SCDigest Editorial Staff

SCDigest Says:

As RFID technology has improved, and price points for tags and equipment decline, the opportunity to use RFID profitably in manufacturing, asset tracking or other applications versus other auto ID technologies increases. What do you say? Send us your comments here

RFID technology has been around for decades. Earlier in this decade, the Auto ID Center at MIT, and its rebirth in 2003 as EPC Global, changed the game significantly by re-focusing RFID tag design on simple, lower cost tags that had the potential to be widely adopted across the consumer goods to retail supply chain, and many others industries.

This EPC movement clearly energized hundreds of companies, government agencies and other organizations to start looking at potential uses for RFID, and spawned the Wal-Mart and US Department of Defense compliance programs, as well as programs in Europe by retailers Tesco and Metro stores, to name the most prominent initiatives.

The EPC vision included an end-to-end ability for trading partners to use the same tags and share supply chain information as products, for example, move from manufacturing to store shelf. The vision was for “open systems” that not only used standards-based RFID tags and readers, but was driven by information that could be leveraged by multiple players in the supply chain.

RFID technology really began, however with so-called “closed-loop” systems. The term denotes a system that is under control of a single company or organization for its own interest and benefit. In a closed loop system, a company deploying RFID typically doesn’t have to worry about making the RFID data available to other trading partners.

Examples of closed-loop RFID systems might be the tracking of work-in-process inventory in a manufacturing environment, or the DoD’s current system for tracking containers sent across the globe.

Closed-Loop Makes a Comeback

To a great degree, closed-loop systems took a back seat in terms of market attention and user focus since the Wal-Mart and DoD mandates and the broad EPC vision. But the payback from closed-loop systems was always there. Closed loop systems can still be deployed using standards-based technology, though many non-standards based applications are also being effectively implemented.

In a 2005 interview, John Hill of eSync told SCDigest that “companies should not let all the attention focused on Wal-Mart’s mandates to obscure the outstanding opportunities for closed-loop systems in manufacturing.”

That comment looks especially prescient today.

Slowly but steadily, closed loop systems are making a comeback. A manager at RFID solution provider Intermec recently told SCDigest that of the more than 260 RFID projects the company had active, the vast majority were for closed-loop applications.

Now comes news that Alien Technology, long considered a leader in EPC-based systems and the Wal-Mart and DoD programs, is releasing new products more aimed at the closed-loop market.

The key factor: the very slow to develop consumer goods to retail and DoD RFID markets.

"We're looking at where the market will be in the next 12 to 18 months, knowing that the mandate market will take a little bit longer than expected," Ronny Haraldsvik, VP of marketing at Alien, told eWeek. "We've seen a dramatic shift from the mandate market to close-looped systems, where [businesses] in many varieties of industries are adopting RFID on their own terms and not necessarily for the supply chain."

While the new Alien products, such as the ALR-9650 Smart Antenna, still have EPC Gen 2 standards as their foundation, the form factors, functionality and price points have been tweaked to appeal to new applications beyond the needs of Wal-Mart and large consumer goods manufacturers.

As always, the driver of all this is ROI. Closed loop systems are adopted only because they provide justification in terms of costs savings, improved decision-making or other benefit. As RFID technology has improved, and price points for tags and equipment decline, the opportunity to use RFID profitably in manufacturing, asset tracking or other applications versus other auto ID technologies increases.

As has been well chronicled, most suppliers facing Wal-Mart mandates have been hard pressed to find similar returns.