RFID Initiatives -
The Race Against Time and Technology
MAJ John Fontana Steve Jennings
The race for radio frequency identification (RFID) and tracking methods is "on" because many of today’s technological, supply chain and logistical leaders see RFID as this decade’s version of the Internet once the technology’s standard and price competitiveness can be developed. Leading the charge for the initiative are the Department of Defense (DOD) and the retail giant Wal-Mart, both convinced that RFID in their internal and external supply chains could save billions of dollars. The DOD will use RFID technology to become more fluid and efficient in its logistical challenges to deploy troops, equipment and supplies quickly to all areas of the globe in times of crisis.
Both the DOD and Wal-Mart have initiated mandates to their top suppliers to be prepared to become RFID-active by January 2005. These mandates drew mixed reactions from their suppliers who have to contemplate their investment in the technology and resources necessary to comply with the RFID initiatives that remain in the infancy stage and are unproven in return on investment capabilities.
Alternatively, the push from both the DOD and Wal-Mart has generated great interest from the technology sector. Many of the "high-tech heavyweights" such as IBM, Microsoft, Texas Instruments, Oracle, Cisco Systems and Alien Technologies along with a huge conglomerate of start-up companies have taken on partnership roles in the research, development and support of RFID. Early April 2004, the DOD announced contracting with IBM to consult on the RFID technology for the next three years. Microsoft has also recently formed its own RFID group that will be providing a platform on which its partners can create RFID-based products and services. Similarly, Sears Logistics has also partnered with IBM, Symbol Technologies and Zebra Technologies for development of further RFID technologies that will be directed at strategic planning and support of direct delivery and logistics systems.
Although RFID technology is in its early stages with many hurdles to overcome such as standardization and cost-efficiency issues, most of the interested private businesses agree that the benefits of RFID, once harnessed, will allow major improvements throughout their entire supply chains and logistical processes. In fact, Eric Michielsen, a senior analyst with ABI Research who covers the RFID market states that "the technology is going to be around for a long time and when the pieces click together – and they’ll do that soon – it will explode."
RFID Technology
The basics of RFID consist of a tiny microchip (or tag) and a small,
ribbon-like antenna. The RFID microchip and antenna can be put in almost any
form, such as placing them between cardboard layers in a carton or layering them
on a piece of tape or label. The RFID tag would store a unique identification
code from which RFID scanners, ranging from handheld units to fixed readers
sometimes identified as "interrogators," transmit radio signals to turn on the
tag that sends back the identification number to the reader.
The DOD is proposing to standardize an Electric Product Code (EPC) that would be used as the product’s identification code. Once the code is read from the tag, the EPC can be linked to look up data bases that can provide detailed information about the item including the manufacturer, characteristics, lot numbers and expiration dates if applicable. The tags can also be programmed to store additional data. Unlike bar codes, the EPCs can be read simultaneously as opposed to one at a time. Also, the EPCs do not require a direct line of sight for the data to be read.
The overall benefits of RFID technology would include a real-time offering of the locations, contents and characteristics of all products within pallets, crates and containers. The increased information would allow for substantial cost savings from the prevention of out-of-stock items, excess inventory and shrinkage as products and materials are shipped from warehouse to warehouse and to final destination. The collection of the EPC data would eliminate the costly loss of time and money that became a logistical nightmare during Operation Desert Storm in the early 1990s in Southwest Asia, for example. During Operation Desert Storm, much of the content of supplies and equipment shipped in containers to the area of operation (AOR) could not be identified and found in what was considered an acceptable and timely manner.
In the face of RFID’s potential for saving millions of dollars throughout all types of supply chains, much work and development remains to ensure the proper efficiencies and cost justifications. The need for creating a standard product code for the technology remains a top priority in the systems development. The Uniform Code Council (UCC) is urging retailers to develop EPCs, which would be compatible with all readers and devices.
Another main issue hindering a speedier RFID acceptance is the cost of the tags themselves. The tags currently cost an average of 25 to 30 cents apiece. Using Wal-Mart’s 100 top suppliers as examples, Wal-Mart estimates that tagging only Wal-Mart’s pallets would require about one billion of the RFID microchips. Other issues include concerns about the durability of the microchips in a warehouse and transit environment where the tags are vulnerable to damage from warehouse equipment, the problems with the ability to read the tags through metals and water, and consumer concerns of potential privacy issues with use of the technology.
However, the DOD is committed to its 2005 deadline mandating that top suppliers begin delivering their pallets and cases of products to the DOD with RFID installed on them. The DOD is expected to issue finalized requirements by September 2004.
Suppliers of the DOD have many of the same concerns regarding RFID as suppliers in the commercial sector, mainly the initial costs of investing in a technology that remains new in nature. Many of the smaller suppliers will simply not have the resources to make that initial investment, but many believe that the technology will take what economists describe as the "network effect." Such a network effect occurs as more suppliers use a physical network, the more valuable that the network becomes. As the cycle continues, the growth of the network expands exponentially until it becomes commonplace. Such a phenomenon would be similar to that of computer networks such as the Internet during the past 15 years. Once a network grows, the prices of software, hardware and microchips fall to a more attractive level.
RFID in Global Conflict
Need for Change
Although Operation Desert Storm in the early 1990s was a
successful military objective, the "push" theory of logistics was definitely in
effect because of the lack of synchronized asset tracking and management.
Thousands of containers did not reach their ultimate destinations or were lost
in the sea of containers populating the Kuwaiti and Saudi Arabian deserts. One
observer recalled many Soldiers, "diving" into various containers to find
radios, batteries, food and other valuable supplies needed during wartime.
A General Accounting Office study of September 1992 reported that accountability and asset visibility were lost during Operation Desert Storm because of a lack of container documentation and an inadequate transportation system for supply distribution. Soldiers were instructed to inventory all items being loaded in a container. Unfortunately, this manual process proved highly unreliable once units were in theater, especially when a critical need for resupply occurred.
The Shift
Advanced technology in asset tracking allowed a paradigm shift in
logistics, of sorts, using more advanced asset-tracking technology. The Army
implemented asset-tracking methods using "fixed infrastructure components,"
larger readers and RFID antennas left in one place. In addition to the
individual RFID tags with their microchips and ribbon-like antennas, such fixed
infrastructure components included an "interrogator" as the reader and a fixed
RFID antenna. In peacetime, such fixed infrastructure systems are usually
adequate for transmitting cargo data, depending upon host nation support.
However, the challenge in contingency or operational areas becomes apparent when
cargo passes through a country where the appropriate RFID interrogators and
antennas cannot effectively be installed before the cargo passes through.
During the ongoing Operation Enduring Freedom in Afghanistan, for example, the US and coalition forces have had to transport supplies through countries where the RFID interrogators had not been installed. This led to major confusion and significant delays. In some countries, customs representatives became suspicious of the RFID interrogators and antennas that will read the individual RFID tags on supply containers. The US military RFID equipment is sometimes suspected of being a monitoring device prohibited by a foreign government or even a demolition device. Several foreign customs inspectors demanded the removal of any asset-tracking equipment before admitting cargo into their countries.
Of the $28.1 billion the DOD had obligated for the ongoing Operation Iraqi Freedom, $14.2 billion was allocated for operation support costs. An additional $4.9 billion was budgeted for transportation costs. Congress asked the General Accounting Office to perform a study on the logistics support and the accountability and control of the supplies needed to support the war effort. (Defense Logistics: Preliminary Observations on the Effectiveness of Logistics Activities During Operation Iraqi Freedom, General Accounting Office, GAO-04-305R, 18 Dec 03) The study acknowledged the military successes during combat operations, but identified substantial logistics support issues in theater. These logistics issues included the following:
Inadequate asset visibility based on the backlog of hundreds of containers.
A $1.2 billion gap between the amount of material shipped to the theater of operations, and the amount of material acknowledged upon receipt of shipment.
Potential loss of millions of dollars in late fees on leased or replaced containers for the DOD, as a result of distribution backlogs or losses.
Compromised readiness issues because of a lack of parts inventory, or parts that could not be located due to inadequate asset visibility.
Duplication of requisitions, again due to the lack of asset visibility of parts previously ordered by the support units.
The DOD’s current RFID network infrastructure relies upon a fixed RFID interrogator at all points in a military transportation route to ensure proper asset-tracking capabilities. Although vast improvements have been made for Operation Iraqi Freedom in Southwest Asia, the disadvantages with the current fixed infrastructure limit DOD’s capabilities.
RFID’s Future at Department of Defense
The future integration of RFID and satellite communications offers
many advantages that may resolve problems with the current fixed systems. The
first, and most obvious, is the global coverage capability offered by the
satellite technology. The Polar Regions are covered, and there are no gaps in
areas over the earth’s oceans. Other advantages of integrating RFID and
satellite communications, according to the Logistics Transformation Agency (LTA),
include the following: independence from foreign/local infrastructure, larger
data capability, worldwide frequency approval, encryption, single point
connectivity with the Defense Information System Network, protection of
sensitive information such as location and user identity, DOD-controlled access,
and an electronic intercept system for further data protection.
However, the LTA cited the following challenges associated with integrating RFID and satellite communications: need to improve RFID devices for satellite communications, need to update RFID technology already in use, and need to shift RFID requirements to a more mobile design to match combatant commander requirements in the area of operation. Also the LTA noted the continuous need to research, analyze and evaluate commercially proven satellite communications technology and RFID integration, as well as issues of interoperability, cost, global coverage, technical constraints, In-Transit Visibility connectivity, and satellite providers.
Challenges identified during an interview in December 2003 with air and ground movement officers who served during Operation Enduring Freedom in Afghanistan were based on the old saying, "trash in-trash out." The movement officers said they could not rely upon the data embedded in the RFID tags because of the lack of standardization for data input at the operator level. A container’s inventory lists were often not electronically loaded and often not associated with the container’s RFID tag, which makes asset tracking unreliable.
The technologies for integration of RFID and satellite communications currently exist. The DOD’s push for improved asset visibility will continue until global success is achieved. The DOD issued a policy in October 2003, directing the use of RFID technology as a standard business practice across DOD to address the visibility issues experienced through the years. The challenge will be to train logistics personnel on how they impact the DOD’s Total Asset Visibility and In-Transit Visibility capabilities.
RFID is in position to become the technology that can truly change how government organizations and businesses interact with their suppliers for the movement and management of products. The overall promise of RFID and its potential cost savings are why RFID has become one of the hottest technological trends in logistics and supply chain management. The ability to track and manage product movement at all points throughout the distribution channels will enable increased efficiencies. With DOD and private businesses the size of Wal-Mart leading the charge, RFID could change the entire landscape of supply chain management and logistics forever.