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What is RFID?

Radio Frequency Identification (RFID) is a method using tags or transponders to enable automatic, remote identification of objects that have been “tagged” with RFID transponders. RFID tags are like little transponders that send out information to a reader, or “interrogator.” An RFID tag contains a silicon chip and an antenna to enable it to receive and respond to radiofrequency queries from an RFID transceiver. The tags are small and can easily be attached to or incorporated into a product, animal, or person. Active RFID tags have tiny batteries in them, while passive tags must usually be “awakened” by a tag reader in order to send information. Active tags can store and send more data and at greater distances than passive versions.

Applications & Benefits

RFID tags are often seen as a replacement for barcodes, with significant advantages over barcode technology. The data capacity of an RFID tag is big enough to allow each tag to have its own unique code. Current bar codes are limited to a single type code for all instances of a particular product. With an RFID tag a product can be individually tracked as it moves from location to location through a process, or through the supply chain.

RFID capabilities

• Since the RFID tag is a transponder, the scanners do not require line of sight access to the tag as opposed to a laser scanner trying to read a bar code. This makes it very easy to read RFID tags on items that are difficult to reach such as cartons on a pallet.
• RFID smart labels can be read and written to through dirt, paint, and many nonmetallic objects.
• RFID tags can withstand harsh environments.
• Tags can be read simultaneously, even through containers and packaging — for example, multiple individual items within one box.
• The RFID readers allow for automatic, unattended scanning. With scanning ranges between 4 inches and 10 feet, boxes on a moving conveyor belt can each be identified individually.
• The RFID chip can hold a large amount of data as well as monitor the movement of the tagged object — acquiring and delivering new information along the way like a traveling database. Greater storage capacity, combined with update flexibility, make smart labels ideal for applications such as product tracking through the supply chain, baggage tracking, or asset tracking.

RFID smart tags can be found in many applications across a wide range of industries.

In the consumer goods and retail industry, RFID technology can provide information about location and condition of an item throughout the entire supply chain, from manufacturing to distribution, all the way to the customer’s shopping cart going through the checkout lane. Information gleaned from the tags can alert retailers to potential stock outs of popular items in time to do something about the situation, validate the authenticity of received goods, and allow retailers to know exactly where goods are in every step of the production and shipping process.

Museums are using RFID tags to guard and track art. Pet owners can have their pets tagged to help identification in case of loss. Attendees at large sports events or concerts can be tagged to prevent security breaches. Keyless car entry, the ExxonMobil SpeedPass and the E-ZPass tollbooth sticker all use RFID technology.

Many hospitals are experimenting with RFID tags in patient bracelets. In addition to storing important medical information, these tags can help track patients as they work their way through the hospital. Doctors and nurses could also be tagged for rapid and easy location in case of an emergency.

Car dealers are using RFID to manage the inventory of cars on their lots. The tags will alert managers whenever a car enters or leaves the lot and when a particular model is in short supply.

Law firms, libraries, and research centers are using RFID tags to track the movement of documents, files, and books, especially sensitive material with restricted access.

RFID tags can be used to safeguard against counterfeit products in the pharmaceutical industry or high-end fashion and consumer goods.

The RFID Mandates

Wal-Mart and the US Department of Defense have published requirements that their vendors place RFID tags on all shipments to improve supply chain management. These mandates affect thousands of companies worldwide. Wal-Mart has required its Top 100 suppliers to apply RFID labels to all shipments to its warehouses by January 2005. By the end of 2006 all Wal-Mart suppliers are expected to be using RFID tags on pallets and cases (RFID Journal, 8/2003).

Similarly, Target, the fourth largest retailer in the United States, has told its top suppliers that they will be required to apply RFID tags on pallets and cases sent to “select” regional distribution facilities beginning late Spring 2005. The company wants all of its suppliers to tag pallets and cases by the Spring of 2007 (RFID Journal, 2/2004).

What is the ROI of RFID?

Major manufacturers, particularly in the consumer-goods market, face intense pressure from Wal-Mart, Target, Albertson’s, and others to get on the RFID bandwagon. But for many other companies, it’s more of a chicken-or-egg game: manufacturers are waiting to see how many retailers install RFID-reading equipment before they invest heavily in RFID tags, while retailers are holding off on such investments until enough of their suppliers start shipping tagged goods. (CFO Magazine, March 2005)

Many major consumer packaged goods manufacturers do not foresee any quick Return-on- Investment (ROI) from adding RFID tags to their packaging and distribution systems. Instead, they see it as the cost of doing business with major customers such as Wal-Mart and the U.S. Department of Defense, which mandated the use of RFID tags by January 2005.

Consumer goods manufacturer Kimberly-Clark Corp. sees RFID as an investment needed to meet supplier requirements. Similarly, Procter & Gamble is still trying to figure out the “value proposition” of RFID and the Campbell Soup Company views the incorporation of the technology as “tactical in nature” to meet the requirements of major customers such as Wal-Mart. (Computer World, March 2004).

The Return-On-Investment for RFID may be longer than some users and early adopters are prepared to wait. The ARC Advisory Group found that 95% of companies surveyed expect a positive ROI for RFID to be more than two years out and that “more efficient warehouse receiving and better management of inbound materials may have to wait until companies have been able to negotiate with their upstream suppliers to engage in more RFID tagging.” ARC interviewed 24 companies actively investing in electronic product code RFID. Respondents found that even at 20¢ a tag, a company that ships 50 million cases a year will incur a $10 million cost. And it’s likely to incur another $1 million in expenses to prepare the infrastructure for RFID. In addition, the labor content of warehouse processes is likely to increase, adding perhaps another $500,000 in operating costs. (Purchasing Magazine Online, 12/2004)

Getting the most out of your RFID investment requires not only a commitment to the technology but a vision to use RFID for collecting business information. To realize ROI from RFID, companies need to see this technology as a way to collect valuable business intelligence that can help increase profits and reduce costs. Before companies start tagging anything, they should first consider their business goals and how information obtained from RFID could help them achieve these goals. A systematic approach is needed for a successful RFID deployment:

• Which problems can RFID solve?
• Which business processes can be improved or enhanced with location identification?

After these questions have been addressed, the available technology can be evaluated, and vendors selected. We recommend first deploying a small, focused pilot program within the company to address one or two goals. When planning an RFID deployment, businesses should also ensure that their computing infrastructure can support the deployment. RFID can produce a tremendous amount of data that can quickly become a burden on a company’s computing infrastructure. Companies need to have robust and reliable back-end systems capable of collecting, filtering, and processing these large quantities of data.

In order to get a real Return-On-Investment on RFID, the collected data should be coming from multiple sources — upstream and downstream. Manufacturers who only use RFID as a high-tech replacement for bar codes will only see limited benefits. Efficient deployment of RFID technology requires that all supply chain partners — suppliers, manufacturers, and distributors — look at RFID as an enabler of doing business differently, and to solve key customer issues or gain a competitive differentiator.

In order to assess the value of implementing the Return-on-Investment, an organization needs to consider not just the cost of the RFID tags, tagging its products, developing an RFID infrastructure, and so on. It is tantamount to assess the benefits that RFID technology can bring. What is the value of better information about the location of products, the product flow, the condition of a perishable product, customer buying behavior? What is the value of being able to
control or prevent counterfeiting or reselling of product? How can this knowledge be utilized by a company to differentiate itself from the competition, provide a better, safer product or service to its customers, and, as a result, increase its pricing power?

Kimberly-Clark Corp., a pioneer in RFID, has dedicated an extensive 5,000-square-foot R&D facility to studying the benefits of RFID and for equipment. According to Kimberly-Clark the recent ratification of a new global protocol for RFID chips should allow more manufacturers to enter into the chip business, and this will drastically bring chip costs down during the next couple of years. However, they feel that investments in “class-one,” or existing RFID technology, will not be in vain. The readers and the software are all upgradeable and will work in the next-generation product. None of the existing technology needs to be scrapped. Assuming that chip costs drop, manufacturers of small goods such as toothpaste and bar soap should be able to place RFID chips into product packaging instead of just on pallets and shipping containers. This, combined with an investment on the retail side in RFID readers that can be used to create “smart shelves,” will allow a product to be truly tracked from the factory straight to the store shelf and checkout line.
(CFO Magazine, March 2005)

While its suppliers are trying to determine a Return-On-Investment, Wal-Mart is already seeing the benefits. In January 2006 Wal-Mart reported a 16% reduction in out-of-stock products at Wal-Mart and Sam’s Club stores. With five Dallas-area distribution centers, nearly 500 Wal-Mart and Sam’s Club stores, and 140 suppliers equipped to handle RFID-tagged shipments as of last October, the retailer reduced the number of product out-of-stocks on store shelves by 16% during a 29-week period last year, according to a study conducted for Wal-Mart by the University of Arkansas. Wal-Mart operates its system of RFID tags and readers on its corporate web-based Retail Link network, providing suppliers, its own managers and employees with web access to data on the movement of shipments. Wal-Mart also reported that the process of ordering and receiving RFID-tagged shipments is three times faster than for non-tagged shipments. In addition, RFID has helped to eliminate excess store inventory due to unnecessary replenishment by suppliers. As RFID tags move toward a price of less than 10 cents this year, Wal-Mart’s RFID project will expand more quickly. Wal-Mart expects to have more than 300 suppliers live with RFID early this year and more than 1,000 Wal-Mart and Sam’s Club locations live by year-end.
(Internet Retailer, January 2006).

The Future

XIn December 2005, research firm Gartner released its inaugural report on RFID market size, share, and forecast Market Share and Forecast: Radio Frequency Identification, Worldwide, 2004-2010. According to Gartner the RFID market will grow from $504 million in 2005 to $3 billion in 2010. For RFID technology to gain wider acceptance successful implementations are needed; companies announcing large projects with substantial benefits rather than just decisions to deploy. Broader implementations across emerging sectors are likely to become more evident in 2006 and 2007. In addition, the industries in which RFID is deployed will continue to diversify, expanding what may have been a preoccupation with applications in the consumer packaged goods and retail industry. Aerospace and defense, healthcare, logistics, and pharmaceuticals are all ready for adoption. Each of these industries will adopt RFID in a different way and at a different pace as vertical applications are discovered. (RFIDUpdate.com)

In Conclusion

The next interesting phase of RFID deployment will involve comprehensive implementations with real ROI for all partners in the supply chain. RFID is a significant part of the broad movement toward sensor-actuator, always-on devices; smart tags with capabilities ranging from monitoring the date of perishable goods and automatically reducing the price as the expiration approaches, to sounding an alarm when a forklift operator places a palette of flammable chemicals in a restricted area. Reaping all the benefits from RFID and achieving positive ROI requires more than just tags and readers. A thorough rethinking of how to do business and a restructuring of systems and processes throughout an organization will be necessary. This is a daunting task that most small companies scrambling to meet their suppliers’ deadlines have yet to address.
(AlwaysOn.com)

There is no doubt that RFID will eventually revolutionize business processes throughout the supply chain, and result in greater efficiency and value for everyone. However, simply adding the tags before shipping, as many vendors are now required to do, provides little benefit other than to the companies such as Wal-Mart and Target. RFID requires careful planning and implementation. Companies that take the time to invest carefully and position themselves for the future will be best able to profit when that future arrives.

Another solution for companies that feel overwhelmed may be to turn to a managed-services firm to handle the management, archiving, filtering, and integration of RFID data, much as companies now turn to outside vendors to manage product catalog data or EDI. If there is a need to share information across the supply chain with logistics suppliers, banks, retailers, and dealers, a managed-services provider could give everyone a protected view of only the data they need, in whatever format they want.
(CFO Magazine, March 2005)

 Overview

This white paper describes the basic components of a Radio Frequency Identification (RFID) system and explores the technology, applications, and competitive advantages of RFID technology and its uses for Automatic Identification Data Collection (AIDC).

1. Introduction

Traditional bar-coding technology provides an economical solution for Automatic Identification Data Collection (AIDC) industry applications. However, this technology has a primary limitation: each barcoded item has to be scanned individually, thus limiting the scanning speed. Extra costs are incurred through the use of manual labor or automating the scanning process. And when the scanning is manually performed, there is the added possibility of human error. As a result of these limitations, RFID technology has been making inroads in AIDC applications. RFID offers greater flexibility, higher data storage capacities, increased data collection throughput, and greater immediacy and accuracy of data collection. An increasing number of companies in a variety of markets worldwide are embracing RFID technology to increase quality and quantity of data collection in an expeditious manner, a feat not always possible with barcoding systems. The technology’s enhanced accuracy and security makes it an ideal data collection platform for a variety of markets and applications, including healthcare, pharmaceutical, manufacturing, warehousing, logistics, transportation and retail.

2. Components of an RFID System

A basic RFID system consists of these components:

• A programmable RFID tag/inlay for storing item data consisting of:
               – an RFID chip for data storage
               – an antenna to facilitate communication with the RFID chip.
• A reader/antenna system to interrogate the RFID inlay.

The RFID Tag

RFID tags are categorized as either passive or active. Passive tags do not have an integrated power source and are powered from the signal carried by the RFID reader. Active tags have a built-in power source, and their behavior can be compared to a beacon. As a result of the built-in battery, active tags can operate at a greater distance and at higher data rates in return for limited life driven by the longevity of the built in battery and higher costs. For a lower cost of implementation, passive tags are a more attractive solution. The RFID tag consists of an integrated circuit (IC) embedded in a thin film medium. Information stored in the memory of the RFID chip is transmitted by the antenna circuit embedded in the RFID inlay via radio frequencies, to an RFID reader. The performance characteristics of the RFID tag will then be determined by factors such as the type of IC used, the read/write capability, the radio frequency, power settings, environment, etc.

The information stored in an RFID chip is defined by its read/write characteristics. For a read-only tag, the information stored must be recorded during the manufacturing process and cannot be typically modified or erased. The data stored normally represents a unique serial number which is used as a reference to lookup more details about a particular item in a host system database. Read-only tags are therefore useful for identifying an object, much like the “license plate” of a car. For a read/write tag, data can be written and erased on demand at the point of application. Since a rewriteable tag can be updated numerous times, its reusability can help to reduce the number of tags
that need to be purchased and add greater flexibility and intelligence to the application. Additionally, data can be added as the item moves through the supply chain, providing better traceability and updated information. Advanced features also include locking, encryption and disabling the RFID tag. RFID systems are designed to operate at a number of designated frequencies, depending on the application requirements and local radio-frequency regulations:

• Low Frequency (125kHz)
• High Frequency (13.56MHz)
• Ultra High Frequency (860-960 MHz)
• Microwave (2.45 GHz).

Low-frequency tags are typically used for access control & security, manufacturing processes, harsh environments, and animal identification applications in a variety of industries which require short read ranges. The low frequency spectrum is the most adaptive to high metal content environments, although with some loss of performance. Read ranges are typically several inches to several feet.

High-frequency tags were developed as a low cost, small profile alternative to low-frequency RFID tags with the ability to be printed or embedded in substrates such as paper. Popular applications include: library tracking and identification, healthcare patient identification, access control, laundry identification, item level tracking, etc. Metal presents interference issues and requires special considerations for mounting. Similarly to the low-frequency technology, these tags have a read range of up to several feet.
UHF tags boast greater read distances and superior anti-collision capabilities, increasing the ability to identify a larger number of tags in the field at a given time. The primary application envisioned for UHF tags is supply chain tracking. The ability to identify large numbers of objects as they are moving through a facility and later through the supply chain, has an enormous opportunity for ROI in retail such as reduction of wasted dollars in inventory, lost sales revenues due to out of stock inventory, and the elimination of the human factor required today for successful barcode data collection. There are large number of additional markets with demand for UHF RFID technology such as transportation, healthcare, aerospace, etc.

Microwave tags are mostly used in active RFID systems. Offering long range and high data transfer speeds at significantly higher cost per tag making them suitable for railroad car tracking, container tracking, and automated toll collection type applications as a re-usable asset.
The table on the following page highlights the different characteristics of the three RFID operating frequency ranges:

3. Applications

Library Information Systems

Tracking a library’s assets and loan processing is very time-consuming and traditional bar-coding systems help to improve the process. However, RFID technology offers additional enhanced features:

Efficient processing – When each library item contains an embedded RFID tag on a printed label, its availability can be tracked much more efficiently (versus manual tracking). Library items can be checked in and out much faster than manual barcode or human readable data processing. In fact, with RFID, processing returned items no longer requires any human intervention at all. RFID enables libraries to provide certain services around the clock, without incurring additional costs.

Security – If a tagged library item has not been checked out, any attempt to remove it from the library premises will be detected via the RFID antenna at the entrance gate, hence the RFID tag doubles as a EAS anti-theft device.

Inventory management – Book inventory that previously took weeks or months to execute can now be shortened to hours using RFID tagging. Using a portable RFID device, a librarian needs only to walk through a corridor of book shelves to check the status of the books available. The RFID reading device reads item information from the books’ IC chips and then automatically interfaces with library inventory software systems to update the appropriate databases. In addition, it can notify the operator immediately if an item is not in its designated location.

Supply Chain Management

Key challenges faced by companies in their supply chain, is the visibility, tracking and traceability of materials and products as well as the quality and quantity of data collected in real time. RFID’s ability to increase data collection throughput and accuracy enable companies to identify materials, products and trends in supply chain with greater accuracy in real-time, compared to data collection technologies utilized to date. Once RFID technology is fully integrated, minimal human effort is required in this
process thus reducing errors and costs. By providing accurate, real-time data and information, RFID solutions enable companies to capture “live” data, converting it to meaningful information and automating all associated transactions and processes.

Healthcare

Erroneous patient data, including administering incorrect medications or dosages, is a major factor resulting in serious and in some cases, fatal medical mishaps. According to the Institute of Medicine:

• Between 44,000-98,000 Americans die from medical errors annually (Institute of Medicine;
Thomas et al.; Thomas et al.)
• Only 55% of patients in a recent random sample of adults received recommended care with
little difference found between care recommended for prevention to address acute episodes or
to treat chronic conditions (McGlynn et al.)
• Medication-related errors for hospitalized patients cost roughly $2 billion annually (Institute of
Medicine; Bates et al.)

These statistics have dramatically increased the demand for fail-safe accuracy in managing patient care; RFID is providing an effective solution.

In RFID-equipped hospitals, patients wear wristbands with RFID tags containing encoded medical information. All prescription bags contain an embedded RFID tag containing details of the medication. Before any medication is administered to a patient, an RFID reader verifies the information between patient’s tag and the prescription bag’s tag. Information about the patient’s medical allergies or other relevant patient care criteria is also highlighted on the RFID host computer. This secure patient-data
system greatly reduces the possibility of human error thereby preventing a majority of unnecessary medical mishaps.

4. Benefits

The primary benefits of RFID technology over standard barcode identification are:

• Information stored on the tag can be updated on demand
• Large data storage capacity (up to 4k bits);
• High read rates
• Ability to collect data from multiple tags at a time
• Data collection without line-of-sight requirements
• Longer read range
• Greater reliability in harsh environments
• Greater accuracy in data retrieval and reduced error rate

What About Barcodes?

As barcodes approach their “middle ages” (it’s been 40 years since a pack of gum was scanned at a Marsh grocery store in Ohio), they are as “alive” and useful as ever. And while RFID provides advantages, the demise of the barcode is greatly exaggerated. The Auto-ID Center, the research and development group that formulated and standardized much of the RFID technology evolution, did not set out to make barcodes extinct. According to its spokesperson, “The Auto-ID Center does not advocate replacing barcodes as barcode-based systems such as the UPC are a standard automatic identification technology in many industries and will be an important complimentary technology for
many years.”

5. Caveats

The main caveat of RFID technology is the cost of the physical RFID tag. A typical barcode label costs about $0.02, whereas an RFID tag label can costs upwards of $0.10 or more depending on quantity. The initial implementation costs for RFID are also higher, depending on requirements and equipment specifications.

Although initial RFID implementation may currently cost more, the cost will gradually drop to a competitive level in the coming years as companies adopt the technology. Meanwhile, companies that can exploit the strategic benefits of RFID today stand to gain significant advantages over their competitors slower to adopt RFID. Early adopters can clearly benefit from cost savings and intangible long-term competitive advantages which outweigh the cost of the RFID implementation.

6. RFID Summary

Over the past few years, RFID technology has been attracting considerable attention. Giants such as Wal*Mart, Target, BestBuy, U.S. Department of Defense (DoD), Tesco, REWE and Metro Group have announced RFID mandates instructing their top suppliers to start utilizing RFID technology as part of a supply chain compliance program. In January 2005, there were in excess of 400 major companies worldwide required to use RFID technology. As a result of the current RFID supply chain mandate schedules, an estimated 50,000+ suppliers who will ultimately be affected by these plans and RFID solutions are a large driver for future business growth.

The long-term focus in the United States will be on the retail and DoD adopters, who have to be compliant in the near future. Eventually, they will move beyond compliance only, and attempt to use RFID to increase efficiency and start gaining return on their investment. This will almost certainly mean more upgrades and additional spending on enterprise solutions.

The dominant RFID dynamic behind supply chain applications is the EPC standard using the UHF frequency band: 902-928 MHz (North America) and 868 MHz (Europe). EPC Global, a joint venture between GS1, Inc. (formerly EAN International) and GS1 US (formerly the Uniform Code Council [UCC]) is focused on helping supply chains and industry implement the Electronic Product Code™ (EPC) through the development of global standards and support of the EPC global network™. The EPC Global Network ideally intends to transform the global supply chain through a new, open global standard for real-time, automatic identification of items in the supply chain of any company, in any industry, anywhere in the world.

8. General Information

There are numerous sources of information regarding the latest RFID developments. Two good places to start are:
• www.epcglobalinc.org

The basic components of an RFID system are:

• Tags
• Reader
• Antenna
• Host computer with appropriate application software

RFID Tags

RFID tags are tiny microchips with memory and an antenna coil, thinner than paper and some only .3mm across. RFID tags listen for a radio signal sent by a RFID reader. When a RFID tag receives a query, it responds by transmitting its unique ID code and other data back to the reader. There are two types of RFID tags-passive and active.

RFID Readers

RFID readers, also called interrogators wuery RFID tags in order to obtain identification, location, and other information about the device or product the tag is embedded in. The RF energy from the reader antenna is collected by the RFID tag antenna and used to power up the microchip. There are two types of RFID readers.

• RFID read-only readers: As the name suggest, these devices can only query or read information from a nearby RFID tag. These readers are found in fixed, stationery applications as well as portable, handheld varieties.
• RFID read-write readers: Also known as encoders, these devices read and also write (change) information in an RFID tag such RFID encoders can be used to program information into a “blank” RFID tag. A common application is to combine such a RFID reader with a bar code printer to print “smart labels”. Smart labels contain a UPC bar code on the front with an RFID tag embedded on the back.

Frequencies

There are 4 major frequency ranges that RFID systems operate at.

• Low Frequency (LF) 125 to 148KHz
• High Frequency (HF) 13.56 MHz
• Ultra High Frequency (UHF) 915 MHz
• Microwave 2.45 GHz

Generally, low-frequency systems are distinguished by short reading ranges, slow read speeds, and lower cost. Higher-frequency RFID systems are used where longer read ranges and fast reading speeds are required, such as for vehicle tracking and automated toll collection. Microwave requires the use of active RFID tags

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