For more information on Cutter Consortium's Business Technology Trends and Impacts Advisory Service, please contact Dennis Crowley at +1 781 641 5125 or e-mail dcrowley@cutter.com.

9 September 2003

RADIO FREQUENCY IDENTIFICATION: BEYOND BAR CODES

The lack of accurate and real-time data about the way in which products flow through supply chains makes it difficult for IT executives to support corporate strategies and operations as efficiently and effectively as they otherwise might. Radio frequency identification (RFID) picks up where bar codes left off by promising exhaustive control of supply chain data, streamlining of product delivery, and pinpointing of product planning.

Cutter Consortium Senior Consultant Robert C. Gardner remarks, "RFID uses the new Electronic Product Code (EPC), which includes a unique serial number. It also allows you to read those numbers with a reader that is not dependent on line-of-sight, and you can scan multiple items virtually simultaneously. The key to such magic is a minuscule chip with an antenna and circuitry that responds to select radio frequencies, which can be attached, or tagged, to almost any 'thing.' We are truly now a systems society, and we are operationalizing 'systems thinking' around the globe."

Gardner continues, "This chip and its associated identification and location information, coupled with the coordinating power of the Internet and the appropriate supply chain analysis software, will lead to what RFID experts call an Internet of Things. Such pervasive use of RFIDs may become a reality sooner than you think; that is, once the unit costs of volume tag production render RFID economical for tagging an item of interest, whether it is a new necktie or a bottle of shampoo."

Complete supply chain visibility is possible when every item has the equivalent of an IP address. Some of the benefits of this include:

  • Reduction in stockouts

  • Continued movement toward real-time point-of-sale information

  • Higher inventory turns

  • Optimized inventory from raw materials through finished goods

  • Shrinkage control

  • Spoilage/obsolescence/return management control

  • Counterfeit control

  • Improved productivity

  • Automated shipping/packing/receiving and checkout

Gardner comments, "As with most emerging technologies, technical and organizational issues require resolution before RFID can achieve widespread adoption. There are also collateral considerations: How is it done now? How will bar code technology respond to the RFID challenge? How will RFID affect the broader collection of players (the economic 'spillover' problem), such as proponents of consumer privacy? Because the consumer ultimately owns the RFID tag, privacy is a significant concern."

"Perhaps you're already investing in RFID; and well may you be. It seems that RFID will come to pass, probably at a pace that allows bugs to be shaken out while it's still on a small scale. RFID likely will reach a considerable scale one way or another before a final fork in the road deciding its mass adoption."

Steps Gardner suggests companies take to move toward the RFID decision point include:

  1. Conduct a business study of RFID for your organization.

  2. Craft an implementation plan, beginning with immediate collaborative partners.

  3. Launch a pilot to test RFID and include business partners.

  4. Steadily scale up RFID as it proves its worthiness.

"This recipe is simple" says Gardner, "but it could become expensive if RFID reaches critical mass before you're ready to adopt it. In that case, companies will need to implement on the fly. Just recall the cost and stress of 'command-performance SAP adoption' versus steady investment at your own pace! By failing to invest in RFID early, you risk being outdistanced by your competitors and of holding up your supply chain partners."

-- Cutter Consortium

Radio Frequency Identification: Beyond Bar Codes

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