18 Sep 2007

History is littered with technical blunders — RFID in the supply chain could be one of the biggest.

In times where productivity and competitiveness are becoming more vital to sustaining economic prosperity, investing in technology for technology’s sake can be a very costly, if not fatal mistake.

The overhyped RFID (Radio Frequency Identification) technology is a prime example.

RFID in the supply chain has been hailed as a replacement for barcodes and the ultimate in item tracking. In most cases, however, upon further inspection, you find an expensive solution looking for a problem.

Firstly, I would like to categorically state that I am a very big fan of RFID. Since 1995, I have been exposed to various methods of solving unique problems using RFID and I have been directly involved in RFID projects.

My company, Heavey RF, has a large range of RFID products to offer and has deployed RFID solutions to a number of companies in Ireland. Unlike many such providers, we have actually made money doing it.

Great expectations

So what’s the problem?

It’s this – RFID simply cannot do what people expect it to do based on the hype that has been generated over the last decade.

RFID uses computer chips to store information. The advantage is that a lot of RFID chips or tags do not need power as they are charged by the reading signal and respond according to the data programmed.

The benefit is that comparatively large volumes of data can be stored in a tag and line of sight is not necessarily required. The technology is being sold globally as a revolution that will eventually replace barcodes.

According to the hype, if you are not on board, you will be left behind. Sound familiar? Remember the dotcom industry in the late Nineties?

RFID technology has been around a long time, as was the internet before general adoption. Then, a huge perceived explosion in the dotcom sector was generated around speculation, hype and a fear of not being part of a ‘new economy’ – a phase that RFID is currently in.

When the dust settled and reality played its part, the dotcom industry began a more sustainable and organic development – the next phase for RFID.

There are two core reasons why RFID will not succeed in replacing barcode technology – technical restrictions and the cost of producing the tag. While costs may come down, there are too many different types of RFID tags required to achieve true economies of scale that would make it a viable replacement for barcodes. Barcodes are more reliable than RFID tags. Some reports have read rates as low as 60pc success at case level.

RFID advocates will tell you that bulk purchases will drive the cost of the tag downwards. However, the big problem here is that there is no ‘one size fits all’, a factor needed to drive the market.

In reality, there are hundreds of different RFID tag types. From short range, medium range, long range, LF, HF, UHF, 2.4GHz, 5GHz – all with different physical attributes depending on the product they are to be applied to.

Because of the physical size of products, their contents, and the properties of RF technology, a large number of different tag types need to be maintained – splitting volumes.

Over the last number of years I have attended seminar after seminar about how RFID is the future and that if you are not on board you will be left behind. I have not heard anything new in these seminars and most of them seem to focus on the biggest thing to happen to RFID in the last 10 years – Wal-Mart.

The Wal-Mart story has made RFID look like a sure thing.

But scratch the surface of the Wal-Mart progress and a very different picture emerges. The Wall Street Journal reported that RFID in Wal-Mart was failing, which was quickly disputed by Wal-Mart, but no real defence was produced in terms of facts or figures or indeed the much sought-after return on investment. On paper, the numbers may add up for Wal-Mart, but suppliers are not seeing a return on investment. To date, not one of the Wal-Mart suppliers utilises RFID for any other customer.

I would advise Irish companies to hold off on implementing RFID unless it can be demonstrated that it is fit for purpose and can deliver a return of investment. RFID can produce some real benefits when deployed correctly and professionally in a closed loop environment.

A proper cost analysis must be performed and the numbers have got to stack up before any decision to deploy RFID should be taken.
Given that barcoding still hasn’t been fully deployed after 40 years in the supply chain, I find it hard to accept that this much more expensive,
infinitely more complicated and not-yet-mature technology is going to be any different.

Given the last 15 years of what is effectively an RFID failure in the supply chain, Irish firms should insist in seeing a proven working solution before taking what is ultimately a big leap of faith. History is littered with large technical blunders – RFID in the supply chain could be one of the biggest.

By Ronan Clinton