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  - May 13, 2008 -  

RFID News: No Surprise – It’s Easier to Implement Closed-Loop RFID Systems than those Requiring Multi-Party Involvement


Supply Chain Applications that Rely on Developing a "Critical Mass" in order to Provide Real Benefits are Lagging Behind, AIM Global Conference Reports



SCDigest Editorial Staff

SCDigest Says:
The vision was powerful, and we’ll get there someday – but for now, good old closed-loop systems continue to see most of the real RFID action.

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So called “closed-loop” RFID systems, in which the application is under complete control of a single company, were what drove the RFID industry for many years, as companies implemented RFID-based systems for work-in-process tracking, trailer tracking into and out of yards, asset tracking, and more.

In fact, there were many more of these closed-loop RFID-based system implementations than most observers realized, even dating back to the 1990s.

With the work first done by MIT’s Auto ID Center, and its successor EPC Global, more attention turned to the potential for inter-company tracking and information sharing based on RFID reads, with the vision of the Electronic Product Code (EPC) form of RFID. That vision included servers on the internet that would provide a place for cross-company supply chain data based on RFID reads available to all that needed it.

The vision was powerful, and we’ll get there someday – but for now, good old closed-loop systems continue to see most of the real RFID action.

That was one of the conclusions coming out of the Automatic Identification Manufacturers (Aim Global) Leadership Summit in Washington DC two weeks ago.

Bert Moore, who has been involved in the Auto ID industry from its earliest days and now edits the AIM Global RFID e-newsletter, reports from the conference that “Closed systems are still the leading candidates for ROI of less than one year,” according to some of the presentations made there by industry pundits.

“It has been clear over the past year or so that RFID systems that are under the control of a single entity (business, organization or government) provide the most direct and easiest to calculate ROIs,” he added. “Asset management, access control, transit cards, libraries and the like will continue to thrive.  Various other "small" applications that automate routine data collection or item identification tasks, and that ensure the accuracy of collected data, are also growing in popularity.”

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In fact, some people believe the initial market fervor over the Wal-Mart and US Department of Defense EPC-based RFID programs/mandates had the effect of making more companies and supply chain-related practitioners aware of RFID technology, somewhat ironically spurring adoption of closed-loop systems that were, in some respects, sort of the opposite of the EPC vision.

“Large supply chain applications that rely on developing a "critical mass" in order to provide real benefits are lagging behind,” Moore observes. 

Moore, however, thinks its likely that today’s closed-loop systems will contain the seeds for future open, cross-company applications.

“Within the supply chain, there are a number of areas where RFID benefits can be easily recognized because they are, essentially, closed loops within the larger open loop system,” Moore says.

For example, he sees a number of apparel retailers tagging SKUs in store at the item level for their own experimentation or benefit. If the positive results hold, it makes sense that these retailers would involve vendors further upstream, both to apply the tags at time of production, and also to benefit from the RFID-based data as the product moves through the supply chain.

Moore also thinks it likely that some manufacturers concerned about their products getting into unauthorized distribution channels (the “gray” market), will use RFID tags to better track the lineage of how a product got into that illicit channel.

“While it may appear that RFID applications are stumbling forward in a haphazard way, indications are that each of these local or closed loop applications will serve as the basis for future, open system applications,” Moore says. “Each application where an ROI can be demonstrated allows companies to move forward with developing the infrastructure necessary for end-to-end data discovery and exchange. In fact, the shift of attention away from large supply chain applications and mandate compliance has allowed the benefits of these smaller applications to be more evident and receive the kind of attention they deserve.”

Well said.

Is it any surprise to you that closed-loop systems are having the greatest RFID success? Do you agree that closed-loop systems actual will be the seeds down the road for broader, cross party systems? Let us know your thoughts at the feedback button below.

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