Emerging Trends in RFID
Several computer giants are revising their microprocessor development roadmaps in favor of a new microprocessor architecture called Chip Multi-Threading (CMT). One of the pioneers in this area is Sun Microsystems which has already introduced the first design of this new architecture. This is just in time for the expected volume spike from RFID data as the US Department of Defense (DoD) and major retailers around the world go into full deployment mode with their RFID mandates. Simply put, CMT architecture bucks the trend of traditional microprocessor design and architecture that primarily seeks to perform single tasks faster and faster. Instead, CMT is an architecture that allows the efficient execution of many tasks simultaneously. This is parallel computing taken all the way to the core of the microprocessor.
Although the data generated by RFID systems can easily reach trillions of bytes that need to be processed almost instantaneously, in fact, much of the data is disbursed across one or more enterprises, and often, across the globe. This suggests that local processing of data, by RFID readers, before passing it along to a centralized computer can dramatically reduce the burden placed on centralized computing resources. This is an excellent scenario in which to apply Peer-to-Peer (P2P) programming techniques to perform RFID-related data processing locally. P2P technology is a type of distributed computing technique that decentralizes computing tasks across several less powerful cooperating computers (peers) within a network.
Falling RFID Tag Price
With RFID technology, cost of components, especially cost of individual tags, will play a major role in determining its ultimate success and ubiquity. From an economic perspective, the cost of tags is expected to continue to drop as the volume production goes up to meet demand. However, both alternative chipless tag designs and advances in fabrication and manufacturing of integrated circuits (IC) are expected to drive the cost of tags dramatically lower. The 5 cents tag, as it has been called, has been widely viewed as the inflection point where wide adoption of RFID will quick-ly occur. To be clear, the supply and demand equation alone is unlikely to drive the price of IC-based tags down to the 5 cents mark. Today, tag prices barely dip below 25 cents, even with existing high volumes. Therefore, alternative tag designs and more efficient tag manufacturing are likely to be important factors in driving the cost of tags down by another factor of five.
Business Process Innovations
As we've already discussed, for a technology to succeed and proliferate in today's world, it must be economically viable. In other words, it must enable businesses to meet one or more of their primary economic needs: reduce cost, increase revenue, and provide a competitive advantage. These objectives compel enterprises to innovate by examining existing business models and processes and reinventing or realigning them to fully take advantage of a new technology. We have just scratched the surface in business innovation that takes advantage of RFID technology.
Much of the impetus for future waves of innovation in RFID can be credited to the mandates set forth by major retailers around the world and the U.S. DoD. These mandates have created a ripple effect across the entire supply chain industry. Mandates have caused all supply chain partners including manufacturers, packagers, distributors, logistics and transportation agents, retailers, and wholesalers to examine ways in which they can improve the efficiency of their own supply chain systems.
RFID technology is already gaining good traction in certain areas of the supply chain such as warehouse management and inventory control. However, we are far from a fully integrated supply chain model. Although many technology and business leaders across supply chain enterprises agree that RFID offers tremendous promise, some argue that their short term return on investment (ROI) do not justify the initial cost of adoption-process re-engineering, re-tooling, and integration. Others are hesitant to make decisions without stronger standards, and most worry about privacy and related public relations issues. Despite these concerns, analysts have predicted tremendous growth for RFID in supply chain management during the next several years. For example, Venture Development Corporation expects the global shipments of RFID systems in manufacturing, logistics and retail markets to reach $4 billion in 2007, up from $1.25 billion in 2004 (2).
In the following sections, we examine the most critical business innovation trends in the supply chain. These will lead the way to RFID's ultimate deployment across the entire supply chain, starting with raw materials, all the way through to the checkout stand at your local retail store.
Item-level tagging is arguably the final frontier for RFID deployment. This concept permeates almost every type of supply chain application. However, from a practical standpoint, item-level tagging is fraught with challenges. On the consumer side, a number of security and privacy issues create concerns and will impact its pace of adoption. From the perspective of cost-effectiveness, the sub 5 cents tag will be key before the potential of item-level tagging can be realized. Although several pilots are under development already-for example, in large specialty retail and drug store out-lets- expert and analyst opinion on the pace of adoption varies. Estimates of when item-level tagging at the retail store level becomes commonplace range between the years 2010 and 2020. Expect a slow but steady pace toward the item-level tagging of just about everything as the industry and consumers meet these challenges head on.
Third-Party Logistics Management
Retailers that are implementing RFID will have better and real-time visibility of the goods they carry in their stores. This, in turn, will help them become more efficient by enabling true real-time management of the links in the supply chain. Retailers may be able to eliminate their own distribution centers and receive goods directly from suppliers. Naturally, this will require suppliers to send goods more frequently, and in smaller quantities, directly to a larger number of retail stores, thereby shifting the equilibrium for handling and shipping costs. Expect third-party logistics (3PL) management services to include aggregation and distribution of RFID tagged goods. Major transportation and logistics companies such as UPS, as well as smaller specialized 3PL providers, will play a significant role in this area.
Real-time Inventory Management
Inventory management happens at every level of the retail supply chain: at manufacture time, during transport, around distribution centers and in warehouses, at both wholesale and retail levels. The recent mandates by major retailers will compel sup-pliers to continue to create new business models and applications that will not only help the retailers but the suppliers themselves, within their own four walls.
Expect a continuous stream of new applications in the inventory management area that offers new ways of making productive use of all the real-time RFID data. Applications already emerging-for example, from Checkpoint Systems, Inc.- include anything from real-time shipment processing and automated inventory updating at the distribution center to more effective merchandising and speedy point-of-sale operations at the retail store.
We've already seen how RFID enables access to lots of new data. The real value of this data is in leveraging it to make better business decisions. The capability to ask new questions or discover patterns in the data all provide more intelligence to a business, improve its decision-making capabilities, and help it become more competitive. Expect new data mining and analytics applications that help do that-by efficiently filtering and analyzing data that has never before been so readily available.
Implementing RFID applications by definition means deploying expanded, or in many cases new, IT infrastructure. On the factory floor, in warehouses and distribution centers, in transportation vehicles, and in retail stores, new computers, applications, and RFID-specific components such as readers and antennae must be installed, integrated, and managed. The owners and operators of these facilities are not always ready and capable to handle this infrastructure by themselves. This creates many new IT outsourcing opportunities, particularly in the area of managed services. Expect an evolution of the already popular managed services model to include services that help manage RFID-related infrastructure and alleviate the need to duplicate new IT infra-structure when it can be avoided.
Real-Time Data Sharing for Total Supply Chain Integration
The highest level of efficiency in the supply chain occurs when all the participants in
the supply chain can share information in real-time, not just between two immediate
partners such as the supplier and the retailer. For example, consider a scenario where
a retailer is running out of a particular type of sneakers. In a typical RFID application,
the retailer would immediately detect this and order more sneakers from one of
its suppliers. However, if the manufacturer of the sneaker also had access to this
information, it could anticipate the demand and manufacture more of the same
sneaker. Similarly, the supplier of the raw material would ensure availability of the
appropriate material and the shipping partner would have immediate visibility into
when it would be expected to handle the transportation logistics. This might seem like
a far-fetched example, and today it is. The problem to be solved here is not so much
about RFID. It's more about the serialization, synchronization, and complex integration
of data that needs to be shared among dozens of supply chain participants and
partners. RFID has simply opened the door to facilitate this opportunity by making
data more readily available and accessible. The recent RFID mandates in the retail
industry and the EPCglobal standards for RFID in the supply chain are powerful catalysts
that will continue to encourage enterprises to rethink their business models and
deploy new processes and applications that extend the benefits of RFID to all their
trading partners. Expect this scenario to develop gradually because the underlying
economics are still evolving and improving, and the ultimate value proposition to
businesses is often complex to articulate and implement.
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