RFID chips have the potential to produce huge amounts of information. How will companies recognize valuable data and avoid getting buried by what they don't need?
The reason most IT executives don't have detailed plans to tackle the data volume is that RFID technology only recently was considered feasible for widespread supply-chain use. And much of the technology for managing RFID data is in early stages of development, forcing companies to design RFID architectures on shifting sands. With the technology still evolving, it's unclear just what end-to-end RFID networks will look like and difficult to understand how RFID-generated data can be used, says Forrester Research analyst Christine Overby. "This is literally changing week to week."
Many technology vendors see great sales opportunities in RFID and are writing software to meet companies' challenges. Startups such as ConnecTerra Inc. and established vendors such as Sun Microsystems are building middleware based on standard specifications for RFID, and SAP last month debuted middleware products for linking RFID readers to back-end applications and monitoring business-process exceptions. Manhattan Associates, Oracle, Provia Software, and others have fielded new versions of their supply-chain and warehouse-management applications that can work with RFID data. Still, these are all new and untested technologies, and some consultants advise businesses to delay implementation decisions until at least later this year, after companies have built and tested initial RFID pilot systems.
Perhaps more important than the technology, managers will have to set policies on how much data to collect from RFID systems: which signals to record, which to ignore, and which to forward to an operational system or person for action. Such policies could be coded into warehouse- or supply-chain-management applications or some type of business-rules engine or even be built into future generations of "smart" RFID readers, and then enforced by middleware.
"The business rules will be very important," says Pfizer's Sommerville. For example, if an RFID chip is coupled with a temperature sensor on a shipment of perishable goods, monitoring middleware can be programmed to ignore constant RFID signals unless the temperature rises above a predetermined level.
Companies need to study how they will summarize and aggregate data generated by RFID chips and readers and move it to middleware and enterprise applications, says analyst Gene Alvarez, technology research services VP at Meta Group. The research firm also recommends that companies create teams of business and technology managers and staff responsible for understanding RFID's capabilities and limitations as well as for planning how the technology will fit into their business processes.
DHL Worldwide Express Inc. has assembled a group of business and technical managers who work in offices around the world that's examining how RFID and the data it generates can be used to augment the company's business, says Michael Bolles, DHL's industry and customer-innovation manager. The shipping-services company also has a steering committee that's looking at IT-infrastructure issues associated with RFID, he says. DHL has a number of pilot projects under way and is mulling ways to use collected RFID data to make vendor-managed inventory, warehouse-management, and other services more efficient.
Companies that successfully manage the voluminous data that RFID systems generate may find unexpected value in the data they gather.
Scottish & Newcastle plc began using RFID several years ago to track nearly 2 million beer kegs shipped to distributors, retailers, bars, and restaurants in order to reduce the number lost in transit or not returned by customers. The plan worked, and the U.K. brewer is saving $25 million a year out of what it previously spent to replace lost kegs. The company also came up with new ways to use the information collected from the read-write RFID tags, which record when the kegs are filled, delivered, returned, and washed. Now they're depending on RFID tags to track product freshness and calculate how much unconsumed beer is returned by customers in exported kegs. This information could result in even greater financial savings: Scottish & Newcastle has asked the U.K. customs department for a refund of export taxes paid on that unconsumed beer. It's still waiting for a response from the government.
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