Magazine Article | October 1, 2005

RFID Does Work

Source: Field Technologies Magazine

There are a lot of questions about the lack of ROI in RFID (radio frequency identification) deployments. If you want real RFID results, focus on closed-loop systems.

Integrated Solutions, October 2005

With so much attention in the RFID space focused on mandates, intellectual property disputes, and evolving standards, it's sometimes difficult to remember that RFID is a mature, proven technology. Most of the current conversation about the smart-label technology centers around passive, UHF (ultra high frequency), open-loop implementations. And in these discussions, there are plenty of unanswered questions. However, RFID has been deployed in closed-loop environments for many years and has enjoyed great success. The growing interest in RFID in general has led end users to look at specific uses for RFID where it makes the most sense. It's at this point that RFID in closed-loop environments starts to make a lot of sense for many enterprises.

Closed-loop RFID implementations have a couple of significant advantages over their open-loop counterparts. Most important is the "closed" nature of the environment. Closed-loop systems are contained within a location or several locations within a single enterprise. For instance, tracking airport baggage is a closed-loop environment. For that matter, so is tracking parts as they move through a refurbishment process or tracking components through a discrete manufacturing process. In each of these cases – and many others – data gathered from RFID-tagged items is being used only by the enterprise that deployed the technology. Open-loop systems, conversely, require RFID data to be accessed and exchanged among many enterprises. Of course, this raises challenges that are currently being addressed.

In addition to the inherent control an enterprise has over a closed-loop environment, the RFID technology deployed in these systems is very mature. In many cases, closed-loop systems employ a combination of active and low-frequency RFID tags. These are much different from the UHF tags being deployed in open-loop environments. In these closed-loop implementations, active and low-frequency RFID tags are mature, effective, and based on standards.

The nature of closed environments and maturity of the technology being deployed have allowed enterprises to implement RFID with confidence. This is in sharp contrast to the feelings many end users have about open-loop deployments of the technology.

End users considering RFID for open-loop systems have to educate themselves on a variety of tags (e.g. EPC Class 1, EPC Class 0, 0+) and an emerging standard. Closed-loop systems, however, don't eliminate the need for education on RFID tag usage. Depending on the application, end users might deploy low-frequency RFID tags, active tags, or a combination of both. "Active tags are more expensive, but they give users a longer read range and can be designed to withstand a lot of abuse and harsh conditions," states Steve Brown, vice president of marketing at Acsis. "But if you're tracking expensive goods, that really justifies the cost of active tags." For warehouse or manufacturing applications, 13.56 MHz tags embedded in reusable totes or pallets might be completely appropriate. In either case, end users will have to weigh a few factors including tag cost, cost of goods being tracked, and the overall site layout.

To gauge the cost of tags, end users can expect to pay a few dollars for each 13.56 MHz tag. Active tags range in price from about $30 to $50, depending on the design. When some vendors and users are still seeking a 5-cent, UHF tag, the cost of active tags might seem prohibitive. "You really have to look at the goods you're tracking," says Dwain Farley, managing partner at Enterprise Information Systems (EIS). "One of our clients is tracking aircraft parts that are each worth tens of thousands of dollars. In that case, the company didn't blink at the cost of active tags. Similarly, spending a few dollars to embed a 13.56 MHz tag in a tote or pallet that costs several hundred dollars makes a lot of sense."

Both Acsis and EIS have histories of deploying RFID technology. Currently, the integration companies are deploying both open- and closed-loop systems for customers. The requests for open-loop deployments, of course, are a more recent development based on mandate pressures. However, Acsis and EIS both have more than five years experience in closed-loop systems.

One of the main sticking points with current open-loop deployments of RFID is the lack of payback. It's a main stumbling block to end user adoption and project expansion. Conversely, the payback from closed-loop systems is one of the main selling points. While some ROI calculations include metrics that are less tangible, closed-loop systems offer hard-dollar savings. Tracking reusable totes through a work-in-process environment is a good example. It's a straightforward calculation to determine how much a company is spending each year to replace lost or misplaced totes. Companies can also expect productivity gains through efficient tracking of materials throughout a manufacturing or distribution process. Reducing the incidence of misplaced products and materials that have to be restocked each year is another way RFID tags can provide a calculable return.

The components of any open- or closed-loop system are similar in that both require tags, readers, and system integration. It's that last area where companies can expect real savings. "With closed-loop deployments, companies can use their own numbering schemes when it comes to identifying cases, pallets, and goods. The data from the RFID tags is consistent with the data currently used with their back end systems. That's not the case with open-loop systems where data is exchanged with partners who might be using a different numbering scheme," comments Acsis' Brown. "This control of data within a closed-loop environment makes the deployments less complex and leads to a quicker payback."

EIS' Farley adds that the payback expected in closed-loop deployments should not be any different from the payback enterprises expect from other technology investments. "I tell clients that they should expect payback from a technology investment in 12 months. If they can't achieve that return, they should look at alternate technologies or wait for a current technology to mature," says Farley. "With closed-loop deployments, the payback is achievable in multiple applications. So, there's no reason not to deploy the technology."

Most technologies are only effective when employed in the right application. RFID in closed-loop environments is no different. The cost of tags versus the cost of goods being tracked is an obvious place to start. However, some closed-loop apps have a proven track record of success.

Acsis and EIS, for example, both have lists of successful deployments of RFID in closed-loop work-in-process environments. Brown points to several deployments where reusable totes are tracked throughout a discrete manufacturing process by reading RFID tags embedded in the containers. When the manufacturing process is complete, the totes are repackaged and returned to the assembly line. Tracking is at the heart of a client implementation that Farley identifies. Instead of totes or pallets, EIS' client is using RFID in a closed-loop environment to track aircraft parts through a refurbishment and reassembly process. Farley says RFID tracking in this particular case cuts turnaround time in half – from an average of 200 days to a projected 100 days.

Companies facing RFID-related mandates have to consider the technology outlined by each initiative. This alone may dictate the applications and types of RFID technology that must be deployed. However, RFID should be considered in a broader context. It's not just a technology that will allow a company to comply with a mandate. In many cases, it's a strategic technology that offers a real payback. That's the RFID that end users need to evaluate right now.