1. Part 3: What and Who is Driving the Adoption of RFID?
What are the key things that are driving interest in RFID? Why is everybody so excited about this? Well [the] emergence of UHF is critical because of the extra distance that is necessary for the supply chain applications. The standards are now emerging, and there are actually 60 companies that have agreed to support this EPC Gen2 standard. The other big thing that a lot of companies don’t realize about RFID is the importance of the Internet. If we had a $0.05 RFID chip 30 years ago, it wouldn’t [have] done as much good as it will do today. Because you can write a serial number to it, you can identify something, but you wouldn’t be able to do much with it. What the Internet allows is when I ship something out of my dock door, I scan 60 cases and I get 60 unique IDs. I check them with my software, and I say, “OK, is this what Wal-Mart ordered? Yes, it is. OK, then send it out immediately.” My systems use the Internet to communicate with Wal-Mart systems and say: “Look, I just sent you 60 cases of Gillette Action razors, and they’re leaving my facilities in Devon, Massachusetts, right now. Here are the numbers that are coming, and here’s when they should be there.”
Now Wal-Mart knows to expect something, and when Wal-Mart receives those 60 cases [and] scans [them] against the 60 numbers I sent earlier, and says, “Yes, I got those cases,” which sends me back a message that they’ve received them. We can now invoice and bill Wal-Mart for those things. That’s much more powerful than simply saying, “I’ve identified something.” Now I send it out, it goes into a black hole the way a barcode on a case does today goes out to that black hole. We don’t know where it is until somebody scans that barcode again. This is a very powerful system and very important.
The competition among the big companies is huge right now; everybody has an Enterprise Resource Plan (ERP) system today. They all have the same IT infrastructures, so now they are looking for the next wave of competitive advantage, and most see RFID as being the one. These are the companies that have issued RFID mandates, meaning they are requiring their suppliers to put RFID tags [on] products that are shipped to them. These organizations when combined with the U.S. Department of Defense (which is also doing this) have $500 billion in purchasing power annually. They buy $500 billion worth of stuff, or they sell $500 billion worth of stuff. Even though there’s a small number of companies, there’s a very large pool of buyers of stuff with a lot of influence [to] force this technology onto their suppliers. Companies currently requiring suppliers to use RFID tags are:
- Best Buy
- Tesco in the U.K.
- Metro in Germany
The FDA is [also] looking at RFID as a way of solving the problem with counterfeit drugs. About 10% of the drugs in the United States are estimated to be counterfeit. Overseas in Europe, it’s [an] estimated 20 to 25%; in Africa it’s about 80%. How do you prevent these drugs from being counterfeited? One way is you put tags on items when they are being manufactured, and you track them through the supply chain. You create “electronic pedigree,” [which is a record of] everybody who touched the item, when they touched it, where they touched it, and you know that it has traveled legitimately through the supply chain and you can track it back. If it disappears and shows up somewhere else, if it’s a shipment that was supposed to go to CVS pharmacy and winds up in Canada or ends up in Eastern Europe somewhere, somebody can scan that and track back and see: where it disappeared in the supply chain, who was the last person to touch this, and what was the last company to use this. And that’s one of the ways [the FDA] hopes to solve this counterfeiting problem.
What’s happening now is lots of big companies, in fact I’d say almost all of the big companies that are in [consumer packaged goods] and retail in the United States, are looking to deploy RFID. They’re not rushing to deploy but they are looking at the technology, and they are experimenting with it. They are waiting for this new Gen2 technology to come out. First products are about to hit the market this fall. More vendors now are entering the market, so you’ve got big players like Texas Instruments and Phillips who will be making these ABC Gen2 tags.
A very important thing is that somebody has to prove that this technology is actually going to deliver some business benefits. So far no one has really done that. There have been studies, there have been tests, and there has been talk, but nobody’s actually said, “I saved a million dollars by using RFID,” or, “I increased my sales by a million dollars by using RFID to replace out of stocks.” Wal-Mart is the front runner here. I’ve been to their stores, and I’ve seen their systems in action. I think that toward the next year, maybe early 2007, Wal-Mart will say on a call with analysts—Wall Street analysts—they will say, “We saved X million by using the RFID systems,” or, “We increased sales X because we reduced out of stocks in stores by using RFID.” They should have about 600 [stores] by the end of this year. When that happens, then you’ll know the RFID movement is for real, and you’ll see everybody jump on the bandwagon at that time. Until someone proves the business case, lots of people will be skeptical, and they’ll work on it, they’ll look at it, they’ll examine it, but they won’t rush into it.
2. Solution for Testing RFID Readers (Interrogators) and Tags
VI Services Network, a NI Alliance Member, currently offers a complete test system for testing RFID readers and tags.
The test system is based on the following NI products:
- Vector Signal Generator
- RF Signal Analyzer
- PXI Chassis and Controllers
- LabVIEW Graphical Programming Environment