Resistance to RFID Lingers Despite Successes

By Renee Boucher Ferguson  |  Posted 2007-07-31

Resistance to RFID Lingers Despite Successes


Resistance to RFID Lingers

Despite Successes"> Alien Technology announced July 30 that one of its customers, textile producer Griva SpA, has realized a 30 percent return on investment of its implementation of Aliens RFID tag and reader system—not in real dollars but rather in time management savings and increased traceability of fabric rolls.

The week prior, Hewlett-Packard announced that it has opened its RFID Solutions Center in Milan, Italy, and that it had been designated a strategic radio-frequency identification technology provider to Euro Pool System, Europes largest provider of returnable packaging for fresh products.

But despite the fact that more companies in more industries seem to be at least testing RFID—particularly for tracking everything from luggage to medical devices—another perspective is quietly emerging. This view suggests RFID may not be quite the magic bullet its been made out to be, particularly in the supply chain, where its often predicted that radio frequency will eventually replace bar-code technology.

Heavey RF, an Irish company that sells and implements RFID, published an article on its Web site July 20 that debunks the hype around RFID. Roman Clinton, managing director at Heavey RF and the author of the article "RFID Bomb?," likens the explosion of interest around RFID to that around the Internet during the dot-com era.

The thing that links the two disparate hype cycles is that they were both predicated on "speculation, hype and fear of not being part of a new economy—a phase that RFID is currently in," according to Clinton.

"If you are an Irish company who does not have an RFID strategy, you have absolutely nothing to worry about," writes Clinton. "If it is ever legislated or mandated to you that you must have RFID in place in your company, you are actually better off waiting as long as possible to reap the benefits of ongoing developments."

Clinton suggests two reasons why RFID will never replace the more ubiquitous and globally accepted bar-code technology: Bar-code technology is both more reliable and cost-effective than RFID. He points to some research reports that show successful read rates of UHF Gen 2 tags as low 60 percent at case level.

As for cost, Clinton suggests that RFID tags will never be as cost-effective as bar codes. "Ever," he writes. "The RFID advocators will tell you that bulk purchases will drive the cost of the tag downward. That is like a helicopter manufacturer telling you that if everybody buys helicopters, the cost will come down to the cost of a car and when that happens you will want to have a helicopter because you have less boundaries, a better view and get from A to B quicker."

Earlier in the month three researchers at the University of Dublins School of Business Studies released a study that suggests the retail industry—and particularly marketing departments, where RFID data outcomes would theoretically see the light of day—is not ready to handle the onslaught of data derived from RFID readers.

The study, which surveyed the marketing staffs at four retailers—three of them multinationals—found that marketers have very little understanding of RFID, and no actual intentions of using any data gleaned from tagging retail items. "The study highlighted the general ignorance of marketers with regard to RFID, with three out of the four companies admitting to have never heard of it," reads the report. "Most worrying was the fact that in the case of two of these companies, RFID trial runs had already been carried out in some of their stores."

Page 2: Resistance to RFID Lingers Despite Successes.

Promoting RFID Adoption

The goal of RFID centers like the one opened by HP is to educate companies interested in the technology—and at the end of the day to spur adoption of RFID.

In HPs Milan center, BEA Systems, Microsoft and SAP are among the companies that provide software for customers to demo in relation to an RFID implementation. HP itself provides a number of services, including an integration center where partners can test and integrate HP technologies, a demo lab for HP customers and partners to collaborate on new services and learn about implementations in specific industries, and a training center where HP employees, customers and partners can exchange technical know-how.

To date, the center has completed between 200 and 300 customer presentations about the center and has nailed down about 35 projects across Europe, according to Frank Lanza, worldwide RFID director at HP.

But HP is not alone in establishing RFID test centers—other vendors like Sun and IBM have done so as well—and the competition for actual customers is fierce.

"We had several descriptions and several offers to participate in a pilot. HP had amongst them all a good offer, but it was not the only one," said Henry Lok, manager of engineering and development at Euro Pool System. "HP is offering a rather independent system with good facilities in Milan, where there is a lot of experience with factories working with RFID." While Euro Pool paid for its pilot project at the Milan test center, there were "some interesting terms with prerelease software" for incentive, said HPs Lanza. While Lok has not been able to find an actual business case for RFID, he believes the technologys benefits in the future outweigh any current challenges.

"We believe that in total that business might be different in 10 years time—[it will be] better," said Lok. "Right now our business is based on statistical analysis of total business. In 10 years time you better know who is creating most of the cost [of doing business], and they will be charged more than others that are costing us less."

Lok is working with HP to pilot both 2-D bar code and RFID embedded in the companys crates, with the goal of getting a better handle on crate reconciliation—where crates are in the process of being utilized and returned to Euro Pool System, or which customer has what crates.

Loks conclusion: In all applications, something is possible. With bar code he is able to read a lot of crates at once, but the crates cannot be moving and they have to be in a readers line of sight. RFID, on the other hand, enables him to read tags in motion without a line of sight.

The advantages of RFID, at this point, outweigh the disadvantages like unpredictable read rates and the cost of implementation for Euro Pool.

"We do not have a positive business case at this moment," said Lok. "We are testing. We dont earn money [using RFID], and in this moment a business case might still be difficult compared to [bar code]. But the big difference is higher accuracy when you get to situations that are crucial—that are costing retailers quite a lot of money. There will be fewer problems with items out of date. But therefore is the need to invest quite heavily in equipment."

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