Another Tough Year Ahead

By Bob Violino

Progress toward the adoption of RFID technology will continue, but early adopters will grapple with RFID data issues and more uncertainty.

  • TAGS

Last year was a challenging one for early adopters of Electronic Product Code technologies. Suppliers trying to meet tagging requirements from the U.S. Department of Defense and major retail customers had to deal with the complexities of putting tags on pallets and cases of a range of products and ensuring that the tags could be read with 100 percent accuracy in the customers’ distribution centers. They had to deal with tag shortages, tags that didn’t function as much as 20 percent of the time and a delay in the ratification of a second-generation EPC standard—all while trying to find a return on investment in RFID and coping with confusing reports about all of these issues from analysts and the media.

While these problems made life difficult for those working to implement RFID systems or meet mandates, it’s worth stepping back and looking at the big picture. What were the really serious issues that arose in 2004, and how will they play out this year?

Many of the problems that companies faced in 2004 will likely be addressed in 2005. There was an inconsistent supply of labels in 2004, but label makers should be able to meet demand this year. Large label manufacturers, including Avery Dennison and UPM Rafsec, have invested in manufacturing capacity, and suppliers won’t be tagging tens of millions of cases this year. At the same time, label makers and RFID transponder providers are taking steps to correct problems with defective tags. Don’t expect 100 percent of tags to function, but the defect rate should be a lot lower than what some end users experienced this year.

Reliability of reads will continue to be an issue. Many products that are not “RF friendly”—those containing water or metal, which interferes with the performance of the tag—will continue to be hard to tag and read consistently. But tag manufacturers are improving designs, RFID vendors are boosting the sensitivity of readers and end users have access to new sources of information that will help them deploy the technology. For instance, the RFID Alliance Lab, a not-for-profit test facility set up at the University of Kansas, has issued a report on the performance of 10 EPC tags.

One of the biggest news stories of 2004 that could have a negative impact on adoption of EPC technology was the delay in ratification of a second-generation UHF specification. The vendor community agreed on a protocol incorporating some of the best features of the original EPC specifications and the proposed International Organization for Standardization (ISO) 18000-6 standard. But the EPC standardization process was slowed when Intermec Technologies, an Everett, Wash.–based RFID systems provider, declared that it would charge royalties of 5 percent to 7 percent on products based on the EPC Gen 2 spec, which Intermec said infringed on its patents.

EPCglobal’s board of governors approved the specification as an EPC standard on Dec. 16, paving the way for vendors to produce RFID tags and readers. The first products will hit the market in the third quarter. But there is still a question about whether ISO will approve the Gen 2 standard as a global standard. ISO requires an eight-bit application family identifier (AFI). EPGglobal has alloted eight bits within the EPC but would like to have the flexibility to use it for an AFI or its own data identifier. EPCglobal plans to discuss the issue with ISO and amend the standard if necessary. Approval of the Gen 2 standard removes some uncertainty from the market, but the AFI issue still needs to be resolved. (Note: The issue was resolved shortly after the print magazine went to press. See Gen 2 Finds a Path to ISO Approval.)

Another area of concern involves China. Officials in Beijing indicate that China is considering its own UHF RFID standard and may reject EPC technology, particularly if Chinese companies have to pay royalties. Given that China manufactures so much of what the world consumes, any decision by Beijing to go its own way would deliver a blow to hopes of creating a global standard for RFID use in the supply chain.

But there was also good news on the global front. Japan took steps to open up an area of the UHF spectrum around 950 to 956 MHz. China and South Korea are working with Japan to agree on UHF regulations regarding which bands can be used and how much power readers can emit.

The European Union increased the amount of power RFID readers could emit in the UHF spectrum. Earlier power restrictions limited the read range in Europe to 3 to 6 feet (1 to 2 meters). With the new regulations, users should get upwards of 15 feet of read range. Singapore also loosened restrictions on power output.

Throughout 2004, more companies announced plans to use RFID in their supply chains (see Top Stories in 2004). How many more retailers publicly commit to using RFID in their supply chains in 2005 will provide an indication of whether adoption is accelerating, slowing or remaining about the same. RFID Journal sources say that several European retailers, one auto parts supplier and one retailer of white goods (large appliances) are doing extensive pilots with EPC technology and might commit to deployments in 2005 (see Predictions for 2005).

End users will continue to face deployment issues. Early adopters need to deal with the challenge of filtering, managing, sharing and storing data. RFID middleware and enterprise application providers are enhancing their products. But expect companies to struggle this year with exactly how they can extract value from RFID systems.

Suppliers will also move beyond tagging goods for customers and try to achieve internal efficiencies (see The Road to ROI). They will need to hire engineers or systems integrators with the ability to deploy UHF systems, but may have difficulty finding people with experience. The industry is beginning to address the problem (see < link /article/articleview/1375/1/1/ Answering the RFID Skills Question>). If the pace of adoption picks up, there will be a shortage of experienced technicians toward the end of the year.

So 2005 will not be the year that RFID achieves widespread adoption. But many of the elements needed for the technology to take off—a global standard, more robust tags, readers and software, and training for implementers—will be in place by the end of the year. Which means that 2006 could be the year when RFID technology begins to be deployed widely in global supply chains.