RFID awareness blossomed a few years ago when retail giant Wal-Mart announced a plan to require its top product suppliers to add passive RFID tags to the shipping pallets or cases in which clothing, paper towels, books, coffeemakers and toys were shipped. So did the US Department of Defence. These "open loop" systems were envisioned to span multiple locations and companies, and were touted as enabling organisations to see for the first time when and where tagged items were moving through end-to-end supply chain.
Typically these are passive tags that are activated when scanned by a tag reader. The tags use some of the energy from the reader's transmission to send back the unique RFID number of the item, which is then passed on to application software and enterprise ERP systems.
"RFID technology development, standards work and awareness were prodded by these compliance initiatives," says Michael Liard, research director for RFID at ABI Research, "They put RFID on the map in various vertical markets."
But such systems are complex and costly, and only the biggest companies have the money to devote to them. Wal-Mart is still firmly committed to RFID. Overall, standards progress is slow, but steady.
In the meantime, all that development work has opened up a host of new applications for RFID, covering a wide range of asset tracking and inventory management, in short anything where an automatic identification system can help solve very specific business problems for even a single enterprise, Liard says. Such focused, tactical applications are called "closed loop" systems.
"It's about identifying your specific business processes and pain points, and then thinking through how RFID technology may be able to address those," he says.
Shipper DHL has had a series of RFID pilots, working with clients to tag pallets or cases and enable RFID tracking from pickup to storage in DHL warehouses, and to final delivery. The company is expanding the range of applications under study, including tagging high-value shipments, sensitive data, perishables and extremely time critical shipments. These are the same kinds of "taggable" assets that many other companies can consider on their own. The Minnesota Department of Corrections is even using RFID to track 1,300 inmates at one of its prisons.
A clothing boutique called the Industry Standard, applies item-level RFID tags to the 1,250 high-end denim items, hoodies and other fashion items aimed at young people. It speeds up checkout and guards against shoplifting. But RFID readers are also installed in the dressing rooms: when a customer hangs up the tagged clothes to try on, the reader records the items' Electronic Product Code and displays relevant information on a touch-screen monitor in the cubicle, such as a biography of the clothes designer, or photos of celebrities wearing that item.
In the future, the boutique plans to create an RFID-based loyalty card for selected customers. When these customers walk in, the RFID system will identify them and call up their complete buying history and preferences. Sales staff can direct customers to a new item from their favourite designer, for example.
"Companies are much smarter than they were five years ago with RFID," says Patrick Connaughton, senior analyst for supply chain, at Forrester Research. "What we're seeing is gravitation away from item-level supply chain RFID because it's too expensive, toward case and pallet level tagging and asset tracking within a warehouse or within a single supply chain."
Tracking bins and vats
One emerging example of this trend is the need to track and efficiently reuse
reusable transport items (RTIs), such as totes, vats, bins or chemical transport containers used to carry the end product.
A 12-month internal study released a year ago by RFID vendor Xterprise found that management of these assets is 'largely conducted by error-prone manual processes, if at all." Studying a group of customers, the company found they had sophisticated and detailed information systems for manufacturing, but profit margins for the resulting products consistently were eroded by poor RTI utilisation within those same supply chains. One company's utilisation was so poor that they factored in an additional $100,000 (£48,830) per quarter to buy disposable containers to supplement the reusable ones, which were rarely where they needed to be on time.
Xterprise is using the data to tweak its Xterprise Asset Management product suite, a turnkey RFID system for managing such items.
Other vendors also are refocusing on these smaller-scale RFID opportunities. Alien Technology has unveiled a suite of products designed and priced specifically for single-enterprise closed-loop systems. "In the past nine months, even though we sell through channels, we've gotten lots and lots of direct inquires from companies that are interested in [using RFID] to track all kinds of products," says Ronny Harldsvik, vice president of marketing and business development for the company. "We're making RFID simpler to use and manage."
One vendor using Alien Technology is San Jose-based FileTrail, which tags important files, documents such as patient charts, and library materials for law firms, hospitals, accounting companies, courts and human services agencies.
"Companies are not tagging everything," says Scott Burroughs, IBM's strategist for sensor and actuator solutions. "Instead, they're tagging high value, or high profit, or high turnover items, things with a lot of uniqueness to them. They're being much more specific about asking 'what [business] process am I addressing and how can this technology create business value in that specific process?'"
One example he cites is the need to track the effectiveness of expensive promotional displays that manufacturers deploy at retail stores: cardboard stands to hold a new product for example, timed with ad campaigns in print or broadcast media. Numerous studies show that many of the displays never make it from the stock room to the shop, Burroughs says. With an RFID system, the product company can confirm the displays are deployed and find out if its products are actually being bought.
Kimberly-Clark, an health and hygiene company, earlier this year reported improved effectiveness in promotions of some of its products at Wal-Mart stores. Interestingly, the project was not part of the Wal-Mart RFID mandate and serves a model for how RFID can be applied on a relatively small-scale basis. The packaged goods company had been increasing spending on trade promotions, the money becoming an ever-large line item in the profit-and-loss statement. A way was needed to ensure the money spent was being effective.
Working with its RFID vendor, OATSystems, and other suppliers, a Kimberly-Clark team created a portable system for tagging the displays, which are designed to be set up at the end of aisles in high-traffic areas. As the displays moved from back room to aisle, they're scanned by Wal-Mart tag readers and the data sent back to Kimberly-Clark in XML format. The resulting information has been used to streamline the initial promotion planning process at Kimberly-Clarke, and to help identify when displays don't get set up on time or other in-store problems. One issue that emerged is that some displays were too large for the aisle widths in some Wal-Mart stores, for example.
In such focused applications, RFID standards aren't strictly necessary. But analysts, vendors and enterprise users generally agree they're still highly desirable, because they can hold down costs and increase equipment and software options. With standards, closed loop deployments can eventually be brought together, to create either larger closed loops or even participate in an open loop system, says Ashley Stevenson, chairman of RFID vendor Reva Systems. "These [closed-loop] islands eventually can get connected," he says. "And you get a whole new value of this 'network effect."