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-------------------------------------------------------------- This story was printed from ZDNet Asia. --------------------------------------------------------------
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By Staff, Eileen Yu, ZDNet Asia
06/09/2005 URL: http://www.zdnetasia.com/news/specialreports/0,,39225778,00.htm
It was first injected into animals. Then it made its way into a human arm. But radio frequency identification (RFID) these days no longer sounds like a scene from a sci-fi flick.
Earlier this year, Dr John Halamka injected himself with a microchip to test RFID's use in healthcare, such as emergency situations where patients lose consciousness or are non-responsive. Medical care officers can scan the tag like a bar code to call up personal information such as name, blood type and medical records.
But while this application is being tested, RFID deployment is ramping up in the commercial world.
RFID explained
Research firm In-Stat predicts that businesses will spend US$2.8 billion on RFID tags in 2009. This is a significant growth, considering spending last year totaled only US$300 million worldwide last year.
This emerging technology has the potential to enhance supply chain management and inventory management, said Mohsen Moazami, Cisco Systems' vice-president of Internet business solutions group, who is also on the board of governors at EPCglobal. A global body consisting of such tech heavyweights as IBM, NEC and Intel, EPCglobal develops standards for the deployment of RFID.
Moazami said improvements in inventory and asset management, and other operational efficiencies, could reduce overall supply chain costs by as much as 3 percent to 5 percent.
This is an attractive proposal for companies, particularly when the worldwide inventory cost is US$325 billion, he noted. Of this figure, US$224 billion is spent on excess inventory, he said, while another US$45 billion is the result of losses incurred from out-of-stock items.
Citing figures from various studies, Jon C. Stine, Intel's global manager for the retail-consumer packaged goods industry, noted that organizations hold "safety stock" for an average of 11 weeks. "That's 11 weeks of inventory just sitting in warehouses and doing nothing…it's taking millions of dollars and throwing it into a hole," he said.
RFID gives new visibility into the supply chain and generates data that can be used to rectify these bottlenecks and operational inefficiencies, Stine said.
Challenges ahead "While RFID is mature in some ways and have been around for decades, with its usage in the U.S. military, it is still young in terms of adoption in commercial markets," said Claude Ringuet, strategy and change leader for distribution sector, business consulting services, IBM Asean and South Asia.
photo courtesy of Auto ID Center
Most of the work in this region has centered around education and helping clients understand what is required to deploy RFID, he said. There are small-scale projects but actual adoption of the technology is still "very little", he added.
"Even though the government here has been driving it, there's still a general concern among our corporate clients about whether the technology is ready. There's also worry about what it will cost them and whether they're really going to get any returns on investment."
Critical mass adoption has largely taken place in the United States and Europe. As a result, very few manufacturers have any significant presence in Asia-Pacific, he noted. Without the needed economies of scale, the cost of adopting RFID in the region is falling too slowly, he added.
Apart from the high investment, there are also concerns about performance issues.
Ringuet noted that there are still problems associated with reading tags on metallic and liquid products. "Read rates can be quite low here," he said. "So the electronics and consumer industries especially are concerned about this."
But it is clear that, in spite of these challenges, early adopters of RFID have embarked on the journey decidedly without any regret.
Singapore-based LHT Holdings leases pallets that are tagged with RFID. Its customers include Carlsberg Singapore, F&N Coca Cola and Foods, and MDD Beverage.
The company's executive director, May Yap, said: "We recognize the challenges in deploying RFID, as is the case with adopting any new technology. But we are optimistic that our investment in this will yield benefits in the long-term, and enable us to provide better customer service and remain competitive.
"While I won't say it's cheap in the initial stages, but as awareness of the technology increases and with the government's support, the price of RFID will go down when there's mass production of the devices."
The Singapore government last November expanded the frequency bands for RFID applications in a bid to ensure systems developed locally can interoperate with those in the United States and Europe. It also pledged to
invest S$10 million (US$5.9 million) over three years to drive the adoption and development of RFID technology in Singapore.
IBM's Riguet is hopeful that things will further improve with the next-generation RFID, specifically the Ultra High Frequency-based EPCglobal Class 1 Gen 2 standard (G2).
Next generation According to Tan Jin Soon, executive director of EPCglobal Singapore, G2 will enable equipment from different manufacturers to interoperate so a reader can retrieve data from a tag of a different make.
Industry players are just now starting to release products that comply with the new standard. More announcements on G2-enabled hardware releases are expected to follow.
But should businesses wait for a wider availability of G2 products before taking their first step towards RFID?
No, said IBM's Ringuet, especially if they have to fulfill requirements established by their business partners. These companies should continue to work towards ensuring compliance with the given mandates, as well as establish a roadmap that enables them to affordably move to next-generation RFID technology, he added.
Organizations that do not have compliance issues to worry about can move forward at their own pace, he said. "At the moment, it's still somewhat unclear exactly when G2 is ready to go," Ringuet noted. "It's also unclear how the tag manufacturers are really going to respond and the capacity they'll be able to come up with in terms of production."
But companies should still consider deploying small-scale pilots "to get the right infrastructure in place", he said. So when G2 standard is released in the market¸ they can get this up and running at a low cost rather than "undo things" on a large scale, he added.
More importantly, it would be a big mistake for organizations to underestimate the amount of time and effort it would take to test the various RFID tags on their products, warned Ringuet. And companies today have already fallen into this pitfall, he said.
Companies should avoid focusing too much on the business benefits and using that as the only base to build a business case for deploying the technology, he noted. "I think that's not enough and in itself, is not going to sustain (a move toward RFID)," he added, noting that it takes time to make everything work.
For example, in order to achieve the best read rate, there are no shortcuts to testing and figuring out the best position to place tags. "It's part of experiencing it yourself," said Ringuet.
IBM uses RFID internally to track wafer carriers at its Fishkill semiconductor plant in New York. RFID readers, positioned throughout the plant, scan and retrieve data from tagged carriers to validate their locations as they move across the production line.
By deploying RFID, IBM was able to reassign its workers to more value-added manufacturing tasks.
Ringuet explained: "Employees were spending a lot of time and effort routing wafer carriers, which can contain up to two million dollars worth of finished products, to the right places. This distracted them from more important priorities like running process equipment slowing production, decreasing yields and draining profits."
The plant is now able to devote the equivalent of one person per shift to more value-added manufacturing functions, and at the same time, reduce product errors and production delays, he said.
Find out what the early adopters say
By Eileen Yu, CNETAsia
Where should the tag be placed? Should it go on top or on the side of the box? Is it 'noisy' enough in the trial lab? Should there be more forklifts moving around the test site? Can this box be made of paper instead of metal?
Strange as they may sound, these were just some of the questions early RFID adopters frequently found themselves asking.
Wal-Mart, for example, spent time experimenting with how it attached RFID tags on carton boxes so the best and most accurate read rates can be achieved. If a tag is placed in the wrong place, the reader could fail to detect and retrieve data from it, noted Simon Langford, Wal-Mart's chief RFID strategist.
One the most recognized RFID users today, the supermarket chain went live with its RFID deployment in January this year, along with eight of its biggest suppliers. The next 200 biggest suppliers are expected to go live by January 2006.
Readers have been installed at numerous points across its supply chain ranging from the doors of stores to trash compactors to warehouses. The organization has since registered over 5.6 million EPC reads and received over 24,000 tagged pallets--and the numbers continue to grow.
On the lessons Wal-Mart picked up during the months spent laboring over its RFID pilot and live projects, Langford noted that perfection comes from practical experience. "We can now deploy 22 read points in less than 2 hours, and we have reduced the cost of deployment by 75 percent," he said. The company first announced plans to adopt RFID back in 1999.
Simulated experience Like Wal-Mart, the hardware manufacturer spent time and considerable effort in carrying out the necessary tests and experiments.
The company soon realized that no two RFID-enabled sites are the same, regardless of how closely it tries to duplicate the premises.
"It's not always repeatable because of the different environments, humidity, layout of your shelves, and so on," Wilkinson explained, noting that these elements can affect read rates. "But we now know what to look out for and this has allowed us to replicate sites more quickly."
He added that read rates can be improved by trying out different positions in which tags and antennas are placed on the products and the grounds of production plants.
HP also operates what it calls, "noisy" labs, to recreate the surroundings and simulate "the real working environment" of a test site, he said.
"The lab has things like metal shelving and forklifts and other machineries moving around the lab, just like you would in a typical production factory or plant," he added. Similar labs are currently under construction in the Asia-Pacific region and will be opened soon. "The objective is to use these labs to test our products such as trying out the best placements of antennas and tags, and also to help our customers set up their RFID infrastructure."
Another early adopter, The Gillette Company, also found that placing RFID tags on certain materials can be challenging. It began pilot projects in the first half of last year, and currently uses RFID to track all of its Venus razor cartridges within the supply chain.
Subas Visalingam, the company's fulfillment manager of Asia-Pacific value chain, said that products which contain metal, liquids or other dense material, have proven tough to tag as they can affect the percentage of successful readings.
"We also found that a 100 percent read rate of cases (placed) on pallets wasn't achievable, while it is achievable on individual cases," he said.
Gillette then drew up a methodology chart which labeled items according to how receptive they are to RFID. For example, an Oral B toothbrush is categorized under "easy" and described as "RFID-friendly" while a Duracell battery is classified as "extremely challenging". This allows employees to quickly identify how they need to handle and tag the company's various products.
Useful data His company had determined that 15 percent of its items are unavailable on store shelves on a Saturday afternoon. This figure climbs to 18 percent by Saturday midnight.
He cited findings from an EPC survey that revealed 69 percent of customer switch brands if a product they need is out of stock.
"As a retailer, if you think your shoppers will be better satisfied and more loyal if they find what they're looking for on the shelf, then you have a business case (for RFID)," he said.
Wal-Mart's Langford also espoused the importance of data that is collected by the tags and understanding how this can be used to improve operational efficiencies.
The implementation has helped the company identify potential inefficiencies in restocking store shelves which it can now rectify, he said. Using RFID, for example, Wal-Mart was able to determine that only 1 out of 12 out-of-stock items get replenished on a busy Saturday.
"A fairly large supplier of ours, as they started tagging, could see a product's end-points and 'dwell' points which lasted as long as hours at a time," Langford said. "We found that on average, there are between 30 and 35 unnecessary cases sitting on sales floors."
"Today, we know how many cases (of a product item) we have in our stores but don't know where they are. With the RFID readers, we will be able to know how many have gone past the back-room door or the box crusher."
The system is then able to automatically locate products and feed that information, so Wal-Mart employees know immediately where a particular item is. That provides a speedier shopping experience for customers and increased product availability on store shelves, he noted.
For the company, it also means improved productivity and better proactive information. There is less freight to handle, and store assistants have more time to focus on servicing customers, he said.
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