The Auto-ID Labs (former Auto-ID Centre) expects tag prices to drop to 10 cents in 2005 and 5 cents in 2006 for orders of 1 million units.7 In 2004, Gillette placed an order for 500 million tags and was able to obtain a bulk rate of 10 cents per tag. RFID reader costs are also relatively high due to limited uptake of RFID systems. The Auto-ID Labs also expects reader costs to come down from about $250 in 2003 to about $100 in 2005 and to $70 in 2006. Finally, middleware costs include computer hardware, software, data processing, data mining, personnel salaries, and personnel training. Information technology consulting firm AMR Research estimates that a consumer products company shipping 50 million cases a year could spend upwards of $20 million for RFID implementation. [Goff, 2004]
- RFID: The Technology, its Applications & Economic Implications
In general terms, RFID represents a way of identifying objects or people using radio frequency transmissions (or using radio waves). Identification is possible by means of unique numbers identifying objects, people, and information, stored on microchips, which can be read automatically, unlike bar codes that need to be scanned manually. With recent advancements in the technology, the automatic identification data capture industry is accelerating its efforts to identify new applications to take advantage of RFID.
A. RFID Technology
Like information technologies (IT) over the last three decades, RFID technologies have been getting more powerful, smaller, and less expensive. A basic RFID system consists of three components:
− A tag made up of a powered or non-powered microchip with an antenna.
− A reader with an antenna that communicates with the tag sending and receiving information.
− Middleware that records and transmits the tag information to a central repository.
RFID Tags: Two types of RFID tags are in use today – passive tags and active tags.
Passive tags do not have a built-in power source; they are powered by the electromagnetic field generated by the reader. Active tags are powered by an internal battery and transmit data to localized readers when they sense a reader is querying information. Tags with batteries are generally larger than tags without them, and while active tags have longer read ranges with the reader, their life is limited by the useful life of the battery. Passive tags are usually smaller and can have unlimited lifetimes. However, in comparison to active tags, passive tags have limited transmission ranges due to interference from environmental and power limits. [IDC, 2004. Onine]
Most current retail applications are designed with passive tags. Active tags are currently most frequently found in defence or military operations, yet also appear in technologies such as EZ Pass, where tags are linked to a prepaid account enabling drivers to pay tolls by driving past a reader rather than stopping to pay at a tollbooth. Another distinguishing feature of RFID tags is that they can carry more information than a bar code. Moreover, re-writeable tags, where information on the tag can be erased, rewritten, or modified, also allow the updating of data and therefore have high utility in security and identification applications. [RFID-101, Online]
Despite the increasing attention paid to RFID, technical challenges remain. While the use of radio waves obviates the needs for a clear line-of-sight placement of a pallet or item, conductive material such as metal or fluids reflect electromagnetic energy. This makes tagging metal surfaces such as metallic coffee cans and containers or shampoo bottles challenging and often results in decreased identification rates. Electromagnetic interference from other nearby transmissions can also affect the tag performance and tag to reader communications. Physical effects such as reflection and diffraction may also affect tag performance. [SRI Consulting, 2004]
Inconsistent interoperability across various RFID systems, companies, and countries also presents a challenge to the wide-scale development and deployment of RFID technologies. Technical standards, frequency, and power levels are critical issues for successful global interoperability of RFID systems. There are several efforts underway to develop and refine technical standards for tags and readers, and common standards remain a goal. Likewise, differences in operational frequency ranges, allowable transmission standards, and allowable power limits in countries continue to serve as operational constraints. [IDC, 2004. Online]
With respect to current research and development (R&D) capabilities and the potential for processors fabricated with new conductive materials, some researchers envision the development of organic microprocessors for RFID tags and other applications in the future. For example, the National Institute of Standards and Technology (NIST) is looking at the technical feasibility of replacing silicon or inorganic materials in RFID devices with mostly or wholly organic materials such as plastics. This and other ongoing research in materials and tag and chip design, fabrication, and production will result in more robust and functional tags over time
RFID Reader Technology: RFID readers perform a variety of functions: activating tags by sending querying signals, supplying power to passive tags, encoding the data signals going to the tag, and finally, decoding the data received from the tag. The reader is a handheld or fixed-mount device that emits electromagnetic waves. The power output and the radio frequency determine the range (distances) at which the tags can be read. RFID systems typically operate in frequency ranges between 30 KHz to 500 KHz (low frequency), 850 MHz to 950 MHz, and 2.4 GHz to 2.5 GHz (both considered ultra high frequency). Other frequency bands are also used for RFID applications, but these tend to be application specific, e.g., automotive electronic ignition keys, etc. Systems that run on low frequency are less costly, but have shorter reading ranges. Conversely, high frequency systems are more costly, but have faster reading speeds and longer reading ranges. According to industry sources, there is little variability in reader design at present, but as RFID is deployed in more applications, application software will determine reader functionality. This could include: anti-collision software that prevents readers from reading more than one tag at a time; verification abilities to ensure that the reader has read all tags; interference minimizing measures between multiple transmitting readers and; security measures to prevent unauthorized access to transmitted data. [Jeff, 2004]
An example of a promising technical development is readers developed by a U.S. start-up company that will have the capability to cut across all technology platforms. This would allow readers to be programmed to read various types of tags simultaneously, as well as process and manage the data. Technology solutions like this provide a solution for legacy and next-generation RFID technology and allow users to bypass technical incompatibility challenges.
RFID Middleware: Comprising the third component of an RFID system, RFID middleware consists of computer hardware and data processing software connected to enterprise inventory or identification management systems. A middleware platform provides the operating system, data repository, and processing algorithms that convert multiple tag inputs into visible tracking or identification data. Middleware can be managed by personnel of the company using RFID or be contracted out to an IT service-provider. The primary challenges to implementing the necessary IT infrastructure and organization processes for RFID include integrating disparate systems across an organization, establishing the corporate governance that ensures the system is used properly, and ensuring interoperability with other systems. According to e-business consultants, RFID applications should be based on an open architecture that is modular, portable, scalable, and uses common data formats.10 For example, using web-based standards can help facilitate organizational training by providing data analysis and reporting through a user interface that is simple to understand and easily accessed. To meet the growing need for middleware development, management, and maintenance functions, several leading IT companies in the United States are gearing up specific departments to handle RFID middleware systems for suppliers and retailers. [Jeff, 2004]
The Future: In evaluating the potential of RFID systems, it is clear that today’s RFID systems will over time evolve into highly networked communication and information transfer systems with global connectivity. However, growth beyond today’s user specific
systems will only occur as RFID is deployed across varying applications in the marketplace and as the tag, reader, and middleware component designs mature.
B. RFID Applications
The promise of RFID stems in part, from the plethora of applications envisioned by the technology developers and potential users. Applications such as: enhanced tracking in the supply chain; integration of inventory and logistics systems; automated monitoring of product availability and quality; control of critical infrastructure facilities; and improved security applications are propelling RFID to the market. While the efficiency-enhancing potential of RFID is high, there are differing time frames associated with the adoption of RFID. For the most part, current RFID tagging is at the container, case, or pallet level for inventory and shipping applications. According to one group of RFID experts, consumers will not see ubiquitous item level tagging for another five to 10 years. [Grocery Headquarters, 2004]
-
Commercial Applications:
Simply because of the sheer scope and size of the commercial industry in the United States, many expect that over the next decade, commercial uses in all application categories will drive the maturation and deployment of RFID technology. The proposed set of applications can be divided into many categories, and include key functions such as tracking shipments and inventory, authentication, identification, monitoring sensors, payment systems, and measurement systems. Different users in similar applications might use both passive and active tags. RFID can also be viewed by its different industry sector applications, such as the consumer product industry, the food industry, the financial industry, the transportation industry, and the homeland security industry.
-
RFID and Supply Chain Management:
Among the applications cited above, the supply chain application is likely to be the dominant RFID application in the near term. Consumer demand for lower prices is driving companies to make their supply chains more efficient. Unable to further cut the costs of back room operations, retailers are spending millions of dollars on technologies designed to extract additional savings out of their manufacturing and distribution supply chains. Some see RFID as the ultimate supply chain solution that will result in millions and possibly billions of dollars of savings throughout the supply chain and other areas. [USDOD, 2004-5]
RFID technology can help suppliers eliminate delivery lag times, determine point of origin, track orders in the supply chain, and make inventories more visible (e.g., in a warehouse, in a shopping cart, on a battlefield). Technically, RFID has the capability to increase efficiencies in supply operations by minimizing the need for line-of-sight proximity between a scanner and an RFID tag. In fact, industry analysts are predicting that within a decade, RFID technology will have matured to a point where loaded shopping carts can be automatically read as a customer moves through the store checkout, without the need to unload or manually read tags.
Major retailer Wal-Mart issued a RFID mandate to its top-100 suppliers that went into effect in January 2005. Likewise, retailers Albertsons and Target have mandated that their suppliers adopt RFID technology in the supply chain in 2005 and 2006 respectively. Within the U.S. Government, the U.S. Department of Defense (DOD) also has mandated vendors to use RFID technology in order to be able to track inventory en-route and within operational areas. According to DOD, the use of RFID tags will streamline supply-chain operations by supplying officials with electronic data that automatically locates millions of items in DOD’s inventory. [USDOD, 2004-5]
In the private sector, apparel retailers also have an interest is using RFID technology to track the size, colour, and type of items for inventory availability. Other potential large-scale users in the private sector are the transportation and distribution industries. Railway freight companies are interested in the ability to track rolling stock. Truck drivers want to ensure they pick up the right trailer containing the right consignment. Distribution service companies want to use RFID tags to update a central database on the maintenance schedule for their equipment. Of particular importance, companies selling hazardous products are interested in using RFID technology to ensure their tank cars and trucks containing hazardous cargo take routes that minimize risks to public safety and reduce the company’s liability.
RFID technology, if combined with other sensors, may also enable a range of other applications that can exponentially increase visibility and monitoring. Companies selling bulk products, including agriculture and some chemical products, are interested in RFID to ensure that perishable products have been delivered to customers within a fixed time and under acceptable conditions. As an example, RFID technology could be combined with a temperature or shock sensor that could help determine whether a product was kept in the right temperature range or received a strong impact. Retailers selling beef are closely monitoring the cattle industry’s pilot programs using RFID to track the meat’s health and exposure during travels within their supply chain.
RFID is also touted as being able to help businesses reduce counterfeiting and inventory shrinkage. Because legitimate parts manufacturers are often held responsible for warranties on imitations, they are very interested in using RFID to minimize the sale of counterfeit goods. This counterfeit problem becomes more difficult when the quality of the packaging of counterfeits closely mimics that of the legitimate products, and the counterfeit products are co-mingled in shipments of legitimate products, making it difficult for legitimate distributors and retailers to distinguish the good from the bad. It also becomes particularly difficult to monitor counterfeit goods when large amounts of products are involved. Pharmaceutical companies are currently experimenting with RFID to eliminate counterfeit drugs and guarantee drug quality from the manufacturer. Container Tracking and Security: Several companies are already experiencing great savings and increased efficiencies using this technology in their supply chains.
Some observers have suggested that RFID could eventually allow port authorities to quickly and accurately check entire containers using RFID tags rather than spot-checking incoming shipments for hazardous or illegal goods. Containers sealed with RFID tags would permit tracking of loaded cargo containers. However, security experts are also cautioning that the use of RFID technology does not guarantee security, noting that worldwide application and detection of RFID would first be necessary to ensure security.
C. A discussion on Economic implication of RFID
If businesses deploy RFID widely in supply chains or other processes, it remains to be seen whether its contribution will be distinguishable from other business process improvements. Whether the effects of either the short-or longer-term efficiency improvements would be great enough to affect the movements of broad economic indicators, such as growth in gross domestic product, trend productivity growth, or employment also remains unknown. [IDC, 2004. Online]
Consumers may also benefit directly from increased use of RFID. For example, if users leave their bridge/toll tags active, information from the tags can be used to determine traffic congestion. This information can be combined with other sources of information and provided to consumers in the form of real-time traffic information. Enthusiasts also note direct consumer benefits from RFID tagging at the retail product level in such activities as more efficient product returns or recalls. Size of the Industry: It is logical to expect that at least some of the firms in an “RFID industry” would in part substitute for or grow out of existing firms in the tracking and logistics business. For example, several large providers of IT services are establishing divisions or groups for RFID systems integration. However, the impact on economic growth of firms manufacturing RFID equipment or selling RFID services is difficult to determine. [USDOD, 2004-5]
- KNOWLEDGE MANAGEMENT: An Introduction:
Over the past 30 years, advances in data collection and database technology have led to massive legacy databases controlled by legacy software. The implicit programming paradigm encompasses both business policies and data validation policies as application code. Yet, most legacy applications are maintained by second- and third-generation engineers, and it is rare to find any staff members with firsthand experience in either the design or implementation of the original system. As a result, organizations maintain significant ongoing investments in daily operations and maintenance of the information processing plant, while mostly ignoring the tremendous potential of the intellectual capital that is captured within the data assets. [Loshin, 2001]
An organization’s data collection is a valuable business resource that until now has been largely underutilized. In the past, when data were mostly locked up in databases, ferociously guarded by organizational overlords, the ability to share and benefit from enterprise knowledge was limited. Today, as technology evolves to unlock and distribute these databases, a procedural methodology has evolved in tandem to help integrate the technical, organizational, and behavioural issues associated with enterprise knowledge. This methodology is referred to as “knowledge management.” According to Karl Erik, knowledge management is “The art of creating value by leveraging the intangible assets.” The Gartner Group states it in a more down-to-earth way: “Knowledge management is a discipline that promotes an integrated approach to identifying, managing, and sharing all of an enterprise’s information assets. These information assets may include databases, documents, policies and procedures as well as previously unarticulated expertise and experience resident in individual workers.” [Gartner Group, 2004]
In other words, knowledge management is a strategic process meant to capture the ways that an organization integrates its information assets with the processes and policies that govern the manipulation of those intellectual assets. The desired goal of knowledge management is the determination and the harnessing of the value of the information resources within the enterprise. While knowledge management encompasses many disciplines, such as document management or e-mail technology, our goal is to focus on the embedded knowledge in data sets that can be expressed as a set of business rules. Having expressed these rules, we can then validate our expectations of the information that we use by testing it against the business rules. [Collins, 2003]
Business operations are defined using a set of rules that are applied in everyday execution. When the business depends on the correct flow of information, there is an aspect of data quality that intersects the operational specification. In essence, in an information business, business rules are data quality rules. This implies that data quality is an integral part of any operational specification, and organizations that recognize this from the start can streamline operations by applying data quality techniques to information while it is being processed or communicated. This in turn will prevent bad data from affecting the flow of business, and denying the entry of incorrect information into the system eliminates the need to detect and correct bad data. Because of this, a “data quality aware” operation can execute at lower cost and higher margin than the traditional company. [Collins, 2003]
IV. Conclusion
Use of RFID is likely to increase in the near future. At present, it is unclear whether the effects of the use of RFID technology will be evident in broad measures of economic activity like output or productivity growth. Increased efficiency in activities related to monitoring the movement of objects, animals, and possibly even people is the near term benefit of this technology. As businesses gain experience with RFID, they may be able to redesign business processes to take advantage of the strengths of the technology and the information that flows from its use. There are certain challenges that RFID faces in the times to come. They are:
- As is common with emerging technologies, several challenges must be overcome for the technology to mature to its full potential. In the case of RFID, these challenges include: maturation of RFID technology, harmonization of standards for hardware/software and wireless spectrum operations, privacy and security concerns, and implementation cost barriers. As these technical and policy challenges are mitigated, RFID will likely become the system of choice for global commerce.
• Interoperability across various RFID systems, companies, and countries is critical to achieving wide-scale deployment of RFID technology. Development of technical standards for tags, readers, and interface systems; and allocation of operational limits for frequency and transmission power will determine global interoperability.
• Initial system and implementation costs are still being refined; in the near-term this could prove to be an impediment to large-scale adoption. Within small and medium sized enterprises, although RFID provides them with new opportunities to compete in the global market, limited budgets, lack of in-house expertise, and a lack of access to new technologies could be an impediment for adoption.
• The collection and use of personally identifiable information through RFID technologies represents a key public policy challenge to the deployment and use of RFID technologies. Much of this concern is with the collection, use, and storage of the data rather than the technology itself. Industry-driven solutions are beginning to include a combination of operational guidelines, technical solutions, and educational campaigns.
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