RFID Mania? EPC Symposium Review

I attended the EPC forum/trade show in Chicago two weeks ago. Given the level of interest, this entire issue of SupplyChainDigest is devoted to news and feedback coming from this event, which the sponsors and Kevin Ashton from MIT labeled as a “Moment in History.” Well, maybe.

First, some basics. I’ve heard some estimates of as many as 2000 attendees. That looked high to me, but it was certainly well attended. There were many supply chain executives, and a high percentage of IT-related personnel – a possible sign that companies are preparing to do something and are sending forth the technical folks to figure out how to get it to work.

I admit to being something of a cynic – as are others that have been in the supply chain business for awhile – not because we are anti-RFID, but because so many of the potential benefits being touted are available TODAY from current technologies, like bar code, the Internet and point of sale data, with substantially less new investment.

But I think there are two really important observations. First, it may not have been a “moment” in history, but it did hit me at the show that we seemed to have crossed a major threshold. Many of the world’s largest companies have now at least mentally committed to the concept that they will be able to track every product, everywhere, proactively, in real-time. This is not something I think we really were contemplating even a short while ago, and it has significant supply chain (and other) implications.

The second observation can be summarized as “too many people just won’t scan bar codes.” Yes, RFID can do many things bar codes can’t, though it wasn’t that long ago that bar codes were driving big savings everywhere by eliminating manual key data entry and paperwork as goods moved. But it appears in some operations, like retail back office, even bar code is just too hard. We just can’t scan stuff into receiving or onto the floor, despite the Symbol wireless devices lying around everywhere.

I have summarized additional Symposium news and thoughts below, in addition to the other weekly news and views section nearby. Give us your thoughts – are we at a “moment in history”?

Click here for more detailed Symposium News and Comment.

New "EPCglobal" Organization
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The Uniform Code Council (UCC) and EAN International announced formation of a new organization, EPCglobal Inc., which will be charted with commercializing RFID technology based on the electronic product code (EPC) standard. Under the new structure, the Auto ID center will give up its standards work as of October 31, and become the “Auto ID Labs,” working in conjunction with EPCglobal on more basic research, rather than standards setting. Current Auto ID center members retail some benefits, but must “re-up” to really participate in the network and numbering assignment.

It makes sense to get the standards setting away from MIT to an organization more suited to the effort. MIT really just well filled a void in RFID standards setting when other organizations couldn’t get it done.

Importantly, there are plans for very aggressive work to commercialize the technology, including an Implementation Task Force comprised of member companies, that is supposed to get its work done between now and the end of the year.

But I think it will be interesting to see how EPCglobal morphs. It certainly has ambitions for more than standards works, with maintenance of Object Naming Service (ONS) reference servers, in addition to touting at the show its goal of being an “implementation partner” for EPC technology, offering consulting services, among other offerings.

While stating that it will fund itself through end user subscriptions for EPC number registration and vendor compliance/certification, EPCglobal at times starts to sound a bit like a vendor itself, rather than just a not-for-profit standards and educational services provider (the traditional role of the UCC and EAN). One has to wonder if there isn’t some interest in eventually grabbing a transaction fee for every ONS look-up, and/or a “for profit” potential in this corporation’s future. I liken it to the New York Stock Exchange, a private, non-profit company that acts a lot like a for-profit organization.

What are your thoughts on EPCglobal? Let us know.

General Observations

Trade show floor was very busy for most vendors. Tough to get into several booths.

One observer commented to me that vendors were moving aggressively ahead, EPCglobal was trying to find its place in this world, and most end user companies were confused. Think this is a reasonably accurate assessment.

Ester Dyson, internet guru and keynote speaker, rightfully raised issues around who owns all this data, and the many privacy concerns. One I hadn’t thought of: your neighbor with a reader can know everything you have in your house?

Déjà Vu All Over Again?

Those of us that have been at this for a while can’t help but have a sense that we heard much of this before. The reality is the expected benefits – lower total pipeline inventories, significant reduction in stock-outs, improved information flow among trading partners – are the same as those we all heard repeatedly in the early 1990’s for Quick Response and ECR, and then again just a few years ago for CPRF.

Maybe this time it will actually work.

But even given a little bit of cynicism based on history, when Proctor & Gamble says it thinks RFID can take out 50 percent of its total supply chain inventories, you have to take notice. But I think many of the lessons of these earlier initiatives – both good and bad – are worth considering here. More on that in a future issue.

There’s Something about a Chip

I do believe that a substantial amount of the benefits being touted for RFID are available today from bar coding and related technologies, and was disappointed that the sessions did not more explicitly address the additional benefits from RFID.

Some did. Accenture’s presentation noted clearly (if quickly) that if you already had a real-time WMS with substantial bar coding, the benefits from RFID in your DC were very incremental. When an attendee from a CPG company asked another speaker about this question, he mumbled something about line-of-sight and moved on.

So, when evaluating the benefits for you, be sure you separate the potential returns from current technologies versus those from RFID, comparing total costs and total benefits. There are unquestionably large FUTURE benefits from RFID alone, like perpetual real-time inventory monitoring, huge reductions in POS check-out (and staffing) by whisking your cart through a portal, etc. But those are many years off.

And I am convinced there is something that is just sexy about putting a chip on something that excites everyone from Time Magazine to CEOs, that a label would just never do, and that is driving some of the interest. But if in the end that gets us re-investing in supply chain management, that’s a very good thing.

Metro’s “Store of the Future”

Germany’s Metro Stores did an interesting presentation on its use of RFID in both some DC operations (pallet/case for picking, loading, store receiving) and a few select SKUs for item-level tracking in its Store of the Future. Metro listed some of its “lessons learned” from its efforts that are worth noting:

	Must focus on technical reliability across the whole system – still a lot of issues
	Set-up of each individual reading system takes a lot of time
	This involves a lot of process change – need to really focus on personnel training
	Lack of standards today is a barrier

It’s a long way for those in the U.S., but Metro offers site visits of its DC and Future Store for those who are interested.

So What Does This Really Cost?

IBM made a presentation that included estimates of total costs. These estimates (I believe at the pallet/case level of tracking) were that 50% of total costs would be for readers (one time cost), 45% for tags (recurring costs) and 5% for integration.

Think the “integration” costs, which include everything outside of tags and readers, seems very low to me versus historical norms for other technology initiatives, and there is no clear reason why RFID should be different. Nonetheless, this is a simple but effective framework to think about costs and calculate your own estimates.

Predictions in several places were for a 5-cent tag by 2006. However, this was based on unspecified assumptions about tag volumes and standards adoption, which will commoditize products and drive down costs. But I do think we could see 5 cent tags in 2-3 years if all goes right.

My best intelligence tells me current tag quotes are in the 20-25 cent range.

And frankly, for a can of Coke, doesn’t the tag basically have to be free, like a printed UPC code, for this to really work economically? The bottlers will change can suppliers today for a fraction of a cent per can reduction.

Just Do Something!

That was the mantra from all of the consultants and most of the other speakers at the Symposium. It can be summarized as “don’t wait, just jump in and do something, you can figure it out later.”

OK, that’s a bit of an exaggeration, but not far off. Think a more prudent view is on order. I do not believe one has to panic about being “left behind” and racing to do a pilot. On the other hand, one would be crazy not to be devoting some resources to understand the landscape, monitor the technology environment, dialog with trading partners, and do some business case analysis. If a pilot makes sense after this at reasonable costs, go for it by all means.

But remember that there are many consultants out there seeing a Y2K type bonanza from RFID adoption.

Did You Go to the EPC Symposium? Yes or no, give us your thoughts.

On RFID and Privacy:
“Sure, the ideas are currently being developed in our R&D labs, but we are still working on operational, practical, prototypes for the simplest of applications - security and inventory tracking! When the tags are only a fraction of the packaging, or product cost, and the technology to read them and transmit the information, is readily available, then we can begin to worry about Big Brother. I personally think there is an argument to be made for being able to "track people" using this technology and I am not opposed to developing applications to do just that. I, as a parent of two young children, am concerned about their safety and well being in today's world.”

Barry A. Webb
Managing Consultant
Supply Chain Management - Logistics
IBM Business Consulting Services

“I would love to have my refrigerator know what is in it, and what is needed. I already track things in my house with their bar codes. But the important control is the flow of this data. Personal privacy and the freedom to chose demands that I have the right to decide where this data goes. If I am online 24/7 then I could let it go to Coke, or the grocery store. Or I should be able to chose that it stays right on the touch screen in the fridge and will print a list for me when I am ready to go to the store or that I can deactivate the tag when it comes into my house or leaves in the garbage. Don't be scared by the data, be certain you control the information. BTW if someone sits outside my house and tries to scan it, very simply it's called "trespassing".

Craig Fogg, CIRM
Mill Wheel Consulting L.L.C.