20 MAY, 2005

RFID is becoming a significant business driver but companies need to define the business case before they start

Roger Lewis editor of RFID Today reports on the RFID Forum’s Networking and Developer Days held on 4th & 5th of May

RFID Forum

If there was just one overriding message that the 75 delegates on day 1 and the 250 on day 2 gained from the RFID Forum’s Developer and Networking days, it is that the hype surrounding RFID and its applications should be disregarded. The clear message was that it is essential that people view the use of the emerging RFID technology sensibly and realistically.

The two days of conferences sponsored by Microsoft and run by Enterprise Events at the Sheraton Skyline Hotel Heathrow Airport on 4th & 5th May were informative and gave a balanced view of RFID without being too technical and had a content that did not embarrass anyone.

During the 2 days delegates were able to select which of the many tracks running simultaneously that they would like to hear. Thus it is only possible to report on those presentations attended.

It is pleasing to state that there were not many sales pitches over the 2 days and virtually all presentations were given objectively and with genuine desire to help people learn.

Outside the conference area there was a small but interesting exhibition area with the following companies exhibiting:-

Alien Technology - demonstrating low-cost EPC RFID label solutions
Arcom Control Systems – exhibiting its network gateways using TCP/IP connectivity
Datascan Systems – showed its system solution utilising Auto-ID equipment
Markem - software and supplies for case coding, and product labelling
Microlise – a systems integrator focusing on supply chain
Objectstore – showing its real-time data management solutions
Sato – specialists in RFID data capture and bar-code readers
Toshiba TAC – demonstrated their B-SX range of thermal printers
Zebra Technologies – promoting its wide variety of printing and labelling solutions.

Day 1 – 4th May RFID Developers Forum

On the 4th the day focused for the first time on IT software developers. The informative content was balanced and proved to be not just a techie day but focused on software applications and the increasing use of middleware.

Opening Session

The opening presentation by Nigel Rix Commercial Director Episys gave a knowledgeable overview of what RFID is, how it is being used and more importantly – why it is being used.

Rix stressed that it should be patently obvious to everyone that to use the technology for technology’s sake was an expensive pointless exercise. He endorsed this by the use of a slide showing the worlds biggest mouse trap which would prove so useful if one had big mice. He then explained in simple terms what RFID was and how it worked.

Rix presented a history of RFID highlighting that it first saw the light of day back in 1940 when it was used to differentiate between friendly and hostile aircraft. In the 1960’s RFID was used to combat retail theft, a function that most of the public was familiar with and if asked when this first started, would say in the last 10 years ago. In the 70s a typical use was for road tolls and the 80s for animal tagging. He emphasised that what we are seeing today is the logical development of the technology and not some brilliant new invention.

Moving to the current time, Rix gave examples of the types of tags in use explaining that these types ranged from Read Once, Write Once and Read/Write. He gave an indication of the comparative costs of each with a divergence of use and costs in comparison with conventional barcodes. With the reducing cost of tags and improved reading ability he showed how the use had moved extensively into supply chain driven by companies like Wal-Mart. He drew attention to the pressure for regulation and for standards such as EPC (Electronic Product Codes).

Having given a very comprehensive overview Rix finished by stressing once again the need to show the benefit to the business before starting on a project, and that investment should be made for long term benefit. However he conceded that external pressures for compliance with the demands of companies such as Wal-Mart or Tesco had influenced the use in the supply chain at whatever cost.

The next presentation given by Christian Schwar Product Manager Smart Label ICs, Phillips took delegates through the pros and cons of the use of the various frequencies of RFID tags and readers, their features and benefits which ranged from 125 kHz to 2.45 GHZ.

Schwar led delegates through the limitations of transponders and the fact that the norm seemed to be settling on the UHF range 862MHz – 956MHz.

He explained some of the problems in the recording or reading at particular frequencies and outlined the decisions to be made when considering where tags were placed on the product; problems of reading if on metal, glass of if the product was used in conjunction with liquids.

Finally he guided the audience through the industry standards. Whilst this was quite technical Schwar presented the subject in a most understandable way. Perhaps the less technical members of the audience (like me) did not comprehend it all, nevertheless the substance was absorbed.

This first session was completed by the Conference Chairman Richard Foggie Head of Electronics Services DTI.

Foggie explained that his presentation was rather difficult as the general Election was due on the following day. Technically he did not know which direction policy would proceed. However he gave examples of some of the public misconceptions of the use of RFID and electronic tagging that were regularly referred to the DTI. One concern was whether a supermarket could continually trace tagged products that had been purchased from a store and if they were able to determine in which room in the home the item was being used.

Foggie stated that the DTI was looking at many uses of RFID and had used Marks and Spencer as a test area. Further information was available on the DTI website www.dti.gov.uk.

RFID – The Future for Developers

After the break Anush Kumar Program Manager for RFID Services presented the Microsoft vision of the future for developers. Kumar had just arrived from the United States and confessed to being a little jet-lagged.

Kumar began by setting out the recent structures that have been set-up by Microsoft in servicing the rapidly growing RFID market. He emphasised the very active participation that Microsoft had taken in EPCGlobal. Microsoft had even decided to participate in the Wal-Mart trials with RFID and began by using tagging in the production of XBOX at its Texas plant and in the products despatch. He reported that Microsoft was now looking at the opportunities that were emerging within China for RFID.

He said that Microsoft had committed itself to deliver rich RFID solutions for use on Windows platforms to build real time applications and solutions. Developments were to be extensible, scaleable and would be standards compliant to supply end-to-end management tracking and monitoring. This would extend through to architect and design guidelines for RFID deployments onto .Net. Drag & Drop software would be typically employed but he like the speakers before him stressed that developers and users should define the corporate objectives to ensure that people identify at the start what data they needed.

Kumar was followed by Dr Alexander Zeier Director of Business Development and Strategic Projects SAP whose 30 minute talk was entitled "RFID Architecture and Standards – Unlocking Value for your RFID Solutions".

Zeier began by taking the audience through the amount if data that will be generated from RFID in a company’s infrastructure and how it could benefit their Real World Awareness (He termed RWA). This covered the typical areas that data would impact in supply chain from commissioning, pick and load and customer orders and servicing.

He gave examples of how RFID would provide the base data in other sectors where it is being used for preventive maintenance, general process improvements, and business innovation.

The method of data collection was another of his points and he ran through the uses and limitations of WIMAX (effective operating distance 48 kilometres), WIFI/WILAN (effective operating distance 10 – 100 metres) and Bluetooth (operating distance 10 meters) as means of connectivity as opposed to wired networks. With RFID (global operating distances) one sees an explosion in data collection and retention and it was fundamental that to control the business one needed systems that would highlight the exceptions. Management would not have time to examine everything in detail.

This would spawn the creation of smart pallets, smart shelves and even smart vending machines in addition to many aspects of mobile environmental control.

Zeier gave an example of a typical application presently used in the aerospace industry where sensors on an aircraft in flight continually monitor the airborne components functionality and performance and radio this back to the ground. Thus preventive maintenance is enhanced as the required materials could be available for installation as soon as the aircraft was on the ground.

Yet again the message was clear that whatever method used or reason to employ RFID technology, one had to define the business purpose before defining the technology to use. In the end whichever method was selected will provide better information leading to a proper process improvement and operating systems.

Enabling RFID to Deliver Real-Tome Visibility of the Supply Chain

In the afternoon Matthew Barnes of Web Methods stood in at the last moment for his marketing Director Olivier Barbe. Barnes took the delegates through a typical supply chain and demonstrated how RFID can be employed to give information at the highest level or can be used to drill down to the smallest detail when required.

He stressed that it is important to ensure that the data collected is clean and that products are rationalised wherever possible. By doing this one would gain the advantage of being able to maximise and optimise the whole end-to-end chain. All participants in the chain could be given total visibility of all links and thus help each other in satisfying demand. Stock reduction and significant enhancement in just-in-time or Kanban systems would result...

RFID Data Infrastructure: Transforming Tags onto Business Insight.

The same message was carried by John Trigg of Objectsore (part of the Progress Software Corporation).

Trigg began by highlighting the fact that where companies are deploying RFID systems they will be find that they quickly overwhelmed by a flood of data. Unless they followed three core principles for building operational data management architecture.

The first was to be able to process data in the locality in which it was collected. Trigg said that it was important to not only collect the data but that it should be able to be used locally. It was at this level that the data can be validated and inspected. As one example he gave the creation and inspection of goods being received into an enterprise. Typically this would be in the warehouse or in the retail store.

The next was use of the data at the central areas. Here data would only be read in context or at higher levels. This meant that there needed to be systems of pipelining the basic data. These systems could be defined as a concentration of data even though the mass of data would be processed for use within the enterprise as a whole.

Finally Trigg said that an enterprise should create a pipeline for data to be used by others. He stressed that it in order for companies to make use of the data streams they must build the appropriate architecture. Typically these structures were the type that his own company was implementing and was fundamental to streams being used by Wal-Mart, Tesco.

Trigg stressed the need for security of data at all times to ensure that only those who were supposed to access the information did so.

Experience of Implementing RFIF: Approach and Lessons learned.

A visit to the Tokyo room followed where Vincent Menvielle RFID EMEA of Manhattan Associates gave some insight into the approaches employed in implementing RFID and lessons that were learned.

Menvielle tended to focus yet again on warehouse management. He drew attention to the ability to ensure that stocks were properly controlled and located. These stocks would also be readily accessible for product recall if a notification had been received.

Tagging of products gave the advantages in situations of a recall by knowing which products had been delivered to which customer.

He then explained that in considering the need for compliance to the demands laid down by customers such as Wal-Mart the recalled products could be traced through to the store and perhaps even the end user.

Menvielle said that in all of these cases it was important for companies within the supply chain to ensure that their systems were properly managed and did not become overloaded. If one system crashed in the end-to-end chain then the whole supply chain could be at risk.

The Potential for RFID over the next Decade

The final session of the day selected was a round table discussion on how the future of RFID could be envisaged over the next 10 years.

The breakout group consisted of 9 delegates who set out to learn more from each other than forecasting the future.

Many areas embraced covered security, pharmaceuticals, healthcare, manufacturing, aerospace, and finance, besides supply chain. However it is true to say that generally the feeling was that the future would be an enlargement and extension of the current uses and no revolutionary suggestions emerged

EDITORS Footnote: In view of the requirements of Sarbanes-Oxley(SOX) in the US and all of the other governance and compliance issues around the world very little was made of these demands on companies. It is true that Rix touched on them but he was about the only one. All referred to process improvement and system management but nobody actually drew particular reference to software development techniques and procedure controls. The words CMMI or ITIL were missing and yet the very need for process improvement generated by RFID (especially in the United States) demands proper controls. SOX 302 and 404 require responsible executives to sign statements that their systems are properly documented and controlled.

RFID Forum – Day 2 RFID Networking Forum

Again the day was split into several simultaneously running tracks and it is only possible to report on those visited.

However this was not a technical or developer day but homed in on the real experiences of RFID in use.

RFID Landscape: Insight from the latest Market Research

The first presentation given by Mike Liard RFID Research Program Director Venture Development Corporation (VDC) was by the far the one that got most of the delegates writing.

Liard presented the current analysis of the RFID market and its trends.

Starting with the size of the global market he showed the compound annual growth over the period 2004 – 2008 for hardware (27.6%), software (59.8%) and Services (48.0%). He emphasised that the market was being bolstered by UHF EPC Supply Chain Compliance (to Wal-Mart, Tesco etc) which would drive the consumer goods share from 3% of the market in 2004 to 22.5% by 2008.

Liard forecast a significant growth in the printer/encoder market from $9.4m in 2004 to $207.0m in 2008. He added that in monetary terms the greatest increase was expected to be in RFID services that accounted for an increase of $1.539m over the period. This would be in training, system/site evaluation and system maintenance. Drilling down further he showed that supply chain was expected to give the greatest rise over the 5 year period and by 2008 would account for 25.7% of a market – a market that was seen to total $5,932.1m

Liard said that VDC had identified 3 main levels of RFID deployment:-

1. Visibility - typically into an organisation, environment or supply chain
2. Security - by which products or assets are controlled and identified
3. Quality - which would give the condition or state of an object.

Any RFID project would begin with level 1 and move to level 3. VDC said that it is when all three levels are employed that project value and business case comes into focus.

When looking at the drivers and end-user ratings people were concerned at having a lesser knowledge than their peers and that they were behind others in RFID adoption and integration. Whilst respondents could see benefit in the technology there was concern over proven ROI. VDC had identified that current evaluators of RFID systems had incomplete knowledge of RFID or understood the impact on business operations (editor’s note: this lack of knowledge was reported in the last issue of RFIDtoday see www.rfidtoday.co.uk RFID Compliance Problems).

VDC forecast that the Supply Chain will remain immature and that the market will force suppliers to decrease costs and increase product performance starting first with retail and governments but that pharmaceutical would not be far behind.

Liard finished by identifying that the EPCGlobal was turning it attention to HF Technology. Due to the read range problems VDC believes that the short term forecast is that HF will be used in the item-level tracking.

Simon Palinkas Programme Manager Tesco followed by explaining why Tesco had moved towards RFID and process change.

The first and overriding reason was that it was better for their customers. The next that it was simpler for their staff and the third that it was cheaper.

He stressed that without customer benefit Tesco would not have embraced RFID. It had certainly not initiated RFID for technologies sake. Also discounting the engineering case for development he said that it was not to follow others. Tesco had defined a clear business case and that most significantly senior management could see the benefit and had wholeheartedly supported the introduction. Without high level sponsorship he thought that any project fail and this included Tesco's.

Setting out the philosophy of a project he suggested that the path should be well defined and aspirations realistic. The key was to keep each step simple and remain focused. By delivering the benefits in stages as pre-defined the Tesco management had remained on-side and supportive. The result was that executives had made money available and had given open support to business change.

A crucial fact in the Tesco plan was that companies needed to work together to achieve the supply chain success that ultimately would benefit all suppliers and customers alike. That meant that partners had to be open and honest with each other.

He continued stating that challenges that had to be overcome were:-

1. The changes had to be aligned and objective
2. had to be focused on performance management
3. that objections from individuals who resented a loss of power or had a lack on knowledge
4. had to bring together many suppliers that had different working practices
5. collective commitment was needed to drive through the changes

Palinkas emphasised that there were two clear phases to go through that all companies might adopt. Phase 1 was to ensure that data accuracy and collection had been improved and Phase 2 there they recognised that this was a major process change. It was important to see a different business model and a different operating model.

His key message was that one should: -

• know why one is making the change,
• ensure senior management support.
• recognise the benefits of collaboration
• certify that the change delivers benefits.

Nigel Montgomery Director European Research AMR then gave the results of their research when looking at the markets to 2013 and extrapolated the development after the pilot tests phase currently under way.

AMR saw the market evolution extending from these pilot sessions continuing to 2008 with the second phase of operational use overlapping from 2005. They saw maturity starting from 2009 and significant growth by to 2013, by which time markets would be fully operational. Software systems would be coming from companies such as SAP- Netweaver, Microsoft - .NET, IBM- Websphere, Oracle – Fusion and other such as Oat, BEA etc.

Referring again to supply chain the first phase would be Synchronisation with EPC enabled coding and inventory life tracking. Then through inventory status and tracking, to raw material s and finished good and finally to manufacturing automation. AMR Research had identified the applicability of RFID through the business processes and the impact on corporate goals.

In a survey AMR had questioned 150 companies and had identified that less than 10% had developed any strategy towards RFID and less than 3% had taken any action to adopt. The prime driver today was for companies to achieve revenue, while others pioneered the technology.

More disquieting was that AMR had identified that companies were continuing to squander money by changing or adding new facilities without considering RFID. They were continuing to operate inefficient networks and many had not even implementing barcodes. Companies were being cautious as there was a feeling that the technology could be thrown away. However they were still hoping to show the big players that they were complying with their edicts (Wal-Mart, Tesco, and Metro). Companies found it difficult to identify a good internal ROI to substantiate the investment.

AMR forecast that to achieve compliance within supply chain, tags and readers would need industry investment of between $5m - $10m, for system integration $3m - $5M, for changes to existing supply chain applications $3m- $5m and for storage and data analysis $2m - $3m The total cost anticipated was between $13m - $23m. Eventually companies would see a benefit in compliance but would not maximise their returns until they invested for the benefit of their own business.

Montgomery said that AMR recommends that companies should get together to learn and to form purchasing consortiums. They should also work with other major retailers to broaden their understanding and not to concentrate on just one. That they should allocate specific budgets to projects rather than to allocate a small percentage within an existing budget. Companies should not underestimate the impact of the software changes and should outsource managed services.

Finally they should not worry about the technology but focus more on the internal impact of a change, and should not be blind to the fact that their internal systems inevitably will need to change.

RFID – Mandatory cost versus ROI and competitive Advantage

Of the next 6 simultaneous sessions the one selected was to listen to Richard Rees Chairman of RFID Group BSI looking at ROI versus competitive advantage.

Rees began by saying that one should forget ROI when implementing a project like RFID. What should be looked for was a competitive advantage. He rightly drew attention to the fact that ROI was not irrelevant but cost minimisation should be the prime objective.

[After hearing nearly every company talk about ROI it was nice to hear someone with a different approach and to put it into context.]

He said it was more important to install the system easily and to be brave enough to face the truth. Maximisation of the learning process would yield far greater benefit.

Companies involved in supply chain would initially simply “slap and ship” for compliance. Later they would look to for internal optimisation and ultimately for external optimisation though closed systems. The key was to start with small projects and see the benefit before moving on.

Edwin Birnbaum Director Clarity followed

Birnbaum introduced the 4 considerations in installing an RFID project.

1. Revenue which should show added value through the investment. He said that within the retail sector on average there were 2.5% of products out of stock. However customers were seeing shortages of 6.5% on the shelves. The reason for the discrepancy was that stock was in the warehouse or in transit and therefore sales were being adversely affected. Coupled with this was the instance where wrong products had been delivered or delivery had been made to the wrong site. Currently mixed pallets caused huge problems but could be overcome by the use of RFID

2. Cost could be controlled especially in the warehouse and the need to keep re-reading barcodes or visibly identifying products eliminated.

3. Reduction of Risk by enhancing product traceability. Significant when recall or withdrawal of a product was needed. RFID would also provide clear data on authenticity of the products.

4. Asset management and the ability to trace product location. One specific application arose when pallets or containers had to be controlled and returned.

He said that project managers had to make important considerations in hardware speed and the capability of the software when trying to gain data from tags on difficult products such as water. Another was radio interference, how tags could be read on a metal products or when the product was in the wrong orientation in relation to the reader. The quantity and quality of tags and their robustness was a final operational consideration.

Andy Robson of Chep an international pallet supplier gave examples of what problems Chep had encountered in the installation of tags on pallets. Chep had now achieved a case-by-pallet visibility and offered greatly improved "Track & Trace" movements.

Tackling counterfeiting and product diversion in the pharmaceutical industry.

Getting away from pure supply chain the discussion on tackling counterfeit products in the pharmaceutical industry was refreshing. The group was chaired by Robert Whewell, Managing Consultant of Aegate part of PA Consulting who had worked with the pharmaceutical industry in setting up a pilot scheme.

The focus of the discussion centred on the advantages of tagging individual products of medication. In the US counterfeit pharmaceuticals had become a significant problem and whilst not so substantial in the UK was becoming increasingly so. The prime mover for tagging was patient safety, a fact endorsed by a representative from the pharmaceutical industry.

Furthermore Whewell said that in their trials it was apparent that whilst counterfeit drugs could be controlled better so could the reduction in the risk of dispensing the wrong medication in hospitals or in pharmacists. The introduction of tagging had shown little disruption to a dispensary workflow.

Whewell said that the coding would most likely would be at the product proprietary name and not at the generic level.

There were 2 suggestions (one more in depth than the other) that this technology could also benefit the pharmaceutical manufacturers in controlling their margins. One example was that branded products that face parallel imports from the Continent where some prices were lower than in the UK could be blocked.

The Pharmaceutical Industry representative became extremely agitated saying that this was a most scandalous thing to say as this thought had never entered into the equation.

However without mentioning product names examples of this were given to him.

He stated that all drug prices were reviewed by the Government annually and an agreed price set. He refuted any allegation that drugs of the same formulation were sold cheaper on the Continent.

He stated that this was fantasy and if prices were cut in the UK then pharmaceutical companies would move their research and other activities abroad.

The discussion became even livelier when a question was raised about re-dating products which might then be sold abroad such as to Africa.

Whewell closed the discussion by saying that talks were continuing on how to implement “Authentication at the Point Of Dispensing” (APOD) a code of conduct for pharmacists.

Boundless Opportunites: RFID in Manufacturing and RFID’s Role in sensory networks

Duncan Macfarlane Research Director Institute for Manufacturing University of Cambridge gave in a brief presentation began by explaining that RFID had been defined as "a tool to deliver identity within specific applications".

He said that development was underway for RFID technology to use open source and away from propriety software. He gave examples of current developments in the aerospace industry and suggested that in time a product such as a shirt could be tagged that would instruct the washing machine on how to wash the garment.

He quoted a Professor Charley Fine who had defined RFID as evolutionary rather that revolutionary. Macfarlane said that as a technology RFID usage would challenge existing business. This was significantly so in the Supply Chain, but would extend to other areas like mobile phones and PDAs. Often problems arose in defining the business case for a technology. In the case of RFID is having a huge impact on many aspects not least on networks.

Mike Haley Senior Technical Consultant BP followed with examples of where BP had deployed RFID and the impact it was having on their business.

Besides normal areas of supply chain and asset management which is a paramount interest to BP Haley gave example of RFID used in safety.

Maintenance within the oil and gas industry was of utmost importance with safety being an overriding issue. This was not least so to their employees. RFID had proved most successful in preventative maintenance that yielded vast savings to their fleet of ships, in pipelines, in refineries and in road safety as just a few examples.

In South Africa BP had introduced cashless filling stations for the public which had the effect of greatly reducing the incidence of raids on their premises. This was good for the company and the employees.

He also gave examples of how engineers, their protective clothing and equipment such as breathing apparatus, goggles and machinery had been tagged to ensure that when they set about routine maintenance or a repair, RFID was used to verify if the person was properly qualified and had the required safety equipment to carry out the work.

With better planned routine maintenance BP had seen a 40% reduction in unplanned downtime.

BP was already using open source within its business case.

BAA RFID Case Study

The final session was given by Nick Raymond IT Project manager BAA Plc on how RFID had been used in the control of taxis at Heathrow to ensure that only proper licensed drivers were on BAA property and that taxis were in the right place for passengers.

BAA had negotiated with the drivers so that a waiting area with rest rooms for drivers and for taxis to be parked during quiet periods. All taxis had a tag and each driver issued with his own pass. All taxis had to be parked in the parking area to the north of Heathrow and were called to the Central area in rotation.

After each fare the taxi was to return to the holding area except where a fare had been within the BAA designated area, when a vehicle was a permitted to return to the terminals immediately.

On passing through the tunnel each vehicle tag is read and compared to the departure from the parking area to ensure that taxis were being used in strict rotation. They are instructed which terminal to go to and are checked in and out by BAA taxi marshals.

This system ensured that there were always taxis where they were required at any time of the night or day.

The sum of £3.16 per visit to the central area was deducted from prepayment data held on the vehicle tag which was filled in the same way as a prepaid mobile phone.

The system was now being employed at Charles De Gaulle airport.

Raymond said that the one problem that BAA had was that the system used HF frequency at 2.4GHz and that for the future UHF would most likely be used at Terminal 5.

He outlined other areas that BAA was now using RFID such as baggage handling, runway light maintenance, and airside permission.

One delegate whose company used large bulk vehicles carrying foodstuffs thought that the technology could be extended to his own firm. When coupled with the BP safety system it could ensure that vehicles were cleaned when they should have been on returning to the depot and the identity of the driver of the vehicle actually recorded.

Conclusion

At the end of the 2 days, delegates were generally fired up and could see many areas and the benefits that RFID could be used in their own organisations. There is no doubt that the 250 or so delegates had been quite stimulated by the 35 presentations available. Some remarked that they would try to attend again at the next conference in the last quarter of 2005 in order to pursue those discussions and presentations that they had missed.

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