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RFID System Components and Costs

A radio frequency identification system that delivers business value includes more than just tags and readers.
By Bob Violino
Enterprise Applications
The goal of any RFID system is to generate data that can be acted on to boost efficiency, cut costs or provide other business benefits. That means that companies will need to invest in enterprise applications that can make use of RFID data. Warehouse management software providers, such as Manhattan Associates and RedPrairie, have upgraded their applications to manage the unique serial numbers in RFID tags. Enterprise resource planning software providers, such as SAP and Oracle, are also working to upgrade their applications. It's likely that software will evolve as RFID adoption spreads and companies learn how to use RFID data to improve their operations. The cost of these applications vary depending on the number of "seats"—how many users will access the application—the number of locations ??? and other factors.

EPCglobal Network Infrastructure
The vision of the Auto-ID Center, which created the Electronic Product Code, was to have a global network infrastructure—a layer integrated with the Internet—that would enable companies to look up basic information about items as they moved through the global supply chain. Additional data would be stored in secure databases, so supply chain partners could share information about the location of products.

Integrators or staff are needed to install equipment
As of January 2005, the network infrastructure is still being built out. It will likely evolve over the next several years, with simple data sharing and applications coming online later this year or early in 2006. Companies that want to take advantage of this open network will have to purchase servers to host local Object Name Service directories. ONS is similar to the Domain Name Service that points computers to Web sites. ONS will point computers to Internet databases where data associated with an EPC are stored. The ONS has a distributed architecture, like the DNS. But companies will want to host a local ONS to avoid having to go out to the Internet to look up information about products every time they read a tag.

It's also envisioned that the EPC Information Service will store data associated with EPCs. Companies may need to host EPC Information Services locally, or they might want to outsource this task to companies such as VeriSign, which provide security and authentication services today and are likely to provide EPCIS products in the future. (See our FAQs for more on the EPCglobal Network.)

Other Costs
Most companies will need to hire a systems integrator to install the readers, determine the right placement of tags for products and make sure that they are feeding data to the middleware in the right format. RFID systems can be tricky to install in a way that provides accurate reads because many factors affect the ability to read a tag, including the placement of the tag, placement of antennas and type of antennas.

Companies will also need to invest in training for their employees, particularly engineering staff who will manage readers in manufacturing and warehouse facilities, and IT staff who will work on the systems that manage RFID data.

The costs can be significant, particularly at this stage when the industry is very immature. In a report published in March 2004, Forester Research estimated that it would cost a $12 billion consumer products goods manufacturer $128,000 for consulting and integration, $315,000 for the time of the internal project team and $80,000 for tag and reader testing.

As the technology improves and is more widely adopted, costs will come down and the technology will be easier to install.

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