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RFID: Is This The Year?
Bert Moore
A version of this article was originally published in the January 1999 issue of Automatic ID News. There are many RFID standards activities currently under way that may come to fruition by the first quarter of 2001 but this information is still generally pertinent as of October 2000.
"Is this the year RFID really takes off; is this the year RFID finally begins to deliver on the promise its held for the past ten or so years?" The answer is an emphatic, "Yes. And no."
That's what the vendors are saying. And that's where it gets interesting.
Anyone who witnessed (and participated in) the growth of the bar code sector of automatic identification and data collection (AIDC) is tempted to look at the lessons learned there as a model for RFID development. That model, essentially, goes like this: The problem is, that model doesn't necessarily work for RFID.
The most obvious difference between bar code and RFID is that bar code uses light as a "transmission" medium between the message and the reader. Real RFID standards will require common data transmission protocols, frequencies, consideration of global regulations, and a host of other factors. Compared to RFID, the creation of bar code standards was a walk in the park. Creation of RFID standards is more like a walk in the woods. At night. Without a flashlight. In the rain. (And that's on a good day.)
RFID standards that address data formats or syntax but only provide public domain technical specifications from multiple vendors are a step in the right direction but don't provide the tight guidelines we expect. In other words, there's no single solution.
"Is this the year?" According to Doug Karp, Senior Director, DiamondCheckpoint Development Group, "1999 will be the year that RFID establishes its credibility. Is a key year; in the last 6 months, there has been a so much interest and excitement about RFID, with real products being available, this is the year manufacturers have to prove that RFID works."
Other vendors are convinced that the technology has already proven itself, in applications such as animal identification, toll tagging, and access control. The difference in opinion over whether RFID still needs to prove itself is based primarily on the focus of the company. For companies focusing primarily on retail logistics, the credibility factor seems to be more critical. For those who are more tightly focused on single applications within logistics or item identification, the reliability issue doesn't seem to be evident. And this makes perfect sense.
For larger applications there may be different requirements at different stages of the process. For more focused applications, it's easier to develop specifications and identify products that meet them.
"For end-to-end supply chain implementation, the standards process is probably holding back implementation," according to Cliff Horwitz, CEO of SAMSys. He added, "There are so many issues to be addressed in RFID that it's difficult to imagine a useful standard being developed in the short term." He's not being pessimistic about RFID's future, however. He's quick to point out that broad standards are less relevant in closed-loop systems and that many companies hungry for RFID solutions in closed-loop applications and they aren't going to wait.
Horwitz isn't alone in this assessment.
According to Pete Sorrells, Marketing Manager for RFID products at MicroChip, "This is the year you'll begin to see the 'hockey stick ramp' [a dramatic rise] in RFID sales. Every conceivable industry has been to our booth; the interest we're seeing is unbelievable. Customers, distributors and suppliers: everyone seems to want RFID tagging for tracking." He too sees that closed-loop applications as being the major driver.
Vendors agree that there are enough technology options currently available, from enough different sources, that end users will be confident enough to implement or pilot new systems. Everyone sees 1999 as "the year of the pilot" at the very least.
According to some estimates, the current volume of RFID tags for all the major applications (access control, animal identification, and toll tags) is in the range of 40-55 million per year. One source felt confident that his company would ship more tags for new applications in 1999 than will be sold for all other, existing, applications combined. And this source agreed that 1999 was not the year RFID would really hit its stride.
For RFID to really "take off," there are a couple of critical issues. For some, the primary issue is the development of standards. Others don't agree.
Steve Miller, Senior VP of Marketing and Sales for Savi Miller is very strong in his belief that users will choose technology winner(s) and that standards will be written around them "The market will lead," he says, "and standards will follow." There is precedent for this view. The ISO maritime container tag standard was written around the AmTech tag technology since it provided the best solution at the time. And, as Miller points out, "Is Windows® a standard? Is VHS?"
So what is the real issue? DiamondCheckpoint's Karp feels one of the critical issues is the development of ROI models. But, Karp says, to his knowledge these ROI models haven't been developed. Implementing RFID is much more expensive than bar code. Savi's Miller is perhaps more direct in his assessment. "Until benefits derived from the use of the technology in open-loop applications accrue to those who bear the cost, open-loop applications won't happen." He pointed to the maritime container tagging application. A shipping line might, for exaple, spend $30 million tagging its containers. But if ports don't invest in readers, the investment is wasted. What's more, even when port operators realize they can gain 15-20% savings on their operations, there's still no incentive for the shipping line. Unless some of the savings are passed on to the shipping line or there's an increase in guaranteed performance. In other words, some direct benefit for their investment. Yes, there's a standard for tagging maritime containers which makes this feasible. But the ROI model hasn't been developed or implemented.
Miller suggests that what may be more important in the long run is the development of even a de facto standard for an RFID "backbone" or bridge. Miller's company has developed software that will work with a variety of RFID products (not only its own tags). What this means is that, as technology changes, different products can be "plugged in" without huge software modifications (and related costs). An analogy might be the development of the PC card form factor for RFDC radios. Although it didn't address any of the technical issues in data communication, this form factor did make it much more cost-effective for portable terminal users to swap out radios as the technology advanced. And that form factor will continue to be a contributing factor. Similarly, many data format and syntax standards, such as ANSI MH10.8.3, are being written to eliminate the need for programming changes. In any new AIDC application, programming often represents the lion's share of program costs.
SAMSys' Horwitz sees another potential limiting factor to the growth of the RFID market in 1999. "The Y2K factor may be distracting or actively occupying many IT personnel who would normally be involved in strategic decision-making. They simply may not have the time to take on new projects until they're confident that their existing systems will survive the end of the millenium."
"Is this the year?" Absolutely. Maybe. Or not. It all depends on your application.
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