Radio frequency
identification
2003 when Wal-Mart and the Department of Defense mandated
that their top suppliers use the wireless tracking technology.
Since then, there’s been a lot of work in the field. RFID components,
including tags and readers, are more reliable than earlier versions. Systems
integrators have a better idea of how to get RFID data into enterprise resource
planning (ERP) applications. And manufacturers are hammering out standards
crucial to interoperability.
But IT managers, especially those not under orders from business partners,
are still grappling with questions. The most pressing is whether a large-scale RFID rollout makes economic sense.
As the worldwide RFID leader for IBM’s business consulting services, it’s Sean
Campbell’s job to help provide answers. Campbell recently sat down with
internetnews.com to talk about the state of RFID and what’s being
done to help speed its adoption.
Q: RFID has been on the minds of large companies for a couple of years
now, but how far along are they in implementing it?
It varies significantly by industry. Consumer goods and retail are the farthest
along. We’re still very much at the beginning of what’s going to be a long
journey. Wal-Mart, Target, Albertson’s and Best Buy have rolled out [RFID],
or are starting to roll it out. Wal-Mart has 137 suppliers and is asking the
next 200 or so to be compliant by January of next year.
We’re still in a very collaborative mode, figuring out how to deploy this
technology in distribution centers and in stores to drive value. The focus
will be on pallets and cases for a while, and we’re starting to get more into
thorny supply chain issues.
Item-level tagging is something that’s an economic issue, and it will take a
while to get there. It’s logical for high-shrink, high-counterfeit items like
DVDs and apparel, but tags are still a little too high to put on everyday
goods.
Q: Besides consumer-packaged goods and retail, the pharmaceutical
industry has been identified as a logical RFID user. What’s happening
there?
Pharma has a major issue with counterfeiting, and the FDA has said that RFID may
be a good way to address it. We’re starting to see a couple of pharma
companies start tagging certain products that have been counterfeited. It’s
very much in its early stages. GlaxoSmithKline has said by the end of this year
it will begin tagging products at one of its distribution centers.
One [of the compelling reasons for pharma to use RFID] is that the tag price
is not as significant when you’re dealing with drugs that cost thousands of
dollars.
The state of Florida has said that by July 2006, all [pharma]
products have to have an electronic pedigree associated with it. So RFID is
a way to do data capture, and that could spur some activity in the pharma
sector. California, Illinois and other states are considering similar laws.
The business case is just much more prevalent when you have high-margin,
high-dollar items as opposed to a box of crackers or biscuits.
Q: You mentioned the price of tags. Industry watchers have said that
potential buyers are waiting for the tag prices to drop to 5 cents or fewer
before committing to RFID. Where do tag prices stand and what are the
chances of hitting the nickel mark?
Tag prices are still all over the map and are a function of a variety of
variables, the largest being the volume [the buyers] are purchasing. It’s
basically a volume play. What will you commit to now and for the future?
Companies without [large volume deals] are in the 20- to 35- to 40-cent
range.
We expect that will continue to come down. Essentially we have two vendors,
Matrix and Alien. As more vendors enter that space, there will be more
options to purchase from. And if adoption continues … that will also
assist with industry-wide prices. But I don’t think the 5-cent tag is
anything we’ll see in the near-term.
Q: What role will standards play in speeding adoption?
There are different types of standards that concern how tags and readers
communicate or how readers will communicate with software. We’ve now gotten
a standard protocol between tags and readers to drive interoperability. Next
will be [a standard protocol between] readers and software and next [a
standard protocol for] data sharing between companies. There’s still quite a
bit more work here.
