RFID:The New-Age Bar Code

Some call them bar codes on steroids. For others, it’s a technology that

will revolutionize the retail business. Either way, Radio Frequency Id (RFID)

technology is now, all of a sudden, the focus of attention of the global IT

industry—second only to Wi-Fi in the hype generated.

All this hype is not without reason. The technology has witnessed large-scale

testing and adoption by some of the largest enterprises including the world’s

largest retail chain, defense establishment and razor manufacturer.

Gillette has ordered 500 million radio-frequency identification tags from

Alien Technology Corp. to use in trial programs, including one with retailer

Wal-Mart. Last October the United States Department of Defense (DoD) made it

mandatory that its suppliers attach RFID tags to the lowest-possible level of

products by January 2005. Wal Mart has directed its top 100 retailers to have

all their cases and pallets to be RFID "chipped" by January 1, 2005.

That would mean up to 8 billion tags used every year by the Wal-Mart top 100

retailers.

Beating Bar Codes



"RFID technology is not rocket science. It’s a very simple technology

that has been around for over three decades," says Sanjay Sarma, a

professor of Mechanical Engineering at Massachusetts Institute of Technology and

former chairman of research and co-founder of the Auto-ID Center at MIT.

RFID is a technology that involves tags that emit radio signals and devices

called readers that pick up the signal. (see box— How RFIDs work?) To put it

simply, RFID tags consist of silicon chips and an antenna that can transmit data

to a wireless receiver.

The question is—if they are so simple, then how are they any different or

better than bar codes? And will they replace bar codes?

"Unlike bar codes, which need to be scanned manually and read piece by

piece, RFID tags do not require line-of-sight for reading. Within the field of a

reading device, it is possible to automatically read literally hundreds of ID

tags," says Sarma. In other words, bar codes need to be physically placed

in front of a scanning device.

Since RFID tags use radio waves and are not optical devices and can be placed

inside boxes or pallets, it is not only easier to take stock of inventory in a

retail outlet but also the store is automatically alerted when products are in

short supply on the shop floor.

"The idea that one can track much more precisely the movement of goods

in the supply chain and that you can automatically read what is coming from the

supplier to the customer is something very exciting. The key here is automation

instead of a lot of manual scanning in the case of bar codes," says Peter

Zencke, executive board member of SAP.

The German Giant plans to release, sometime this year, a technology that

enables users to expose RFID-associated data to the Internet as a Web service.

So, if the technology is so exciting, what is stopping retail

outlets across the world to rush in and adopt the technology?

The Hitch



The answer is straightforward — cost. Today, an RFID chip costs 15 cents

and upwards. And experts reckon that till that touches the 5-cent mark,

large-scale adoption of the technology will continue to be a mirage.

But this does not dissuade die-hard proponents of the

technology like Sanjay Sarma. "A couple of years ago when chips used to

cost more than a dollar, people thought that we were crazy when we told people

them that RFID tags would cost just about few cents in the years to come. But

they are not laughing anymore," he says. Sarma believes that the 5-cent

dream is not far away especially considering the fact that the technology’s

adoption was growing in leaps and bounds.

SAP’s Zencke agrees that the prices are likely to come down

even more. " When we started working on the technology in our Japan labs

about six years ago, they used to cost above two dollars. Today, we have vendors

saying that the price is going down to 10 cents someday in the near future.

Right now, the technology is ready for a high-value product," says Zencke.

"Perhaps, where you could start today is with marking

pallets. If you go down to the cases, and then to individual products, it is not

cost beneficial today. A nice way to start now would be to begin with the most

obvious thing and try to get returns on the very high level- say the pallets,

and then go on to the next level (individual units) as the prices go down,"

adds Zencke.

Another major concern with the technology is the privacy

issues raised by consumer protection groups in the US who fear a "Minority

Report kind of world" where a tagged article can still be monitored once

the consumer leaves the store.

Experts like Sarma believe that most of these fears are

fanned by lack of awareness about the technology. Others like Zencke believe

that the issue needs to be handled with care. "We must use RFID to enable a

more effective and efficient supply chain but avoid using it as something that

interacts with the consumers because that will raise privacy issues," says

Zencke.

The Opportunity



For Indian companies, the opportunity is immense. And industry leaders like

Wipro and Infosys have already ventured into this space. Infosys began looking

at moving into this domain in March 2003 and has developed a framework to help

its clients quickly examine the potential impact and business value of RIFD

investments. The big opportunity however, lies in the amount of software

development required to link RFID networks to enterprise systems.

Developing that software offshore can dramatically cut costs

and such savings will provide customers with a lower TCO for RFID network

deployments, says Pravin Rao, senior vice president, Head Retail Integrated

Business Units IBU at Infosys. Infosys has also has become a member of the

Electronic Product Code (EPC) global Network, a joint venture between EAN

International and the Uniform Code Council (UCC). EPC global is spearheading the

development of industry-driven standards for the EPC network to support the use

of RFID. Wipro too has joined up the EPC global network.

Despite the spurt of enthusiasm, some industry watchers

advise caution. Says Zencke, "Today, RFID is a hot topic and we need to be

a little careful about it. Two to three years ago, people said that the Internet

is everything and if you were not on the Internet you were dead. Then it was

mobility and now it is RFID. Even though in principle it’s a great idea, I

would advise caution."