Oct/Nov 2007

RFID is still seen as a rising star in logistics and mobile computing terms - so what's holding up that rise, and when will the 'twinkle' really be delivered? Robin Meczes looks into the situation

If new technologies could be marketed as easily as they can be talked about, radio frequency identification systems (RFID) would be almost ubiquitous. But despite all the hype, the truth appears to be that RFID is still struggling to find applications in the logistics arena; and even where it does, it is generally only within relatively simple 'closed loop' applications. The holy grail of supply chain-wide sharing of RFID data across many different organisations, on the other hand, seems as far away as ever.

RFID is making progress, however. According to market analyst IDTechEx, over a billion RFID tags were sold in 2006, and while that's fewer than expected, it still represents 24 per cent of all RFID tags sold in the last 60 years. The firm predicts that during 2007, 1.91 billion tags will be sold.

The problem is that relatively few of these seem destined for applications in the supply chain. IDTechEx suggests that only 200 million tags were sold into pallet and case tagging applications worldwide in 2006 - far fewer than the 600 million previously anticipated - and it predicts that during 2007, worldwide demand for such applications will reach 375 million tags. Most pallets and cases, it adds, will not be tagged until ten years from now.

Item-level tagging, meanwhile, with one or two notable exceptions like Marks & Spencer's tagging of items of clothing, has really failed to take off at all so far, except in some high-security applications.

So why isn't RFID catching on in the logistics sector as predicted?

Priyanka Gouthaman, an industry analyst for the auto-ID practice at market research firm Frost & Sullivan, says part of the problem is the fact that barcodes continue to provide a very functional alternative to RFID at much less cost, and the increasing use of so-called '2D' barcodes has added to this trend, since such codes have much higher data storage capacity than regular barcodes.

'That's an issue for some users who have perhaps invested in RFID architecture without understanding that there was no real need for it in the first place,' she says.

Clearly, if the cost of RFID fell to that of barcoding, then take-up would surge. Whether that will ever happen is another matter, however. 'The costs certainly can be reduced, but at the end of the day, you've still got a silicon chip, an antenna and the housing with RFID, so the price can't ever fall as low as a barcode that you can just print out,' says Ulrich Denk, worldwide RFID product manager at tag manufacturer Texas Instruments.

There are companies implementing the technology in supply chains, stresses Denk. Walmart, Metro and Marks & Spencer are probably the three highest-profile examples, he says. But he says the cost does limit the technology's appeal.

'If you can use the extra functionality of RFID, like the reading without line of sight and the greater onboard memory, and if you can get a return on investment based on that, then there's no reason not to use it,' he says. 'But if you can realise your application and fulfil your requirements with barcodes, you really don't need an RFID tag.'

Postal services are one sector where an ROI can be clearly calculated, suggests Eddy van Herbruggen, group specialist on RFID at systems integrator Zetes. 'If you're a postal operator and you're losing 1,000 roll cages a year worth 150 euros each, that's an annual cost of 150,000 euros,' he says. 'If you can reduce your loss to 30 per cent by spending 200,000 euros on an RFID installation, you're clearly looking at an ROI of around two years.'

Postal operators might also be able to justify the cost of RFID if it helps them avoid massive regulatory fines for failing to meet performance targets, points out Andy McBain, service product marketing manager, EMEA, for mobile devices and RFID at Motorola, which recently acquired handheld device maker Symbol Technologies.

But finding the ROI in a simple warehouse operation is often another matter, he adds. 'Some companies find the ROI they were looking for just isn't there,' he confirms. 'If you're already getting 95 per cent accuracy out of barcodes, is there really a good return on investment if you only get an extra 3 per cent by switching to RFID instead? Not generallyÉ'

The price of tags is also still a factor in itself, adds Dave Ryan, pre-sales technical consultant at Psion Teklogix. 'The cost of the tags is still too high for single-item tagging, which is where we all thought we were going,' he says. 'If you looking at item-level tagging, for example if you're a retailer looking at a smart-shelf application, you don't want tags that cost 50p each, you want tags that cost a penny.'

Technical restrictions

But it's not all about the cost, stresses Ryan - there are also technical restrictions that are holding back the development of RFID. One of these, he says, is the lack of global standards for ultra-high frequency (UHF) tags. 'The Chinese market has started using 920MHz for UHF tags, whereas in the UK we use 868MHz and in the US it's 915MHz. But if the Chinese can produce their tags for a few pence each - and they do have a history of producing things very cheaply - then who's going to want to buy 868MHz tags that can only be used in the UK?'

The different frequencies also raise issues about readers, adds Ryan. 'Reader manufacturers are going to have to make readers that can cope with all frequencies. There are some looking at this, but we're nowhere near where we need to be to overcome this chasm,' he says.

McBain of Motorola points to another technical constraint: because of the limited frequency range in which RFID can operate in Europe and the current requirement for readers to incorporate a 'listen-before-talk' function, it's effectively impossible to have more than ten or so readers in close proximity to each other - hardly practical when you consider gate-type readers on loading bay doors in a large warehouse, for instance, where there could easily be 40 doors side by side.

This should change in the new year, says McBain, as proposals to remove the requirement for readers to listen before they talk are currently awaiting approval. 'That would increase the speed and flexibility of RFID communications considerably,' he says. 'The listening function wastes a lot of time.'

There are also some issues with handheld UHF readers, says Mike Knowles-Leak, sales director at systems integrator Unique ID - so much so that his firm only supplies low- and high-frequency units. 'UHF readers are often too big to get into a handheld device at the moment, and a lot of UHF terminals have the RFID reader attached to them like a big plate,' he says. 'It's pretty ungainly.' He adds: 'Apart from the size of the reader, there is also the question of power draw. Since UHF's read range is much longer than that of LF and HF, it needs more power, and you need the battery to be much bigger as a result.'

By contrast, says Knowles-Leak, most handheld devices already feature integrated barcode scanners, and many are even 2D barcode-enabled.

The size and power requirements of UHF readers can be negotiated in various ways, however. Intermec's approach, for example, is to make the RFID reader a clip-on addition to a standard terminal and to give it its own battery. Symbol, meanwhile, is about to unveil a new model in its MC9000 platform with a fully integrated RFID reader. Psion, too, features integrated readers in its existing Workabout Pro and 7537 handheld devices.

There is also, however, a limited choice of readers on the market at the moment. 'I'd say there are perhaps three to four suppliers out there that have four or five models each,' says Craig Backham, EMEA business development manager at Intermec, 'though some of those will be for particular applications, like fixed readers. Not all are mobile solutions.

'It's still very early days,' he says, 'and there are a limited number of manufacturers and types of unit available. And I don't expect this will change, either - RFID is quite specialist technology.'

Sometimes, RFID is also restricted by what it has to interface with, suggests van Herbruggen of Zetes - a good example being the warehouse management system (WMS). 'With barcoding, the operator tells the WMS what he's going to do, and only then starts scanning barcodes, so the central computer knows what's going to happen before it actually does,' he explains.

'With an RFID reader, on the other hand, like a gate reader, say, the central system suddenly has other computers telling it what they have seen without telling it, for example, which truck is on the loading dock or whether the operation is loading or unloading. A huge number of events start getting sent to the WMS, and a lot of WMSes aren't really ready for that.'

Rising star

Despite all these issues and the noticeable lack of uptake so far this year - none of the suppliers m.logistics spoke to for this article could point to any significant new orders for RFID solutions in recent months, in fact - most industry observers believe RFID is still a 'rising star' and that more widespread take-up in logistics and more general mobile computing applications is still very much on the way.

Knowles-Leak at Unique ID, for example, says that pump makers in the UK are just one group now eyeing up the technology for the ease with which it could provide service engineers with each individual pump's service records when they turn up for repair or maintenance work.

Backham of Intermec says he feels there is 'still a lot of mileage' in returnable asset tracking, and agrees that though there isn't much happening on the field service side, there probably should be. He highlights vending machine servicing as one good example. And Ryan at Psion Teklogix also says that field service applications are an obvious area for the technology, though he admits that so far there are simply 'insufficient people out there willing to take the plunge'.

So when might this widespread take-up begin to occur? Anything from six months' to five years' time, depending on whose guess you believe.

'Everyone keeps saying it'll all change in two years' time - but they were saying that two years ago and it hasn't really come about yet,' says Knowles-Leak of Unique ID. 'I think it'll be at least three to five years before anything significant starts.'

'If you look at closed-loop applications, there are projects happening alreadyÉ but I don't think you will ever get the mass hysteria, hockey stick approach that was predicted,' adds McBain of Motorola. 'We expect a slow and steady development in the next two to three years. As far as the hardware goes, I don't see any magical mass demand for millions of readers, though there will probably be faster take-up on the tags themselves.'

'I don't think we're going to see a huge amount of movement in UHF for at least six to eight months, until the standards issues get resolved,' suggests Ryan of Psion Teklogix. 'There are a lot of people looking at RFID but nobody is actually doing very much just now. And in terms of 'open-loop' applications, I think you're talking a good few years.'

Time will tell which forecast is most accurate. In the meantime, while RFID remains a star in the making, its ultimate rise remains - for now at least - frustratingly elusive.

BOX-OUT ITEM

Winning awards - but no customers

Proving just how difficult it can be to sell an RFID solution - however good it is - is Microlise's innovative Trailer Portal system.

Introduced a year or so ago, the system combines RFID technology on delivery vehicles with vehicle and trailer tracking to provide confirmation in real time of exactly what goods are loaded or unloaded at any given time and place.

Despite winning two separate awards for innovation, however - one from Frost & Sullivan, another from the RFID Networking Forum - the trailer portal hasn't been rolled out to a single customer yet.

'I think it was just too early for the market,' says Lee Nixon, RFID product manager at Microlise. 'The Trailer Portal is ideal for operators who already use RFID - for example in their warehouse - but because a lot of companies haven't got that back-end side operating with RFID already, the market just isn't ready.'

There are two pilot schemes ongoing, however - one with a sportswear retailer and another at a grocery retailer, says Nixon.

'The whole RFID market just hasn't taken off in logistics as expected,' adds Bob Harbey, business development director at Microlise. 'There are innovators, like Marks & Spencer and Metro, but the ROI isn't easy for everyone to see, and nobody really understands the full costs of implementation.'

Implementations outside the logistics world continue to multiply, though. Indeed, one of Microlise's latest is an innovative wristband RFID solution for visitors to the Alton Towers theme park. It interacts with the park's cameras, allowing customer-specific highlights to be collected and put on to souvenir DVDs.

However, implementations within the distribution sector remain conspicuously few. 'You have to realise just how far behind the technology curve the distribution sector really is,' says Harbey. 'While significant investment in manufacturing and warehousing has been the norm for many years, there has been little significant investment in transport until quite recently, and even now, the emphasis in this sector is on low-hanging fruit such as vehicle tracking and electronic proof-of-delivery systems - not RFID.'

Despite this, Microlise remains confident that the use of RFID in distribution will grow. 'It's all about multiple track-and-trace technologies,' says Harbey. 'You might use GPS or GPRS for global tracking, then RFID for tracking at distances of 2 to 4 metres, and barcoding for line-of-sight tracking after that, combining them all to get tracking from just a few millimetres to hundreds of miles.

'We feel RFID massively complements what we are doing with vehicle tracking and telematics, and we strongly believe a combination of tracking technologies is the way forward.'