5 Misconceptions About RFID

The first players to enter this field are already intensifying their logistics operations with the help of RFID applications. However, there don't seem to be many Finnish companies involved. Could this be due to some rather tenacious misconceptions about automatic identification technology?

Success certainly wouldn't have come so easily to the Finns, if there hadn't already been customers in the 1980s interested in embracing cell-phone technology. Without all those eager mobile service providers, many ideas might have been left on the drawing board. Now, once again, there is new technology on offer, which the initial players have had a chance to gain considerable profit from. If the last runner, trailing behind everyone else, has finally managed to catch on, then perhaps its time we considered the competitive advantage that is now possible. But local industry still seems bent on waiting for the train to actually leave the station. Those already using RFID in places like the USA, England and Germany have managed to gain a lead of a couple of years. The delay elsewhere might partly be as a result of some misconceptions about RFID technology, which just don't seem to want to disappear. Although in reality, some of the initial problems already faded away some time ago.

Misconception 1: The T-shirt controls the washing machine

The media surrounding RFID technology has been spinning incredible tales about how our every day lives will be changing in the near future. RFID-chips attached to clothes will soon be able to tell our washing machine which temperature each T-shirt will need in its wash cycle. Even if such unlikely eventualities could in reality come true, this is in fact just one identification technology among others. Such exaggerations have created the impression that RFID is just nonsense without any real use in business activities. However, RFID is superior to the bar code and other older systems, and it has already been in use for some time in areas where the identification of products has always been important -- at the various stages of the supply chain.

Misconception 2: Identifiers are too expensive

Discussions about RFID-technology have persistently concentrated on the unit price of each RFID-identifier. If the RFID stick-on label costs a number of euros, it is naturally not worth attaching such a label to each bottle of milk. For that reason many have hastily concluded that investments in RFID are a waste of time and money even before the price has had a chance to go down a few cents per identifier.

But the most important thing in the supply chain is rarely that every single product can be identified separately. The reason for that is simple: low-cost products are not worth delivering one by one, so they are gathered into larger quantities anyway and transported on palettes and in containers and trailers. Trucks, aeroplanes, trains and ferries are loaded up with packages worth thousands or even millions of euros. The delivery of individual items that cheap cannot justify the cost of a 20-30 cent RFID-identifier. Also, RFID-reader devices represent an even bigger investment. Even though the less expensive ones cost only a few hundred euros, those intended for industrial use can cost as much as thousands of euros per device. In the end, it is the strategic management that determines the cost in terms of IT (information technology) for the firm's logistics operations. The price of an ERP-system will inevitably be enormous. By comparison, the costs of RFID-technology are insignificant. The price of the program licence for the management of the operation or the integration project does not depend on the chosen identifier technology. Therefore, the smart RFID-identifier's digit- and processing costs are often more beneficial than that of the old bar code. RFID can actually last several years on the delivery path. A bar code however, has to be renewed several times during the same period. In England for instance, the chain Marks & Spencer saves over five million euros annually just by replacing fruit package bar codes with RFID-identifiers.

Misconception 3: The benefits have still not been proven

Do the people from retail headquarters in Finland really believe that Wal-Mart cannot count the benefits of RFID? Or that the world's largest department store would take useless risks? Surely these first players had to do all the groundwork, and that generally takes away their advantage. On its own, the work of integrating the information system for the project cost approximately 35-40 million dollars. Since the beginning of 2005, hundreds of major suppliers will be delivering their products to Wal-Mart with an RFID-identification attached.

The manual aspects of receiving and delivering goods are reduced to the extent of being non-existent. For the same reason all kinds of errors can be avoided or omitted. A whole palette of goods can be identified in a few seconds. The gain here is remarkable compared to the time it takes to identify products with bar codes on them. When the RFID system identifies products automatically, potential delivery errors will be discovered instantly. The corrections in that case can already be made before the goods are delivered to the wrong address. The number of products being stored as buffers can be decreased substantially, and so in principal the result will be that warehouses will become increasingly useless. In addition, RFID reduces waste in the supply chain. The more expensive the products are, the more important it is to know whether all the initial parts are still there. If a product for one reason or another goes missing, the exact moment it went missing can be learnt immediately. Besides the fact that RFID-technology resolves insurance issues, it also enables the company ordering the consignment to proceed to a simpler service based invoicing system. If the goods aren't being delivered to the recipient according to the agreed schedule, the carrier will have to pay a fine for the delay.

Misconception 4: The technology is unreliable

Some years ago RFID-technology was new and at times it didn't function all that reliably, and there remains no uniform standard for RFID-technology. But the present bar code reading devices also function must better than they did in the beginning. The USA has always used their poor UPC standard and the Europeans, their EAN-system. It's unlikely that anyone will question the gains that have been made by the bar code system. It's true that the RFID-system, which has already been working for several years at a frequency of 13,56 MHz, has been gnawing away at the whole credibility of distance identification. The furthest the identifiers could be read from was a meter away, which in some ways represents some progress. On the other hand, this becomes a hindrance that blocks many logistics applications. The surrounding metal surfaces are poisonous at that frequency -- for example, the metal trailers in use could not be monitored at all. Fortunately in September 2004, the UHF-frequency was standardised at 868 MHz, which removes the problems associated with reading at greater distances. Now the reading device can use an antenna, which increases the reading distance to several metres. If the capability of the reading device increases several times in accordance with the UHF-standards, then the interference caused by metal surfaces also decreases. If a reading from an identifier cannot be gained from one side, it can be read from different angles simultaneously. Naturally, no technology functions perfectly, but the results of Stockway's international project have so far proven that the systems that are being used function incredibly reliably. The RFID-identifiers on boxes loaded on palettes can be read in 3-5 seconds, so that the likelihood of a mistake is just a thousandth of a percentage. The results are much better than any of the other identifier-methods. For technical reasons, it is no longer possible to avoid RFID-technology.

Misconception 5: The cackle of the Americans

For a couple of decades now there have been a number of different kinds of RFID-applications. Earlier for example, in engineering-shops, data storage was almost the only thing talked about. Nevertheless, many presumed that they wouldn't be able to find anyone in Finland with know-how in this brand new field of RFID-technology. In reality many local companies represent the field's top end.

Idesco Oy is one of the world's oldest companies specialising in RFID-technology -- it started business in 1989. Idesco delivered the first RFID-products in 1991, and now they develop and sell reading devices as well as identifiers for the fields of automated manufacturing and logistics. UPM Rafsec is a unit belonging to the UPM-group, which develops and prepares passive RFID-identifier stickers. The identifier consists of a silicon chip and an antenna laminated into a polyester cover. The ready-made cover is only a quarter of a millimetre thick. The company has plenty of product development know-how, in addition to which it cooperates with research institutions, universities and other organisations committed to developing RFID-technology. Initially, Nordic ID was a small design company, but now after 20 years it has grown to be one of Europe's largest portable reading device manufacturers. Many of the "old continent's" largest retail business chains are using Nordic ID's data terminal equipment.

Sidebar story 1: RFID's roots in war

Like many other inventions, RFID-applications were also initially developed for military purposes. Radar technology in WW II was relatively primitive. An aeroplane could be seen on an air-traffic controller's screen, but was it their own plane or the enemy's? The Allied powers attached RFID-identifiers as large as a square meter to their planes. In addition to the ordinary radar reflex these identifiers also sent back another message -- a delayed pulse. If you now saw two consecutive spots on the radar screen, then you knew it was your own plane. In all other cases it was the enemy. The identification signal was called IFF -- Identify Friend or Foe or FOF -- Friend or Foe. In 1948, Harry Stockman, in a publication called "Communication by means of reflected power", described identification technology that became the predecessor of the technology used nowadays. The military men also continued at the forefront of that technology, by further developing aeroplane identification systems after the war. The first commercial applications of RFID were born in the 1960's for the apprehension of thieves. Over the next decade the technology started to generalise as electronics became packaged into increasingly smaller microchips. By then identifiers were also being used to tag cattle and to control logistics for car manufacturers.

Resources:
http://en.wikipedia.org/wiki/Radio-frequency_identification
http://books.google.ba/books?id=ukjhUlI7s80C&dq=RFID&printsec=frontcover&source=bl&ots=dTK9OAmmv6&sig=eH0tY_Dn2VahPW_QABHFp6jedDE&hl=bs&ei=BKVbSoTuHInmnAOXkoTXAw&sa=X&oi=book_result&ct=result&resnum=10