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Remember the Closed Loop

More companies are discovering that UHF RFID systems are not just for open supply chain applications.
By Mark Roberti
Dec 05, 2005For much of this year, analysts have been issuing reports claiming radio frequency identification delivers no return on investment. I spoke at about 40 events this year, and I've often made this statement: "There probably isn't a company with more than $50 million in revenue that couldn't benefit from RFID."

It's a bold statement, I know, but one I fervently believe. The ROI is not in tagging shipments for a customer, of course—that's a business requirement. The ROI is in tracking assets internally or in a closed-loop supply chain.

I was reminded of this fact last week when I interviewed Phil Lazo and Larry Blue of Symbol Technologies for an upcoming Vendor Profile. The two senior executives, who run Symbol's RFID hardware and tag businesses respectively, report that their RFID business has been strong this year, but that not all of the demand for tags and interrogators is coming from mandated companies. They also say they've seen an increase in sales to companies that want to track assets within closed-loop supply chains, including apparel makers, postal services and airlines.

Lazo worked at Tyco/ADT in the late 1990s, when it offered an RFID asset tracking solution using low frequency tags. It didn't do well, he says, because the read range just wasn't long enough. But with second-generation EPC UHF hardware hitting the market, companies now have high-performing products that can track a wide variety of goods and assets within their own four walls.

This week’s featured story also looks at an important pilot in which EPC technology was used in the airline industry to track baggage in a closed loop, as the bags moved between airports in Amsterdam, Beijing, Tokyo and Chicago (see EPC Bag Tagging Takes Wing). The results of the EPC trial proved the applicability of the EPCglobal Network in a closed-loop system, while increasing the understanding of inter-airport baggage-handling processes. With the IATA endorsing the use of ISO 18000-6C protocol-compliant UHF tags and readers as a global standard for RFID baggage tags, I look forward to the day when manufacturers and aviation industry end users can finally put price concerns behind them and implement their plans for RFID, letting demand drive production and cost competition.

It's not necessary, of course, to use EPC UHF systems to track goods and assets internally, but there are some advantages to using technology based on an open standard. The volumes of tags and interrogators purchased by other companies to comply with retail and U.S. Department of Defense mandates will drive prices down, which means you'll likely pay less for standardized systems. And the quality and performance of products based on open standards is likely to be better than those of products based on proprietary technology. Vendors will invest more in developing and enhancing products based on standards, because they need to differentiate their products and because they are likely to get a bigger return on their investment in products based on standards, which are attractive to a larger market.

UHF technologies are likely to appeal to businesses looking to track returnable transport containers, tools and other assets used in factories, warehouses, distribution centers, cross-docks, hospitals and other facilities requiring wide-area coverage. But companies shouldn't overlook other technologies. RFID Journal has published numerous case studies in which manufacturers, distributors and shippers have achieved a huge ROI in active RFID systems that can track assets over large areas.

In addition, don't forget high-frequency technologies, which have well-established standards developed by the International Organization for Standardization (ISO). HF products can be used for asset tracking, particularly for small items that need to be tracked at close range, such as test tube samples in a lab, totes in a pharmacy or retail supply chain, or clothing on a shelf.

Tracking assets or products moving within a company's own operations is an ideal way to learn about the issues involved with deploying RFID systems—interference, tag and reader collision, data integration and so on—while developing a system that can deliver a real ROI within a year. I know of one hospital, for instance, that doesn't pay for rental equipment when it's not in use. It uses logs from an active RFID system sold by GE Healthcare to determine when assets are in use, saving hundreds of thousands a year. That system paid for itself and is now using the savings to explore new ways to apply the system to achieve additional benefits.

Whether you are facing an RFID tagging mandate or not, tracking assets internally offers the chance to gain an education while saving money. That seems like an opportunity few companies would want to pass up.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below.
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