RFID Today and in the Future

RFID (radio frequency identification) technology in the near future is set to transform real-time business across industries with benefits as diverse as revolutionary supply chain efficiencies to preventive maintenance improvements in environmental and physical safety. Few other technologies will have as much impact on both business efficiency and the consumer experience.

Will the right product always be there when my customer wants to buy it? Will the transport of a potentially perishable product make it to my customers in the right state or will it be ruined by faulty temperature controls? Will I have to scrap a major chip production run that was demolished by lags in temperature control? Will unexpected seismic activity impact my production schedule? These are some the pressing business issues that will be addressed by RFID technology.

RFID development



RFID technology had long been used in high-cost applications, such as automated tolling systems and security-ID badges. But in recent years, the price of RFID tags has dropped dramatically and their performance has improved, giving the sensor technology new momentum.

The price of the tags dropped from $1 each in 2000 to 25 to 60 cents in 2003 and is expected to drop further to five cents a piece within the next few years. The prospect of affordable tags could have enormous implications for retailers and manufacturers alike. RFID can help improve customer service and deter shrinkage; primarily, however, it will help businesses build more efficient supply chains, allowing for real-time (or near real-time) replenishment and requiring smaller amounts of items in-stock.

Real world test



RFID tags consist of an antenna and a chip containing a code with information about a product. Implemented effectively, RFID technology holds the promise of reducing inventory, decreasing labor costs, increasing responsiveness to customers and increasing asset utilization.

As a result, many retailers and consumer goods companies have begun to look at RFID as the next hot technology to invest in. In 2003 Wal-Mart announced that it will require its top 100 suppliers to begin using RFID tags on cases and pallets of consumer goods shipped to its distribution centers and stores by January 2005. The US Department of Defence (DOD) has also announced similar requirements for its vendors. And the Germany-based METRO Group has announced a comparable initiative, which will begin in November 2004. These mandates will give RFID its first broad, real-world tests.

The business case today



Many companies are racing to use RFID to enable business processes, such as putting tags on pallets and cases, to scan and report information back to the warehouse so that distribution centers and retail outlets can replenish goods automatically when stock is low. If every item in a store were tagged, retailers could improve customer service by replenishing shelves as well as locate mislaid products, deter theft and offer customers personalized sales pitches through displays. Ultimately, tags and readers could replace bar codes and checkout labor altogether.

Longer-term strategic role



In the longer term, RFID is likely to enable more widespread benefits at the heart of the supply chains relied on by major businesses around the world. Over the past 10 to 15 years all manufacturers have been building increasingly sophisticated supply chains using, among others, barcode technology. RFID-centric supply chains will bring significant benefits. RFID tags can store more information about a product than bar codes can - not just what it is, but also when and where it was made, where its components come from, and when they might perish. In addition, bar coded items sit on a retail shelf and do not generate any data until they are scanned by a code reader. RFID, on the other hand, can be used in automated processes. A reader can extract location and product description data from a tagged item every 250 milliseconds. This means that RRID tags can act as passive tracking devices, signalling their presence over a radio frequency when they pass within yards of a scanner. This capability also makes RFID a very promising technology for a range of industries. For instance, RFID tages can be used for security applications, such as tracking cargo ships or in the chemical industry in preventative maintenance.