What's Wrong With RFID? - ' Page 4'

Standard Deviation

Meanwhile, the readers, tag signals and middleware for translating RFID data into accurate and useable information that can be delivered to corporate ERP systems will lag as long as EPC standards remain in limbo.

Currently, all hardware and software is designed around one of two different RFID data syntax protocols, Class 0 and Class 1. Recently, some readers and middleware have been developed that decode both signal classes, but even RFID proponents view this as an interim and somewhat unreliable solution.

"This industry needs standards desperately," says Mike Sheriff, CEO of Dallas-based X-Change Corp., an RFID systems integrator.

"We'll only build the large user base that will allow us to deliver affordable technology, by eliminating the fear that if you use a certain type of tag it may not be able to be read by someone upstream or downstream in the supply chain. The lack of standards defeats the purpose of RFID, which is transparency, not opaqueness."

EPCglobal—a joint venture of the international supply-chain standards organization EAN International and the Uniform Code Council, its North American counterpart—is considering four proposals for so-called Generation 2 RFID standards that will finally ensure that all equipment and software is built around one set of rules. The organization says it will choose a protocol, which it promises will be backwards compatible with Class 0 and Class 1 tags, by the end of this year.

That's good news, but it still leaves open the question of when EPCglobal will finish work on a much more intractable problem: developing an EPC network that will permit password-protected access via the Web to RFID data anywhere in a company's supply chain—an essential component for widespread acceptance of RFID. The Coca-Cola Co. could, for instance, query the EPC network for the specific location of all cans of soda with the special Santa Claus promotion that were shipped out in November. Coke could then alert retailers to put the cans on the shelves, thus avoiding the cost of throwing out the inventory because it was buried through the Christmas season in store warehouses under other cases of Coke. It's unlikely, however, that a fully formed EPC network will debut before 2006, and it may not arrive until as late as 2007.

With all of these obstacles, the most prevalent supply-chain RFID application currently in use is "slap-and-ship," and it's the technique adopted by most of the Wal-Mart top 100 suppliers. This involves merely putting a tag on cases and pallets just as they are about to leave the warehouse. Electronic readers at the supplier's loading dock will scan these shipments and produce a list of the products included in the order. This "ship notice" will be e-mailed to Wal-Mart, whose own RFID readers will examine the incoming shipment and compare it against the supplier's documentation.

Although it's a relatively primitive application, even slap-and-ship has some potential benefits for suppliers. Order payment should be speeded up, because the shipment will be logged in immediately when it arrives at the distribution point and is scanned by the RFID readers. And chargebacks, in which retailers pay only a portion of a bill because they claim not to have received the whole shipment, should be cut back, because automated RFID systems will have verified the order at both ends of the transaction.

"By starting in this limited way, suppliers get a reasonably low-cost vehicle to evaluate the potential impact of RFID on their business processes without spending tens of millions on revamping their whole supply chain," says Kellam. "During this stage—the learning-curve stage—companies can determine how RFID data can be integrated into their enterprise applications and into their warehouse and factory infrastructures."