The Future of Business

By Bob Violino

Mark Roberti, Founder & Editor, RFID Journal

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I’d like to talk for a few minutes about the future business, about RFID and about why I started RFID journal. A lot of people ask me how I had the foresight to launch this publication, how I knew that this technology was going to be so important. I’d like to think that it’s cause I’m a really brilliant guy, but it’s not. I didn’t look for a business to start and say, `Oh, RFID is going to be the thing that is going to take off.’ I’m not that smart. What happened was it started with a problem. The problem was bad data.

I was a reporter at the Industry Standard, which, for those of you who don’t know, was considered the Internet bible. We were writing about the dotcoms. I was covering supply chain technologies—i2 Technologies, Ariba and those guys—and I would ask the end users: `Are you getting the benefits that you expected from this technology?’ Overwhelmingly, the answer was no. And so I asked why. Is the software bad? They would say, no, no, no. The software is not bad. It’s not perfect, but it’s not bad. The problem is the bad data. You put garbage in and I receive that garbage out. (Download presentation.)

The problem often came down to human error. People forget to scan barcodes, they scan barcodes twice, they forget to input data, they input the wrong data, any number of problems, any number of reasons why the data into your system is really bad. So I started looking at this issue. I was planning to do a story on it and was doing research and talking to people and trying to find the answer to how to get good data into your systems.

I went to this conference, which had nothing to do with RFID and nothing to do with supply chains. It was actually a manufacturing conference. I’m sitting next to this guy whose name I don’t remember. I was telling him about my article on bad data, and he said you should check out RFID. What’s that? I’ve never heard of it? He said well it’s this microchip with an antenna coiled around it—this one if from Texas Instruments—and you can scan it automatically and you can get the date into your systems. You don’t have it have people scanning things. He told me that the military was looking into this because they had this big complicated supply chain and they are looking to use RFID to get good data into their systems. So I got intrigued by the idea that you didn’t scan barcodes, you didn’t need to type in data—it happened automatically and in real time. To me it seemed RFID had the potential to solve the bad data issue, and that’s what got me excited about it.

Radio Frequency Identification is a very general term. It’s got a lot of different meanings to a lot of different people. Generally speaking, it means the ability to get an identification somehow remotely by using radio waves. RFID is actually the only truly automatic identification technology. Barcodes are considered an auto ID technology but you have to scan, it’s not automatic. It’s also a networking technology. It’s not just a one-way thing; it’s a two-way thing. I can actually send data to the tag and it goes back and forth.

Yes, you can track items; you can do that with a barcode. Barcodes have worked very well for a long time and probably will work well for a lot longer. We do have some conveyor systems that can scan barcodes and direct product down different shoots or different directions. But with RFID that becomes much easier. If you take baggage handling, for example, where you scan barcodes on bags coming down the conveyor, the error rates were very, very high. It’s very difficult to read randomly organized items. With RFID, that becomes much easier

And now you can begin to understand the condition of an object. You can understand whether it’s been stored at a temperature that was too high or too cold, whether the item was dropped. You can begin to learn a lot more about the items that have RFID tags and sensors.

We’ve heard a lot recently about the benefits or the potential benefits of RFID. You’ll be able to reduce excess inventory, reduce out of stocks, reduce shrinkage, and reduce many types of human errors. There are two questions that we’re all grappling with now, I think. The first one is: Will RFID really provide 100% accurate data, in real time? The answer probably right now is no. But I’m very confident that it will very quickly become yes. We’re going to see improvements in products. We’re going to see improvements in engineering of the systems. One of the reasons I had the confidence to launch RFID Journals is I interviewed a lot of people when I was writing a story about RFID for the Standard, and I would ask them are you getting the benefits you expected to get. Universally the answer was, it was harder to do than we expected, but we got more benefit than we expected, more benefit because once the systems were in people, found new ways to use them.

The second question that we’re dealing with is: What’s the value of good data? We know bad data is bad and we know good data is good, but how much are you willing to spend to get good data? That’s the issue that every company is going to be grappling with for the next year or so.

The future I think is very exciting. I see this as a journey. We’re just starting out. Identifying items is the beginning, then taking advantage of the data that we don’t have now—that’s the next step. And then we can really begin to automate things when we have really good information and computers can begin to make some basic decisions about where things should go and what they should do and they can actually begin to control products. SAP likes to talk about the adaptive supply chain. It’s a very difficult thing to do. It’s a long-term vision. It’s going to take a lot of hard work, but I think that’s where we’re going. We got to get more flexible and do it in real time.

E-commerce can happen automatically, you know we heard about that internet and e-commerce and Amazon is a wonderful organization and they’ve done a terrific job, but if you go inside Amazon’s big book repositories where they’re storing their inventory, there are guys on skates going up and down picking the books. One of the things that RFID can do is it can allow you to scale because robots can pick books with complete accuracy if they can read an RFID tag so eventually we can automate a lot of e-commerce applications, but even in the short term we’ll see a lot of things happen automatically when you scan, when you send the goods out of your warehouse, you automatically let the retailer know that those goods are coming when they arrive. The retailer will automatically let you know that they’ve gotten most things. You can automatically begin to generate invoices and begin the payment process.

And of course the big application is to try to synchronize the supply chains so we all know what each other is doing and we can create a new level of efficiency. I think we’re going to see many businesses change and this is one of the core beliefs of RFID Journal — that good data is going to enable companies to do some pretty profound things. I don’t even know in the end what everybody is going to come up with for their data. But I do know that once you have this good data, you’re going to begin to really think of new ways to run your business.

We’ve already seen in the short-term tremendous improvements in efficiency. We have NYK Logistics presenting a case study about how they’re using active tags in their distribution yard and I think you’ll see it a very compelling business case there. Health care can become safer and more efficient. We’ll hear from some of the people looking into counterfeiting drugs. We’ll hear how the military is using RFID to track soldiers in the field in a rack.

Retailing is going to change very profoundly. I think we’re going to have a great deal of improvement and being much more able to tailor what we have in the store to what the people actually want. I recently went out to buy some exercise equipment, and I went on the web and I did some research and I found out what I should buy, picked out an item and I went to a store and they didn’t have it. They said that they sell that brand and I went to another store, and it wasn’t there went to a third store and finally I said, I don’t have time for this anymore. I’ll just buy one item that’s not the one I want. So I wasn’t happy. The two stores I went to previously weren’t happy, and I bought a cheaper item than I was planning to buy so the third store lost out. I think we can do a lot better than that.

Manufacturing systems are going to change profoundly. We’re all talking about the supply chain but manufacturing is also going to be profoundly impacted by RFID. We have Dunkin McFarlane from the Cambridge Auto ID Lab. The Cambridge Lab is actually a manufacturing research center and Duncan is going to tell you some of the pioneering work that he is doing in manufacturing.

So let me tell you what RFID is not. It’s not a panacea. It doesn’t fix broken supply chains; it’s not the answer to every business problem. Barcode is still going to be a very good answer for a lot of applications. It’s not a way of tracking consumers. We’re going to have a privacy panel and we’re going to be talking about the privacy issue.

Just quickly, there are many, many types of RFID tags, and we were talking about low cost UHF tags right now. But RFID is a tool and you need the right tool for the right job so active tags are important, passive tags, semi-active and semi-passive. Different frequencies will be used for different applications, read-only tags will be used for some things, read-write for others. Question is always figuring put when is the right time to apply the right tool, what’s the right application, what’s the right ROI.

RFID cannot transform your company. It’s a tool that you can use to transform your company, transform the way you do businesses, but you have to change your business process, and RFID doesn’t do that. It’s also a tool that can wreck your company. These guys they used the wrong frequency. I’m just kidding. It’s a little bit of an exaggeration that it can wreck your company. RFID can make bad data a bigger problem because you’re going to have a lot more bad data, so that’s not something you want to deal with, you want to fix your internal systems. You want to make sure you’ve got good data that you’re passing and sharing with your supply chain partners, I think that’s a very big issue that gets lost when we all talked about how great RFID is, but if you don’t have your internal systems set up properly, you don’t have accurate data in your master files its going to be a huge problem.

RFID is not a strategy. Deploying RFID is not a strategy. We have a cover story in this month’s issue about developing an RFID strategy. RFID has to be aligned with your business strategy. Wal-Mart is keen on RFID because they see it as a way of cutting costs. That’s their whole way of doing business—everyday low prices. If you are Prada, then you look at RFID in a much different way. You have to align RFID with your own strategy.

The road ahead is definitely full of potholes you know we talked about many of those issues yesterday in the pre-conference you know there was standards work to be done there was inter operability issues, there are, you know, data synchronization issues all these things need to be resolved and it’s going to take sometime. The cost of compliance is high we all know that. The ROI is unclear in many cases. Again, what’s the value of the good data?

The technical challengers are many. I tell people RFID is complicated, and they say well, you know, it’s kind of low-low tech. The chip is very simple but getting the readers in the dock doors, so they read the products accurately 100 percent of the time is a challenge. Then you have the integration part of it, the middleware getting the data into the right systems at the right time. That’s a challenge. Then using that data effectively to change your business processes. That’s a challenge.

There are many different pieces that all have to fit together in order to get those benefits. Our mission right from the beginning was to try to help people to use the technology successfully. My personal feeling is, if there is no ROI then nobody should use it. We’re here because people need to use this technology where it helps them and it may not help in every application. We try to help people avoid some of the potholes. We want people to understand the limitations. This technology doesn’t do everything, and people need to understand and need to be realistic.

We want you to take advantage of it at both the strategic and a tactical level. I believe that this technology is very important, and I believe it’s the future of business—the way the Internet was the future of business. This is not something where I think you’re going to have a choice—we will deploy or we won’t deploy. The question in my mind is how do we do it in a way that’s effective and people get the benefits and that’s what we’re trying to achieve.

I’m very fortunate that we’ve been able to put together a terrific program that’s part of this mission to educate, to be realistic, to talk about the problems. Our first speaker is Ed Coyle who is the head of the DOD Logistics Automatic Identification Technology Office. I first interviewed Ed about eighteen months ago, and I was very impressed with his knowledge of RFID. He is not just an expert in RFID, but all automatic identification technologies. These guys are building the 21st century supply chain. The military is out there on the front leading edge, and they have the most complicated supply chain on earth. They have 45,000 suppliers. They deal with millions of different SKUs, different products and the problem for them is that when they don’t get the goods to the right place at the right time they don’t lose a sale but potentially they could lose a soldier, I think that our men and women fighting in a rack, I think we’re very fortunate to have people like Ed Coyle behind them making sure that they get what they need to do their jobs properly. So ladies and gentleman please join me and welcome Ed Coil. Thank you.