RFID Implementation Challenges Persist, All This Time Later
Sure, RFID is useful--but problems and costs associated with it continue to cause frustration, even among true believers
Mix a promising but immature and costly technology with fast-moving adoption mandates from a huge customer to which you can't afford to say no. Throw in a pinch of inevitable human errors, stir in the unyielding laws of physics, and then top it all off with a dash of bickering about standards. And what you get is the passive radio-frequency identification market near the end of 2005.
As Wal-Mart prepares to add 200 more suppliers in January, and as initiatives from outfits ranging from Best Buy to Target to the Defense Department get under way, RFID adopters continue to struggle with problems that have been around the technology for two or more years, and they're finding new ones, too. These challenges won't stop RFID's inevitable forward movement, but problems with data filtering and analysis, clunky tag-read work-arounds, continuing high costs, and unrealized returns on investment are causing temporary derailments. They're also breeding frustration--and maybe even a backlash.
Gillette Co., an early advocate, began shipping about 200 RFID-tagged product types to Wal-Mart's Sanger, Texas, distribution center in March. But Gillette has reduced the count to an undisclosed number, concentrating on fast-selling products like razors and items that do best in promotions, says Dick Cantwell, VP of the global value chain for EPC and retail availability at Gillette.
Wal-Mart's ultimate goals always have been to use RFID across the company's supply chain to speed inventory to store floors and eliminate out-of-stock items. But Gillette may not be the last company to decide that it wants a more-targeted approach. For some products, such as DVDs, manufacturers are exploring RFID-tagging only during the first couple of weeks or months after release, when sales are greatest. Meanwhile, logistics champs FedEx Corp. and UPS Inc. don't yet see a business case for widespread use of RFID, not when bar codes do a fine job tracking packages, for less money.
Annin VP Beard found RFID tag pricing confusing and initially underbudgeted for them.
Companies are seeing progress and pushing RFID technology forward, but it's limited in scale and scope. Consumer-goods maker Kimberly-Clark Corp., an early proponent of the technology, has been moving rapidly ahead with its deployment. The company ships more than 200 items, from diapers to detergent, in RFID-tagged cases and pallets to Wal-Mart, Albertsons, and Target distribution centers in the United States, and overseas to Metro Group and Tesco. Its RFID research lab last month became one of just two in North America accredited as testing centers by the main RFID standards groups for consumer goods and retail. But even Kimberly-Clark still flows RFID data into a separate database rather than integrating that information with its ERP systems. That step will be key to realizing a return on investment by pinpointing shipment whereabouts and out-of-stock goods. "We spent the year learning compliance, physics, and infrastructure requirements to get the performance out of the technology," says Mike O'Shea, director of corporate Auto ID and RFID strategies at Kimberly-Clark. "Now we have to start taking a look at how to deliver the value."
Bicycle maker Pacific Cycle LLC has firsthand knowledge of the integration nightmares that come with trying to merge RFID data into its SAP ERP system. Data-formatting issues and software incompatibilities make it hard to import accurate data, never mind the extra steps needed to gain valuable insights. "We have a heck of a time with the amount of middleware, trying to get one to talk with another," IS director Ed Mathews says. Pacific Cycle has dedicated a person to sift through the 70,000 records it receives weekly from the more than 50 RFID-tagged products it ships to retailers, searching for inconsistencies that crop up time and again. That includes duplicated data, such as multiple reads being generated when a pallet of tagged bicycles gets stalled near a reader at a distribution center.
Given all the headaches, most companies are skating around the difficulty of integrating RFID data into their core manufacturing processes. In the face of painful realities, they aren't even trying to take full advantage of RFID's promise. Spending on RFID systems and services is trending up, with AMR Research predicting $1.9 billion next year going up to $4.2 billion in 2009. But it's the rare consumer-goods company that spends close to earlier predictions of up to $22 million on a deployment, AMR research director Kara Romanow says. Instead, most companies are taking a risk-averse approach, with the average consumer-goods company spending about $662,000 on simple slap-on-a-tag-and-ship deployments. "Rather than spend the millions of dollars we predicted it would take for manufacturers to implement RFID the correct way and integrate it into business processes and applications, they did the bare minimum to comply with retail mandates," she says.
Getting the bare minimum right can be hard enough, especially with the 3-year-old problem of inconsistent tag read rates. Annin & Co. is a 158-year-old flag manufacturer that hopes to comply with Wal-Mart's mandate by November, well ahead of its January 2007 deadline. But wild fluctuations in tag read rates are forcing a makeshift data-collection process at its Ohio warehouse. During trials, pallet read rates of the tag's electronic product code, developed by RFID standards body EPCglobal Inc. to identify items, range from 40% to nearly 100%. Companies need to do a tag read in-house before shipping their products, to verify that the label works and collect tracking data. So Annin set up a conveyer system to scan and collect RFID data one case at a time, before the pallet is assembled. The goal had been to read all the cases on a pallet with one scan. But "the technology isn't there yet," says Carter Beard, Annin's VP of manufacturing and distribution. The one-at-a-time approach provides accurate reads but takes its toll on time and resources.
Many companies have struggled with read rates. Kimberly-Clark early on had to weed out tags that were dead-on-arrival, and "there was too much work up front" to keep weak tags from getting turned into labels, O'Shea says, though the work has paid off with near-perfect read rates. Wal-Mart, too, reads each case individually to provide more accurate EPC data for internal users and suppliers--an extra step that wasn't part of the original plan.
Wal-Mart officials argue that there has been plenty of progress. "We've seen more than 5 million cases go through the participating stores," says Simon Langford, Wal-Mart's RFID strategist. "That equates to about 58 million electronic product code reads." But as Wal-Mart's deployment grows--from 130 consumer-goods companies shipping RFID tags on 65% of their products to two distribution centers, to more than 300 suppliers in January shipping goods to five distribution centers--things could get more cumbersome. Wal-Mart, which expects 100% reads of individual cases on a conveyer, today reads between 50% and 90% of tags going through on a full pallet.
Some of the early problems with tag reads were caused by factors such as tags that didn't transmit signals quickly enough, and too many tags being read at once, confusing readers about which signals to pick up. RFID implementers also still struggle with the fact that metal reflects radio frequencies and liquid absorbs them, making it difficult to read an RFID tag signal on containers with either material. That leads to what Miley Ainsworth, director of innovation and scanning technology at FedEx Services, terms the "place-very-carefully-and-ship" method, a time-consuming process of positioning the tag over an air pocket on the outside of a carton.
5 Top Federal Initiatives For 2015As InformationWeek Government readers were busy firming up their fiscal year 2015 budgets, we asked them to rate more than 30 IT initiatives in terms of importance and current leadership focus. No surprise, among more than 30 options, security is No. 1. After that, things get less predictable.
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