RFID

Joe Farrar

2^nd Follow-up Presentation Paper

Our presentation focused primarily on the positive aspects and the underlying technology of RFID and only provided limited details on the concerns associated with this technology. For my follow up paper I will expand on the challenges RFID faces and the potential repercussions associated with its use. There are important considerations companies and the individuals in charge of RFID initiatives should weigh before making the transition to RFID.

The cost of RFID technology is presently too expensive and the price of RFID tags has traditionally been a significant obstacle to its widespread deployment in medium to smaller size companies. A survey conducted by the consulting company Accenture found cost to be one barrier to the implementation of RFID. Current passive tag cost estimates range from $0.15 to $0.75, with the volume of tags purchased having a significant impact on the per tag cost. This indicates that the current cost of tags is too high to justify tagging all items. This is why most companies mandating the use of RFID such as Wal-Mart and Target are focusing on tagging pallets and cases of products, rather than each item.

Some experts suggest that per item tracking is approximately ten years away. However, I would argue that some organizations will never move to RFID technology because the cost will not justify the benefit. The integration of RFID into existing practices requires considerable investment from organizations. Reengineering a business and aligning systems takes time and, more importantly, money to complete. The process of implementing RFID technology will affect all facets of the organization and should be expected to cost millions of dollars.

Wal-Mart and the U.S. Department of Defense have come under fire from many of their suppliers, sense the cost of complying with mandates made by them, may reach over $9 million. The money required to implement RFID technology is likely to deter the cash strapped airline industry from using the technology in their baggage processing systems. This is compounded by the fact that many airlines span a large number of airports thus generating significant financial implications to implementing a cohesive system. As a result, some industry consultants have indicated that companies should allow a five-year transition period and a budget of $20 million to integrate RFID technology into current processes.

Additionally, there are concerns that there will soon be a shortage of skilled individuals in the RFID industry. This will become all too apparent when the number of companies integrating RFID technology begins to increase. While RFID technology has been around for decades, only been recently has its efficiency in the area of supply chain management been touted. As a result, an apparent lack of standards is hindering the technology’s adoption and widespread use in supply chains.

Most RFID products do not possess interoperable qualities, meaning that they can not be easily integrated into the supply chain between partners and as such they would not add value. The development of standards has progressed somewhat through the formation of the EPCglobal network. However, EPCglobal’s standard is yet to be backed by the International Organization for Standardization (ISO). There is still no standard supported by both organizations that meets everyone’s needs.

Incompatible systems exist across different industries making interoperability a foremost concern for the seamless use of RFID across supply chains. The EPC standard is of paramount importance to the success of RFID. Ongoing refinements and the backing of numerous multinational organizations mean that it will most likely become the adopted standard in supply chain management.

Another issue related to the difficulties of using RFID technology is radio spectrum allocation. Radio spectrum is a finite resource so it suffers from the inherent range limitations associated with the radio spectrum. As RFID uses the radio spectrum to transmit its signals, it is susceptible to interference that hinders its ability to transmit clear and reliable information to RFID readers. Numerous institutions try to ensure that the spectrum is managed in a way that is beneficial to the end user, it is ultimately in the control of government agencies like the FCC to decide how it is allocated. This issue becomes one of international law due to the fact that different countries have already allocated different areas of their spectrum for the use of RFID. Clearly, private and public organizations alike lack the standards needed to integrate RFID into their daily practices.

Proper tagging is also a barrier to implementing RFID. Some tag readers are only able to read product tags that are facing a particular way, so items need to be packed accordingly. Another problem arises when a pallet containing different packaged items is read, as the reader needs to be aware it is reading multiple types of items. The ability of RFID to read through most packaging material such as plastic wraps and cardboard containers is one of its most valuable assets. However, metal and liquid can play havoc with RFID signals. Evidently, tagging is not simply a matter of attaching RFID tags to items.

Privacy issues associated with RFID continue to be the biggest threat to the success of RFID. Current RFID protocols are designed to offer the most optimal performance between readers and tags, but failed to address consumer privacy concerns. As these tags become more prevalent, RFID could be used by marketers to do research at such a specific level of detail that the threat of invading a consumer’s privacy becomes a very real one. Privacy advocates are worried that, if RFID tags are placed in common items, the product may continue to be tracked once purchased by consumers. One of the public’s biggest concerns with RFID in general is lack of information as how to turn the tags off once an item was purchased. Human rights organizations have already raised their concerns about the technology.

Privacy concerns have the potential to derail an RFID initiative before it gets off the ground. For example, clothing retailer Benetton came under fire for placing RFID tags in its clothes. Once the public was made aware of this, consumers called for a boycott against Benetton, causing the retailer to abandon its RFID plans. Companies implementing RFID without considering their customers’ privacy issues concerns could stand to lose goodwill by using RFID improperly.

In conclusion, the technology of RFID still has a long road to travel before it becomes a widely used technology. There are many wrinkles that need to be ironed out before a standard is adopted by all stakeholders. Steps that further address the protection of consumer privacy must be taken. RFID does hold the potential to change the way businesses operate for the better and should be seen as a way to supercharge existing processes. Time will tell as to how widely RFID is used in the future. The management of these challenges will play a big part in determining if RFID meets its potential.