Bar Codes on Steroids

Radio Frequency Identification is on Most Everyone's to-do List; So Really, We Should All Know What it is

By Kimberly Griffiths, Associate Editor -- Industrial Distribution, 1/1/2005

Could we see a show of hands, please, from those of you who knew what RFID was before Wal-Mart made it a mandatory acronym last year? What was this odd technology that could manage your inventory with little more than labels and a cool scanner over the loading dock? And, how...HOW...is this the wave of the future?

Good questions, all. Google RFID and you'll find about 1.6 million hits, all wanting to explain the phenomena, or sell you something in regards to it. RFID is a step into the future, and you'd best catch up with it.

Radio frequency identification pits technology, radio waves and distribution against the old days of paperwork, confusion and lost inventory. How does it work? In terms of a larger example, radio tags containing a chip that emit a frequency are attached to packages and pallets in a warehouse, describing the parcel's contents and vital information. These chips transmit that information to portals, devices constructed quite similarly to an airport's metal detector, as the parcels move in, around or out of a warehouse or docking area.

"RFID is a non-exact science right now," says Anurag Mendhekar, CEO of Blue Vector, a sensor-based RFID systems company in Mountain View, Calif. "It's not one size fits all. Companies considering it need to be sure what products would best capitalize on the most effective placement. Look at the business. RFID can improve inventory management in shipping and receiving, leverage in the warehouse, and enabling technology."

Blue Vector started as exclusively sensor-based technology about two years ago, but since RFID has emerged, the company champions this supply chain management system. The company concentrates on the larger, warehouse-based aspects of RFID.

"We've designed our RFID solution as a single technology in a simple approach," says Mendhekar. "It's designed as a plug-and-play solution constructed for each customer, block by block."

"RFID is the natural extension of the bar code technology," says Ralph Moher, director of marketing and communications for General Data, a provider of integrated bar code labeling, identification and data collection products and services in Cincinnati. "We've been involved in bar coding and that kind of technology since its inception. Our strongest emphasis has been in industrial technology, of which RFID is a growing power."

General Data is a member of EPCglobal, an organization comprised of leading firms and industries focused on creating global standards for the EPCglobal Network, a system of industry-driven standards for the electronic product code to support the use of RFID. EPCglobal's goal is to have products move through the supply chain while being tracked by a database, so when a consumer takes a package, data goes to the manufacturer telling them that the product has been consumed. Everyone in the supply chain will get information faster.

Jim Bacho is General Data's director of sales. "Smaller RFID chips have been around for 25 years. Distributors are migrating to the larger RFID chip because of the Wal-Mart and Target requirements. [Wal-Mart has mandated that all pallets from its top 100 suppliers be fitted with RFID tags for delivery to store warehouses by January 2005, and all cartons by January 2006. Target's mandate requires distribution center compliance by spring '05, and all-carton compliance by spring '07.] Currently, the tag doesn't work that well, or meet these standards. Manufacturers and EPCglobal are working on a new chip, with better security to prevent hacking, but they are having problems with the technology and frequency."

A case in point: water absorbs radio waves and metal repels them, obstructing the tags' reading on pallets containing either of the two elements.

As for how RFID will change distribution, Bacho is adamant. "It won't change it at all. RFID is only adding cost and time to the process right now," he says. "Tags are about a dollar right now, and then add encoding, readers and all the other system pieces. And the complete system isn't even close to working right."

Bacho cites bar codes as an example of the time taken to assimilate a technology. Bar codes showed up on their first product in 1978, but scanners and such weren't universal until 1984.

Mendhekar cites three big things standing in the way of RFID changing distribution: "One, cost points. Until tag prices become cost effective, they can't be put on smaller pieces. Two, the state of the technology is still evolving. And three, companies need easy out-of-box solutions. The technology must be able to adapt to all products and systems."

One recurring sentiment in most RFID conversations is the state of the specialized tags. Call them labels, chips or tags, the RFID tag is a bar code in a more sophisticated form. The tags themselves look like regular paper labels, can be read from about 10 feet away, and as of right now, cost about 80 cents.

"The price of tags is still high. Eventually, they will come down," says Robert Holmes, president of WinWare, Inc., an inventory management company in Marietta, Ga. "As the technology is accepted, and more distributors are required to tag their quantities, the supply and demand will even out."

Advocates of the technology anticipate costs decreasing significantly over a few years.

While the tag prices may seem a large stumbling block for RFID compliance, it can be overcome. The objective of RFID is to turn inventory into an asset with proper management. The system improves the picking process, driving benefits back into the business; streamlines shipping manifests and paperwork; manages warehouse transfers, reducing errors and ensuring that older inventory ships first; and as for Federal Drug Administration products, RFID can ensure that expired items don't leave the warehouse for delivery.

When it comes to managing movement within a facility, RFID technology takes away much of the human factor. Smaller RFID systems can control the inventory in a customer's supply room, with employees' identification badges and supplies' RFID tags all being noted by the room's portal. The system records which employee took which part, and assimilates the part to that employee's task. When inventory on that part runs low, the system notifies the distributor, who then replenishes the stock.

Holmes' WinWare specializes in the RFID more applicable to the industrial distributor, focusing on the movement of indirect materials. The company's software and Accu-Port system manages the inventory and store rooms, and doesn't go on the final product.

"Our RFID system manages inventory at the location," says Holmes. "RFID has been touted as the new bar code, and we have developed a system that works with that. We have a plug-and-play doorway that tracks the movement of items, including assigning them to the employee and the job."

When a part needs replacement, the software contacts the distributor/supplier, and more items are sent to the location.

"This eliminates the need for an action to trigger a transaction. It happens automatically," he says.

Wal-Mart and Target's mandate has, more than anything, thrown RFID technology to the forefront of distributors' to-do lists.

"It has certainly increased awareness, and brought a lot of attention to the technology," says Mendhekar. "That, in turn, has spurred interest in other domains, such as other retailers, airlines and airports, and service companies that deal with bulk products."

"The technology will have to change significantly before it is working everywhere," says Bacho. "The current state of RFID is not the end-all of how this technology will work. Questions about encoding and reading will be the same for another few years."

Bacho's General Data helps companies navigate the maze of RFID products, standards, limitations and applications in order to integrate RFID label printing and tagging.

Says Bacho, "Today, we're dealing with just the first step into this field."