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Government tunes in to RFID

Radio frequency identification (RFID) technology dates back to World War II, but interest surged recently as large organizations in both the public and private sectors mandated that their suppliers begin using it to track products in the supply chain. In government, the Department of Defense (DoD) is the leading user, while large retailers such as Wal-Mart and Target are driving progress in the private sector. Implementation still faces a tangle of issues ranging from reliability to standards and privacy. But it is moving forward in selected areas where strong business cases can be made.

All RFID tags operate by sending a radio signal to a sensor. Active tags contain their own battery power sources and can be read at distances ranging from 350 feet indoors to 1,000 feet outdoors. Passive tags rely on receiving power sent to them by a scanner, which then lets them transmit a signal. Because active tags are much more complex, they are also much more expensive, although their prices have come down in the last year from $100 to about $70. Passive tags are now under $1.

INPUT predicts that the federal market will grow rapidly from 2004 to 2009, increasing 17% per year from $51 million to $112 million. Although the civilian market is only one-third the size of the defense market, it is expected to grow faster, at 23% per year. Forrester Research (forrester.com) counts RFID technologies as one of the top 10 new technologies for state and local government.

Acting locally

The city of Virginia Beach, Va., began investigating RFID technology for use in its libraries in 2001. At that time, the cost of RFID tags and developing the infrastructure did not support the business case for changing from barcodes. However, by 2004, the declining cost of RFID tags put the project within reach.

"We were moving one library branch to a new facility, so every book had to be handled anyway," says David Sullivan, CIO of Virginia Beach. "We decided it was a good time to switch." The library began tagging the books for its Oceanfront branch and completed the process in October 2004.

The business case for the $1.5 million system depended in part on moving at least half the library's clientele to self-service checkout. Rather than requiring customers to decide on one or the other, all customers go to the same desk. Two self-service scanning stations are available, and an assistant is provided for those who need one. Customers swipe their library card through a reader and can place a stack of a dozen or more books on a pad containing the scanner.

"Our rate of self-service is actually about 90%," Sullivan observes, "which allows our staff to greet patrons and provide assistance to them rather than being tied to administrative tasks."

The library follows guidelines from the American Library Association (ALA) regarding privacy, which means that the RFID tag does not record the name of the person who checked out the book. The only information on the tag is an identifying number of the book and whether it is checked out or not.

"If someone leaves with a book that is not checked out," Sullivan notes, "the identifying information about the book is recorded as the alarm sounds." Previously, if someone left without checking a book out, the alarm sounded, but if the person kept going, the library didn't know what book was missing.

Finding books that are shelved in the wrong place is also much easier now, because the librarian can pass a wand in front of the shelf from a distance of several feet and detect the presence of the book.

Initially, Sullivan had expected a three- to four-year payback time. However, with the decreasing cost of tags, he now estimates that time will be shorter. Savings in labor costs and the avoidance of having to replace aging security gates and checkout equipment account for the payback. An important effect of moving to the self-service model for checkout is that librarians are now free to perform specialized tasks for customers. The remaining branches will be brought on-stream using a phased approach, and project completion is expected by 2007.

At the federal level

The Department of Defense is far in the lead with respect to RFID technology, having used active tags for more than a decade to provide logistics support. As of Jan. 1, the DoD mandated the use of passive RFID tags by its suppliers of food, clothing and weapons repair parts. By 2007, suppliers of all products will have to tag their shipments. The requirements are comparable in scope to those made by the leading retailers in the private sector, and will drive the RFID industry forward at a more rapid rate than was the case during the last decade.

The Social Security Administration (SSA) has placed RFID tags on key cases for vehicles in its motor pool to check vehicles in and out, and also monitors fuel usage with RFID technology. The system has been in use since 2003. The SSA has tested RFID technology for use in controlling purchaser access to its office supply store and for providing inventory information on selected items sold in the store. In addition, the SSA tested pallet tracking to demonstrate that items could be successfully time-stamped and tracked as they entered and exited the facility, and is considering use of RFID to track supplies of publications. The SSA hopes that inventory management and order fulfillment can be made more efficient by replacing barcodes with RFID.

The Food and Drug Administration (FDA) is recommending that all pharmaceutical producers, wholesalers and retailers use RFID tags on pallets, cases and unit items. The FDA believes that use of RFID technology would help protect consumers from counterfeit drugs.

The U.S. Postal Service (USPS) awarded a contract in February for RFID tracking of its vehicles and equipment.

The General Services Administration (GSA) issued a bulletin in December 2004 providing guidance to federal agencies for their use of RFID, particularly with respect to tracking assets. Each agency is directed to "review its processes and consider strategies for the future use of standardized RFID technology in those applications where benefits can be achieved or efficiency can be improved."

Analytics dilemma

One of the big question marks about RFID technology is how to derive value from the mountains of data coming out of the systems. The challenges are significant, but so is the potential.

"RFID will bring a fundamental shift in the way we think about data," says Mark Roberti, founder and editor of RFID Journal. "IT systems have been historical, with a focus on gathering information, analyzing it and then making business decisions based on the results. RFID provides a real-time source of information, and the goal is to use it to support decision-making in real time."

Roberti adds that in many cases, a combination of historical and real-time data is most effective. For example, up-to-the-minute inventory data from RFID sources can be combined with historical usage patterns to predict inventory requirements with greater accuracy than either one alone could provide.

RFID middleware will provide part of the answer to the data deluge. Data brought into the network is processed by middleware, which corrects errors and aggregates the data. It also provides routing and security. RFID middleware is offered both by companies specializing in that area, such as ConnecTerra and Manhattan Associates, and by companies that offer other middleware products and are extending into RFID as a new market, including IBM, TIBCO Software, and webMethods.

None of the major business intelligence (BI) companies are offering an RFID solution yet that would answer the questions that one might want to ask an RFID tracking system. Business Objects, Cognos, SAS and other BI companies appear to be waiting until the RFID market becomes larger and the technology more standardized before developing tailored solutions.

Meanwhile, companies such as ObjectStore and T3Ci are offering products to make RFID data streams meaningful. ObjectStore RFID Accelerator supports query and analysis of RFID sensor data as well as integration of RFID into other enterprise applications. T3Ci's Historian software collects information from RFID sensor systems and relates it to a model of the supply chain.

"Historian is structured to handle the type and volume of data that comes from RFID systems," says Josh Golovin, marketing manager at T3Ci, "which may include non-sequential data, missing data or extra reads."

Global standards emerge

EPCglobal was established to develop industry standards for the Electronic Product Code (EPC) that will support the use of RFID. The organization was established to commercialize technology based on standards developed by the Auto-ID Center, an academic research project at the Massachusetts Institute of Technology. The UPC is an identifying number for products in the supply chain; its numbering system identifies manufacturer and product type, as do other product codes, but it adds a unique serial number for the particular object that is tagged.

EPCglobal approved a new RFID standard, Electronic Product Code Generation 2 (EPC Gen 2), which was released in December 2004. That standard brings greater sophistication to RFID tags and also compliance with global standards. Because the new standard is on the horizon, users are ordering tags to cover usage just through this year, but not beyond.

The EPC Gen 2 standard has also been submitted to the International Standards Organization (ISO). "This is an important step," says Dennis Gaughan, research director at AMR Research , "because outside of North America, ISO is the recognized body for global implementation of standards." Not every country has agreed on frequencies to be used, and availability of bandwidth varies across different countries. However, Gaughan believes that by 2006 a global standard may be in place for EPC Gen 2.

Judith Lamont is a research analyst with Zentek Corp., e-mail jlamont@sprintmail.com.

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