The hype on RFID (radio frequency identification) runs high as that of any nascent technology over the last decades. Although early adopters are still struggling to bring to the table a persuasive ROI report, experts agree the key is to take a pragmatic approach to RFID investment. With the rapid changes in the vendor landscape, companies find it difficult to make sound investment decisions. Potential RFID adopters are well-advised to examine their infrastructure readiness and look deeplyinto their ROI potential.
Elsevier Food International, Vol. 11, Number 1, February 2008
Joel Vega

The current RFID vendor landscape shares something in common with the giant chessboard that Alice has found herself in Wonderland - the faster she moves around, the more she stays in the same place. “The RFID technology is evolving very rapidly, the pace of evolution is very fast that this can be daunting to companies who are thinking of RFID adoption,” said Stephen Proud, associate partner at Accenture Europe. Accenture conducted a recent survey of key retailers, manufacturers, consumer product companies and vendors in North America, Europe and Asia. That no one doubts that RFID is here to stay is a view shared by all respondents, according to the Accenture report. But what differs is the variety in how companies implement their plans between now and RFID’s eventual broad uptake in the marketplace.

For supply chain applications (such as tracking pallets and cases), the UHF technology is the most appropriate due to the read range and speed.

“By some market projections, RFID budgets will double by 2007, tag purchases will reach 1.62 billion, and 83 per cent of today’s pilots will convert to full-scale implementations, with the RFID market approaching US$27 billion in ten years,” said Accenture. And even if these market estimates are inflated, RFID growth in the marketplace is like to average 40 per cent over the next few years. Moreover, Proud said, the improvements in RFID technology fortunately are supporting the pace of adoption.
As one market leader in the survey says, an RFID reader is four times better than a reader available six months ago, and up to ten times better than in early 2004.
But despite the steady increase in the uptake of the technology, barriers still exist. Among them are the component cost, global standards and technology reliability. While 2004 would be seen as the breakthrough year in standards and market regulations, 2005 and 2006 may yet be remembered as the year of product development, with market observers saying the next 18 months would see rapid changes unfolding in the vendor landscape. Experts say the changes will particularly be striking in the middleware market, not an unusual development as technology markets can be cyclical.

The European experience
In the case of Europe, the ratification in December 2004 of the ‘EPC Class1 Generation 2 standard,’ commonly referred to as Gen 2, has created the first global standard for UHF RFID technology and provided a boost to uptake. Particularly for supply chain applications (such as tracking pallets and cases), the UHF technology is considered the most appropriate due to the read range (a range between 860 and 930 MHz) and speed. RFID hardware vendors have been quick to announce new products and early adopters in Europe such as German retailer Metro and the UK’s Tesco have launched pioneering implementation projects. With the new European rules and the approval of the Gen2 standard, the market has found an environment that is ripe for a wide range of UHF RFID applications.
But hardware vendors are also critical whether the new European rules can meet the needs of implementations with high volumes of tags and readers in close proximity. The vendors expressed concern regarding the limiting availability of the UHF bandwidth spectrum in Europe. With only 2 MHz available, compared with the 26 Mhz available in the US, the speed at which readers can receive and process data from tags could be affected.
Furthermore, the LogicaCMG RFID survey noted that most of the hardware vendors agree that in Europe there is limited technical expertise surrounding UHF RFID technology. The LogicaCMG report said companies that implement and integrate the different RFID components for a specific customer musttherefore possess a deep understanding of thecapabilities of the technology.
“For end-users this means they have to be veryselective in choosing a system integration partner for RFID pilots and implementations.End-users should look carefully at the experience, skills, partnerships, as well as thecommitment by a system integrator to develop its knowledge about RFID technology,” said the LogicaCMG report. To the question whether the UHF RFID technology is ripe for adoption by both early adopters and mainstream users in Europe, LogicaCMG believes that in the next 12 months, the maturity of UHF RFID is no longer an obstacle for investments in large-scale RFID implementations.
“In other words, with Gen2-compliant products coming to market in the next 12 months, UHF RFID technology in Europe is ready to be adopted for many - but not all - applications,”
said LogicaCMG.

Early adoption vs. wait-and-see
Although various market analyses on RFID concede that the current vendor landscape is a complex one, experts warn against adopting a ‘wait-and-see’ attitude. LogicaCMG cited one hardware vendor who said that early adopters have the advantage compared to those companies who simply have chosen to follow. “This is very much an industry where you learn by doing, so you’ve got to go out and make your own luck,” said a hardware vendor. LogicaCMG said mainstream users tend to hold back as they often prefer minimal risks by using ‘off-the-shelf-technology’ from reliable partners.Instead of adopting a wait-and-see attitude, the LogicaCMG report urged mainstream users to experiment with RFID solutions. “The reason to start experimenting with RFID today is simple: RFID is only an enabling technology and the real benefits from RFID will come when you understand the full impact on your business processes. This knowledge takes time to develop, and cannot be copied easily from early adopters,” the report said.
At Accenture, Stephen Proud said the early adopters in the survey recognised that widespread adoption and payoff may be gradual and over the longer term. According to him, pragmatic pioneers expect significant improvements in the value chain and real ROI and competitive advantage. “Many believe that waiting to deploy RFID could be a losing proposition, deferring costs to a later, more expensive, catch-up stage,” said the Accenture report. Yet these RFID leaders remain highly cost-conscious. And their recommended approach to RFID adoption? “Not too fast and not too slow,” the report said, adding that leaders are convinced that they see no letup in the expanding use of the technology.

RFID virus: Teething problems or toothless threat? In early March this year, news headlines bannered a report from the Vrije University in Amsterdam that challenges the security of RFID tags. Prepared by a team of academics, the report claimed RFID tags can be used to corrupt databases and even potentially spread computer viruses. RFID advocates quickly responded to the challenge and said the study, although well-intentioned, was based on flawed assumptions. The ruckus over a potential RFID virus prompted AIM Global, an association and worldwide authority on automatic identification, data collection and networking in a mobile environment, to issue its own official statement. “Many of the basic assumptions in the paper overlook a number of fundamental design features necessary in automatic data collection systems and good database design,” says AIM Global president, Dan Mullen. The researchers built a system with a weakness and then proceeded to show how the weakness could be exploited. Not surprisingly, poor system design, whether capturing RFID tag information, bar code information or keyboard-entered data will create vulnerabilities.” Other experts say certain fundamental characteristics of RFID suggest it will not be a very attractive target, and RFID’s capabilities for the transmission of data are not as advanced as email. Impinj CEO William Colleran said: “In email, I can embed things that include scripts and application codes. In RFID, everything on the tag is by definition data and not instructions.” Despite the brouhaha, RFID players appreciate the report as the challenge indirectly shows how attentive to security the industry has been up to now. As Sue Hutchinson, EPCglobal director of product management, said: “We ve been very proactive in addressing security for our membership. Security has been paramount in all of our considerations...It s a reminder about how vigilant we need to continue to be in addressing security.”

Key issues
To retailers like Wal-Mart and Tesco, the benefits of RFID are clear such as better inventory
management, improved margins and reduced shrinkage and out-ofstocks. But to some consumer package manufacturers, the benefits are less than obvious. While the average spend for an initial RFID investment can range from US$1 million to US$3 million, companies expect key clear developments in key issues. In the Accenture report among the key issues identified are the cost of tags, technology, data integration and global standards. Russel Ossendryver, managing director of the US-based worldlabel.com which produces the Xtrack RFID Smart Labels, said vendors expect prices to go down. “The cost of inlays such as the chips are decreasing more and more, and this will prompt key market players to develop complete solutions that offer low-cost RFID,” said Ossendryver. The five-cent tag is considered the target price that many players are waiting for, but Ossendryver expects companies with high-value goods to amortise costs over time as they are convinced of the ROI for these high-value products. Impinj, a semiconductor company whose chips are used in high-performance RFID systems, for instance, is working with partners to come up with a total solution that covers tags, readers, systems integration and modems. Another company working closely with retailers is Intermec, maker of innovative industrialautomation technologies. Intermec’s RFID product range covers tags, handheld and stationary readers, printers, labels and wireless local area networks and software, among others.
Technology trends include the development of the next generation of Gen2-compliant readers, and the industry expects readers that are more intelligent and networked, equipped with selfdiagnostic systems and can be rebooted remotely. The early adopters also say that it is important that RFID readers that will come to market in the coming months are firmware upgradeable. This requirement provides endusers the assurance that readers can be upgraded at low cost to support future functionality. Regarding data integration, adoption across the organisation and in different industries is expected to unfold in stages, said SAP’s Amar Singh, VP of application solutions management, in the Accenture report. Meanwhile, industry collaboration is crucial in achieving global standards. “When all users can operate on the same platform, networks will proliferate based on a strong business case and cost efficiencies,” said Accenture. 
This early hype on RFID also attracts its share of gloom scenarios such as the recent scare that  RFID tags will open the Pandora’s Box to technological sabotage via the spread of viruses (See Sidebar). The RFID story, according to market observers, obviously makes good news headlines as the attention is focused not only on the economics but also on the security of a nascent technology. Proud said above the technological din the bigger message is that, ultimately, RFID is about process change.  “There is a lot of work required over and above the technology layer and the systems integration layer. I have said it before, but the key for end-users is to carefully asses their situation and match the technology to the business problem,” Proud says.

Sources: Accenture’s ‘Pushing the Pace: How Leaders Are Putting RFID to Work,’ LogicaCMG’s ‘RFID Hardware Survey 2005,’ AIM Global, www.rfidupdate.com