RFID Tribe News - RFID Enabled Supply Chain Networks: The Next Network Build-Out

RFID Enabled Supply Chain Networks: The Next Network Build-Out

Dallas, TX (April 3, 2004) – Remember the go-go days of the 1990’s ? The stop-the-world-I-
want-to-get-off network infrastructure building frenzy. Industry could not build the developing
computer, telecommunications and wireless networks fast enough. Well, here comes the next
big one – RFID enabled supply chain networks. Radio frequency identification (RFID)
technology teams around the world are collaborating with retailers, distributors and
manufacturers to create supply chain networks based on RFID technology. Building these
networks represents significant challenges and sizable commercial rewards.   Building RFID
networks will, in many ways, mirror the themes we saw in computer, telecommunications and
wireless networks.

RFID uses wireless technology to transmit information from small microchip tags attached to
objects in order to automatically identify and track those objects. Many automobile tollway
systems and ExxonMobil’s Speedpass payment system use RFID technology. These
applications are early adoptions of RFID technology.

But a big prize in RFID applications involves the supply chain - tracking products from the
manufacturer, through distribution, on to retail channels and finally to the consumer. Supply
chain RFID technology promises optimized inventory, real-time visibility, improved efficiency and
increased control. Supply chain implementations are coming of age with the advent of the
Electronic Product Code (EPC). EPC is the next generation of product identification similar to
the UPC (Universal Product Code) or barcodes.   The EPC is standardized information written
onto RFID enabled microchips called tags. Enterprises can electronically track goods by
attaching a RFID tag to those goods.   RFID enabled electronic product codes are leading to
what some call an “Internet of Things”

Computing and telecommunications networks have many similar elements as compared with an
RFID enabled supply chain networks that make possible an “Internet of Things”. Here a few
structural parallels:

Computer/Telecom Networks               RFID/EPC Networks

Email or Computer File                         Object, Thing, Product
IP Address or Electronic Header           Electronic Product Code (EPC)
Domain Name Server (DNS)                 Object Name Server (ONS)
Extensible Markup Language (XML)     Physical Markup Language (PML)
Computer or Network Node                   RFID Reader or Supply Chain Network Node
Router/Switch                                        Distribution Center
Content Producer/Media Company       Manufacturer, Object Producer
Network Operator                                  Third Party Logistics Provider (3PL)

But RFID enabled supply chain networks differ from computer/telephony networks. Supply
chain networks not only push information (electrons), but also push objects around the world.
Machine and human interactions required for transporting objects pose unique operational
challenges. If you haven’t “lived” in a warehouse, cross docking facility or truckload
consolidation depot where interactions occur between machines, humans and objects, you can’t
fathom the complexities. Firms who frame RFID enabled networks as merely a “technology
challenge” will be surprised and may learn from experienced supply chain network operators
like FedEx and UPS.

John Baker understands warehouse operations. He is president of Dallas area firm Venture
Research, a supply chain systems integration business with an RFID interoperability lab. The
lab is filled with the latest equipment from all the current big names in RFID – RFID tags from
Alien, Matrics, Rafsec and Texas Instruments; RFID readers from Alien, Matrics, AWID, Tyco,
Omron, ThingMagic and SamSys along with a variety of RFID printers from Zebra, Printronics,
TEC and SATO. Next to the lab a computer hums, its screen filled with active graphics. Baker
explains, “This system is monitoring live distribution operations, performing fault management
and correcting operations and applications problems for a large consumer packaged goods
manufacturer. The network manages over 100 distribution centers, each warehouse containing
multiple pieces of equipment and operational complexities.”

In the telecommunication industry this kind of system is called a NOC (network operating
center). A NOC is a computer system showing live data feeds from network nodes, the purpose
of which is to keep the network up and running 24/7. Venture Research is wired into the
customer’s supply chain network. Its NOC sends initial alert dispatches to in-plant and remote
support personnel when the fault management software can’t auto-correct an identified
problem. The system performs escalations to key personnel when operating thresholds, such
as warehouse data delivery, operator usage errors or equipment downtime, are passed.

Venture Research’s NOC is just one illustration of supply chain network technology for a large
scale business. Challenges abound for RFID enabled networks; determining optimal network
architecture, sorting through equipment “plug and play” interoperability issues, network
monitoring, real time data challenges dealing with large volumes of “live data” and managing
data volume with data filters to prevent information overloads.

The challenges are great and so is the opportunity. Through the years, computing, sensing
and network intelligence devices continue moving towards the outside edge of the network.
These devices have moved closer to operations – where real business happens. Compared to
the 1 billion computers and 2 billion smart devices like cellphones, PDA’s and GPS devices, an
estimated 100 billion sensor devices (RFID tags and other tiny sensing devises, like smart dust)
will dwarf the volume of those familiar electronic devices. A majority of those sensing devices
on the outer edge of the network will be part of supply chain applications.

To put the opportunity into perspective, Wal-Mart’s ships 2 billion cases of product a year
through its 100 plus distribution centers. Wal-Mart’s RFID mandate calls for those shipments to
be RFID tagged at the pallet level and at the case level. Building an RFID enabled network
comes at no small price for RFID tags, readers, software applications, middleware and
integrators. The cost to implement the Jan 2005 Wal-Mart top 125 vendors is estimated at over
$500 million according to a January 2004 Bear Stearns report on supply chain technology. This
is a first phase RFID implementation for just one retailer.

While the RFID opportunity is great, the young RFID industry is forming and learning. Like the
computer and telephony networks, there are a huge number of RFID technical challenges to be
solved. And the need is great. Players are scrambling to find the answers and are forging
technology alliances in this formative market. All the signs of a forming market exist – market
fragmentation, emergent standards, players faced with technology challenges, disruptive
technologies, market entrants chasing market share opportunities, players making technology
alliances and retailers making announcements regarding RFID initiatives. Today’s RFID
industry resembles the early days in the computing and telecommunications industries. Many
have hyped RFID technology and understated the potential setbacks that are inevitable for this
emerging technology.

Building and operating networks takes teams who understand the pitfalls - scientists,
engineers, entrepreneurs, operators, venture capitalists and an educated, technical workforce.
Look for the stars who built the telecommunications and computer networks to build RFID
enabled supply chain networks. Add to those teams supply chain operators who know the guts
of warehouses, distribution centers and transportation hubs. Concentrations of network
building teams and supply chain operators are found in metropolitan areas throughout the
world. London, Brussels, Boston, San Francisco and Dallas are just a few of the hotspots for
RFID network technology.

Network build-outs create winners and losers. We all remember the winners of the computer
and telecommunications network build-outs - Intel, MicroSoft, Cisco, Oracle and Verizon. Many
firms see the potential for RFID and are scrambling to establish market positions. It is early in
the game. Those who apply lessons from building and operating
computing/telecommunications networks will be winners at building RFID enabled supply chain
networks.

About the Author:
Mark Johnson, RFID Tribe leader, has served in leadership roles as CFO and COO for
software, information technology, consumer electronics, telecommunications and supply chain
businesses at Texas Instruments, Alcatel and Exel.

About RFID Tribe:
RFID Tribe is a radio frequency identification (RFID) collaboration forum. The group
collaborates on RFID and sensor technology, standards, venture capital, legislation, products,
solutions, industry trends, people and events.

CONTACT INFORMATION:
Mark Johnson
RFID Tribe
214.808.1352
http://www.rfidtribe.com

Copyright © 2004 RFID Tribe

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