At Alien’s announcement yesterday, which was the start of a two-day company conference on Gen 2, was the US military’s deputy under secretary of defense Alan Estevez, who is responsible for the government’s global supply chain policies to support the country’s global war fighter. Estevez and others used the event to share RFID experience and discuss the technology’s future.
Alien’s new ALR-9800 reader is the industry’s first to be embedded with IBM Corp’s RFID middleware, WebSphere RFID Device Infrastructure.
The software is widely compatible with other company’s RFID readers and IBM expects to strike up similar partnerships with other companies, said IBM vice president of sensor and actuator solutions Robert Mayberry.
Key to Alien’s new machine is its ability to simultaneously read older and new types of RFID tags, including Gen 2. Also, the reader is compatible with Microsoft Corp’s RFID infrastructure and Oracle Corp’s Sensor Edge Server, including Oracle Warehouse Management, EPC Compliance Enabler and other programs.
A number of RFID outfits have debuted Gen 2 technology recently and the industry expects Gen 2 will spur the adoption of RFID by enterprises to manage their global supply chains.
Precisely when RFID would become a broader enterprise reality, which today is hindered by the high cost of RFID tags, and persistent RFID privacy issues were among priority concerns for the more than 50 RFID customers and suppliers at yesterday’s event at Alien’s Californian headquarters.
The Gillette Company, which a couple of years ago predicted it would have company wide RFID implementation (a goal it has not yet met), expects a rapid pick-up of RFID usage in the US and elsewhere within two years, said VP of supply chain Dick Cantwell, at yesterday’s event.
In the next two years, the bubble is going to burst and adoption is going to happen exponentially, he said, adding that his company’s previous RFID-implementation target was predicated on Gen 2 being up-and-running today versus in a year’s time. (Gen 2 is slated for adoption by the International Standards Organization in March 2006).
Indeed, by 2007 the US Department of Defense – one of the world’s biggest consumers of active RFID tags – plans to start RFID tagging of individual items, rather than just on pallets and crates of goods, Estevez said. The goal is to RFID tag all goods the DoD buys, ranging from weapons to toothpaste. (Currently, the DoD is testing how RFID interferes with high-grade weapons, he said).
The DoD also is rapidly moving toward using passive RFID tags during the next six months and expects to install its first passive RFID site in Iraq in the near term, Estevez said.
Also, within 90 days the DoD would include a clause in all its supplier contracts that certain goods shipped for DoD use must be RFID tagged, he said. This builds on policy first introduced about a year ago. Until we get that [Defense Federal Acquisition Regulation] case out there, we are not going to see a massive amount of tagged goods, he said. That RFID clause would be expanded again next year, he said.
The DoD’s optimistic expectations for its return on RFID investments is $1.7bn within seven years, not including savings on inventory, Estevez said. Already, RFID tags used in the last tactical mile in Iraq, which means getting supplies out to soldiers on the ground, has reduced inventory from $172m to $70m in the country.
Wait time for goods has gone from 28 days to 16 days. And reduced retail backlog has dropped to 11,000 orders from 92,000 orders due to those marines in those operating bases not reordering again because they don’t believe they’ll get the thing they ordered, Estevez said.
The dialogue has changed from where is my stuff to why isn’t my stuff moving – a big change for the DoD, he said.
Of course, the US government is a far cry from industry. Currently, Gillette is tagging all its Venus-branded ladies’ shavers with RFID tags at the case-level. Cantwell expects RFID tags would reduce order verification of its products from 80 seconds to 20 minutes per pallet of goods to just 10 seconds at some future point.
Within 10 years, Cantwell expects the company would see ROI on RFID of more than 25% in increased sales and productivity savings.
He also made the bold prediction that tags costing just one cent – the industry’s magic price point that would enable widespread RFID proliferation – would become available in 2012. It’s a guess based on my team spending a lot of time with folks at MIT looking at technology possibilities for the future, Cantwell said.
Today, sub-20 cent tags are available on the very lower-end of the scale, which are small, non-Gen 2 tags that have no available area for printing additional data on, and in one-million unit volumes, said Alien CEO Stav Prodromou. Most tags being used, however, measure roughly 4-inches by 6-inches and include a printable area.
Prodromou said that future sub-10 cents tags, and indeed 1-cent tags, would not look anything like today’s RFID technology. Just the material cost of the printed label [used in most existing tags] will not get the price down to a nickel, he said.
Instead, RFID tag makers would need to embed tags into a product’s packaging. Think smart packaging rather than getting the cost of a 4×6 label down to a nickel, he said.
On RFID privacy concerns, which have become a hot-button issue in the US and elsewhere, president of EPCglobal, the industry’s standards-setting group Mike Meranda, said EPCglobal is being advised by about 40 enterprise chief privacy officers, as well as working with legislators and consumer groups. It’s still very early days, but we are working on that very hard and our community takes it very seriously, Meranda said.
The potential implication of military RFID tags getting into the wrong hands, however, doesn’t seem a great concern. The information stored on the tag is not meaningful unless an authorized person was also tapped into the database that decodes that tag’s data, Estevez said.
Being able to read the tag in and of itself is not relevant, he said. Also, tags can only be read within a 30-meter range. [An RFID tag] is a license plate that doesn’t really mean anything and to read it you have to be inside the gate [of a military complex] — and if you’re already inside then there are other issues [the DoD has to] deal with, Estevez said. People laugh at that, but it’s a reality.
The US military is, however, interested in encryption and secure database technology, he said.
EPCglobal’s Meranda noted that during the past quarter, Asia-based participants of EPCglobal, which formed in late 2003, overtook North American-based participants for the first time. He said China-based companies and companies with operations in China were increasingly becoming involved in the standards group.
Also, in September, EPCglobal will begin performance testing Gen 2 tags and readers, he said.
Alien’s ALR-9800 reader, which is also available without IBM’s software stack embedded, would ship in September at a cost of $2,400.
