to Basics
To understand the EPCglobal Network, let’s consider its three essential components. The first component is the ONS or Object Name Service that is the "authoritative directory" of RFID tag information. This directory maintains key information about the RFID tag itself. The second element of the EPC Network is the EPC Information Services component, which provides a secure environment for sharing and storing specific EPC product data between trading partners. Thirdly, track and trace functionality is provided by EPC Discovery Services and "creates a unified view of data across the supply chain."
Now that an opportunity exists for RFID implementation beyond the aforementioned supply chain efficiencies, each manufacturer must address the organization’s talent for being a true learning organization, along with the level of inherent core competencies, and it must determine if core competencies are aligned with the new direction. This would include identifying and building new 21st Century skills that might shift an existing culture of core manufacturing to core visibility providers.
To further clarify the fit between converter and the EPCglobal Network, a strategic review of all external stakeholders is essential. Start first by looking at immediate customers by channel, product, and market share. Then, look at your customer’s customer and determine precisely how the converter can create value. Likewise, consider inbound suppliers and vendors in the same way.
In the end, the strongest business for RFID is to uncover, streamline, and enhance existing business practices that can leverage the combination of RFID and EPCglobal Network functionality.
Some opponents to RFID have said it is a solution looking for a problem. The implication is that to achieve and sustain long-term benefits, opportunities to improve the business—not only a subset of the business—must first be identified. As already mentioned, the potential of the EPCglobal Network necessitates education. To do so, start by making a commitment to a small-scale RFID project that can drive supply chain efficiencies, limit disruptions to the core business, and lay the foundation for future strategic initiatives. To have the ability to identify an item, case, or movable asset level automatically from a distance (as opposed to line-of-sight) using RFID reader(s)/antenna(e), and communicating with the EPCglobal Network is a great enhancement.
Benefits cited as a result of RFID include the potential to vastly improve velocity of overall floor operations better than static bar code technology alone; lower inventory levels; fewer opportunities for stock-outs; increased system-wide supply chain visibility; use as an anti-counterfeiting device; and use as a tool that can enhance business relationships beyond mere transactional orders.
By exploiting RFID and the EPCglobal Network and by reaching ahead to the next logical iteration of manufacturing productivity, converters are ensuring a future that guarantees their long-term viability and relevance.
The Mechanics of RFID
Similar in function to unique license plates on registered motor vehicles, RFID tags are affixed to individual items and contain embedded variable information that uniquely identifies a single object, case, or pallet. In terms of RFID, the license plate analogy corresponds to the Electronic Product Code or EPC contained within an "intelligent" microchip on the RFID tag. The EPC code is akin to a bar code’s Universal Product Code (UPC). A passive RFID tag is comprised of a microchip, antenna, and substrate. EPCglobal has taken on the responsibility for developing RFID standards from the Auto-ID Ctr. and on April 1, 2004, issued a set of EPC Tag Data Standards that defines an EPC as an "identification scheme for universally identifying physical objects via RFID tags and other means." The open EPC standard provides definition to the "length and position of data" so companies have the flexibility to impart and share serialized product, case, or pallet data among trading partners using common systems and protocols. A similar approach was taken when organizations were setup to coordinate data requirements to allow Electronic Data Interchange (EDI) to flourish.
RFID technology at its most basic level is found in a tag and reader. Read-only tags and write/read tags can either be passive or active. When passive tags are being used, a low-power radio frequency signal is required to "wake up" the tag for it to transmit its EPC information to the specialized reader or interrogator. Active tags are coupled with a battery or source of energy that continuously transmits information. The contrast between the two is that a passive tag "wakes up" in the presence of energy and then transmits information to a reader. Active tags are always transmitting a signal allowing specially tuned RFID antennae to capture a tag’s unique information. In both cases, software algorithms and program logic are used to avoid signal collisions. Eliminating multiple "reads" from the same tag is achieved using special purpose filtering software.
While the operational effect of RFID may seem similar to the capabilities of existing bar codes, the primary difference is the execution of reading a RFID tag. Bar codes require line-of-sight (visual inspection) equipment and therefore read ranges are measured in either inches or centimeters. With RFID, each unique pallet, composed of unique multiple cases containing unique multiple items, can be read as it passes through a bay door or gateway equipped with interrogators or antennae, all within seconds. RFID tag and reader manufacturers adhere to strict EPCglobal standards to make this possible.
1890s—Guglielmo Marconi demonstrates the successful transmission of radiotelegraphy across the Atlantic Ocean.
1900s—Ernst F. W. Alexanderson demonstrates the first continuous wave radio
1920s—Birth of radar.
1940–1950s—Radar refined and used due to major WWII development effort. Today’s RFID applications conceptualized in a 1948 paper by Harry Stockman.
1950–1960s—Early explorations of RFID technology in laboratory experiments.
1960–1970s—Development of RFID theory. Start of application field trials.
1970–1980s—Explosion of RFID development. RFID testing accelerates. Very early adopters begin implementations of RFID.
1980–1990s—Commercial applications of RFID enter mainstream use (animal tracking, personal and transportation tracking, toll-collection).
1990–2000s—Auto-ID Ctr. forms. Emergence of standards. RFID widely deployed. Wal-Mart and Dept. of Defense issue mandates to suppliers.
2000–Beyond—Auto-ID Ctr. closes and transfers its work to EPCglobal. RFID enables complete visibility for supply chain management.
RFID Timeline is provided by "Shrouds of Time, A History of RFID," The Assn. for Automatic Identification and Mobility (AIM Global), October 1, 2001.
Anthony Miano, CPIM, is executive partner of S.G. Hart Assoc. LLC based in Ridgefield, CT. Miano has more than15 years of supply chain, consulting, information technology, and brand equity protection management experience. S.G. Hart & Assoc., The Brand Equity Protection company, is a strategic supply chain security consulting company helping global firms protect their brands from counterfeiting, diversion, tampering, and theft.