The purpose of conducting RFID due diligence is to either help a company confirm or rule it out as a choice for a given application. The due diligence process incorporates all information germane to the application and the technology and makes it possible to accurately project a company's degree of risk and estimate its return on investment for that particular application.
In analyzing whether RFID fits your business needs, it is important to understand where the technology is in its evolution and how that stage fits your corporate environment. Conducting due diligence requires that you have a clear and accurate understanding of two subject matter areas:
1. the targeted business application
2. the maturity of RFID technology
This section presents an overview of the type of information you would need to acquire in order to conduct a thorough due diligence regarding introducing RFID into your company. In the RFID Landscape section, we describe the environment in which RFID is evolving. We do this by describing the technology producers, users, standards bodies, and sociopolitical issues, along with their roles and their interactions with each other.
Assessing your company's readiness for RFID does not result in a yes/no answer regarding whether you should use it or not. Rather, it results in identifying the factors in your company that should influence your decisions in choosing the best possible approaches to adopting RFID, one of which might be ruling it out.
Some factors that will influence your approach to RFID are as follows:
• Core business functions. Is your company one in which supply chain management is critical? Are factory-floor materials movement and management critical? Is supplier management critical? Does your company sell a product that requires physical distribution? What major work functions are integral to your company's ROI?
• Core talent pool. Is the expertise in your company mostly engineering/scientific/high-tech? Or is it financial, marketing, or other?
• Core culture. Is technological innovation a key company value? Are employees comfortable with technology ? its terminology, its flux, its promise for improvements, its glitches and challenges?
The description of each of these profile areas would lead you to different decisions regarding whether to:
• develop a custom design versus an off-the-shelf design
• outsource all or part of the application development versus use in-house employees
• deploy RFID early enough in its development that you could influence its standards versus waiting until the technology is more mature • deploy RFID early in its evolution because its potential to improve your company's operations and ROI is great enough to outweigh the advantages of waiting.
Due diligence is always recommended, even when a technology is mature,
because it brings rigor to your business case analysis and helps you reduce risk.
And while RFID is becomming a mature technology for certain applications, due diligence is still critical, especially in new areas of application.
Although the technology is at Stage 4+, risk still needs to be assessed in the following areas:
• ROI analysis is more complex than with mature technologies
• Technology compatibility and interoperability issues still exist
• Trending data is limited in such areas as price points, product failure rates, product performance, and upgradeability.
DataFlows can help you minimize that risk. If you want more detailed information regarding your company's application, please contact firstname.lastname@example.org.
The following list includes the areas studied when DataFlows assists a CTO in conducting due diligence for RFID. The final result of due diligence is to support the CTO in one of the following ways:
• justify and propose an RFID application to a
company's executives or board
• modify a business plan
• justify why RFID is not suitable to the application being studied
Due diligence evaluates the company's direction relative to:
• the selection of RFID to support the targeted business application
• projected improvements anticipated
• impact on various entities internal and external to the company
• maturity of the technology relative to the company's readiness
• the company's resources (qualifications, availability, constraints)
• the company's contracted specialists
• application design, work process and dataflows extraction
• status of standards
• standards compliance
• regulatory requirements
• supplier interface
• supplier specifications
• potential for integration horizontally and vertically
• opportunities to deploy sooner, later, or differently than proposed
• accuracy of projected costs
• accuracy of projected ROI (application specific)
Many companies' CTOs clearly envision the massive potential of RFID to enhance their company's supply chain management. Radio frequency identification (RFID) technology was developed in the late 1940s, yet its use in commercial applications is at a relatively early stage in certain applications. (see RFID Overview)
The astute CTO recognizes that a gap exists between how RFID could work in a business application versus the reality of how it does work given the status of several factors, some technical, some sociopolitical.
CTOs seek a rigorous and effective method of technology analysis relative to their specific business needs in order to determine whether and/or when and how to deploy RFID to their company's benefit. DataFlows uses the following tools and constructs to help CTOs make informed decisions regarding who should use RFID, at what point, and for what reasons.
The word landscape refers to understanding the world that RFID inhabits in terms of its technology producers,
standards bodies, technology users, and sociopolitical issues, and the influence all of these have on RFID's
evolution. A thorough evaluation of the potential for RFID to improve your business starts with
understanding the impact of the following influences as they relate to your business application:
The second step requires overlaying all of these issues against the backdrop of where RFID lies in its stage of development as a technology. RFID is in Stage 4+ or in other words operating in full production mode in many applications. The significance of this is discussed in the RFID Stages of Development section.
RFID technology manufacturers include: Alien Technology , Texas Instruments (TI),
for chips, antennas and readers, companies like Avery and 3M for label production.
RFID relevant standards bodies include: ISO, EPCglobal (MIT AutoID Lab), UCC EAN, FCC, FAA
Clearly, those in the business of supplying RFID components and systems are motivated to see the technology succeed. To that end, they typically fund research projects focused on resolving any operational issues, improving the design and manufacture of the RFID products. Additionally they typically offer personnel to work on standards committees both to facilitate and promote the standards process and also because they have a vested influence in seeing that the standards being developed aren't in conflict with their product's architecture.
In the RFID case (as with any emerging technology), one thing you are looking for is the number of technology producers and their size and/or history in previous technology product development and deployment. RFID has an impressive list of companies developing and producing RFID components and systems. There are also a fair number of systems integrators offering implementation services.
The technology producers have been on a steep upward curve in production volume of RFID components/elements and systems over the last two years, and the trajectory is continuing upward. This is a very good sign for RFID; it indicates a substantial level of industry momentum behind the technology. This indicates RFID will see increasing penetration into existing retail supply chain applications, and in two to three years there will probably be RFID used in a few applications beyond the retail supply chain business processes.
ISO, EPCglobal (MIT AutoID Lab), UCC EAN, FCC, and FAA have all had a hand in RFID standards related to things like data standards and data communication protocols, air interfaces, frequency range definitions etc. (See the RFID Overview for more detail.) It is important to note that the activity level (indicating strong commitment to the progression/growth of standards for RFID) is very high and there actually seems to be consensus building among the standards bodies (most importantly ISO and EPCglobal) around the latest version (gen2) of the RFID standard for passive class 1 read and write tags that can operate both domestically and internationally. This most recent standard was completed in approximately 18 months. In the standards world, that is lightning fast. (Update - gen2 tags are now well established)
That's both good news and bad. The good news is the momentum and widespread support. However, rapid cycle time on standards is an indication of a technology's immaturity. It also introduces higher risk that evolving standards will cause incompatibility with your deployment.
On the horizon, standards definition of additional classes (general availability - currently class 0 and class 1, limited availability gen 2 class 1). Overall, these are good signs for RFID. However, it should be noted that standards consensus supports but does not guarantee interoperability. For example, two vendors can be completely compliant with a specific standard but because they went with slightly different feature options allowed by a standard, they might not be able to interoperate.
There are a number of alpha pilots going on in the retail and government industry (predominantly in supply chain business applications) sectors. Wal-Mart was among the first commercial enterprises to select RFID technology to achieve improvements in the inventory supply process and theft control. Wal-Mart started the process of implementing RFID in its retail distribution chain by requiring its top 100 suppliers to use RFID tags by year-end 2004 on the pallets and cases they shipped to Wal-Mart. However, due to the status of standards, manufacturers of RFID tags were unable to meet the volume of demand within Wal-Mart's desired time frame. Of comparative interest is the fact that it was Wal-Mart that pushed UPC into the mainstream with a similar edict in the mid-1980s [Mark Roberti, Case Study: Wal-Marts Race for RFID, CIO Insight, September 15, 2003].
Case in Point. Wal-Mart's top 100 suppliers have completed their RFID alpha pilots and are now in production mode. These original pilots are taking place at the Wal-Mart distribution center in Texas, and in most cases the suppliers are putting RFID tags only on products shipped to that location. In many cases those suppliers have been using what is referred to as the "slap and ship" technique. This means that the suppliers are placing the RFID tags on the pallets and cases only as they leave the dock door. In other words, in many cases theses suppliers are not deploying RFID throughout their internal supply chain operations. Despite that fact, overall the alpha pilots have been successful within a limited deployment scope.
Case in Point. DoD is the other large early RFID technology adopter. They face unique challenges because the locations they are shipping to in the Iraq war theatre are mobile and unpredictable. They have seen demonstrable, major advantages to tracking inventory in Iraq by using handheld readers to find the tagged equipment and instantly identify inventory that came from a particular depot. (Again, this is still in alpha pilot stage so not everything is tagged).
DoD's suppliers in some cases also used the same slap and ship approach as Wal-Mart's suppliers used. At this point, very little tagging is occurring at the item level. Rather it's at the pallet and case level.
The ability to identify a product at its source and at its demise would inherently pose minimal concerns regarding individual privacy. However, it is the identification of the product's whereabouts in the interim - as it leaves the retail store and potentially accompanies an individual purchaser to his or her home, workplace, and places of political activity, recreation, entertainment, or worship - that raise the red flag of privacy violations.
While the technology offers extensive advantages to industry, particularly manufacturing and retail, it also poses a potential and ubiquitous threat to individual privacy. Some groups maintain that RFID poses greater risks than rewards, and view it as a surveillance technology that could severely impinge on individual privacy. Because the technology allows for unprecedented cost savings to large corporations, it is logical to assume that corporations will be compelled to implement the application of this technology faster than its risks will have been identified and protective measures invented/applied.
For more information about privacy issues associated with RFID technology go to the Privacy Rights Clearinghouse.
The information provided in the RFID Landscape section becomes more meaningful when examined in concert with RFID Stages of Development. The following tables describe the stages through which emerging technologies migrate during their evolution to maturity. The right column identifies the landmarks that place RFID solidly in Stage 3. For a more detailed description of these stages as they apply to emerging technologies (not limited to RFID), go to Stages of Development.
Stage 1: Technology Concept
|Questions a CTO asks at this stage:||RFID Comments|
1. Would this technology address any business problems or provide new business opportunities for my company?
2. What is the status of standards drafts and time frame of future drafts?
3. How big is "mainstream" (beyond my company's) interest in the concept?
|This stage has been completed. |
The technology was first introduced in the 1940s with limited capabilites. In recent years, due to miniaturization and dropping component costs (Moore's Law) it has been "re"-introduced with a broader range of technical capabilites.
Stage 2: Technology Feasibility Analysis
|Questions a CTO asks at this stage:||RFID Comments|
Questions a CTO asks at this stage
1. At what stage is standards development – how long is it taking for first drafts to be
published? (Longer time indicates that there may not be sufficient momentum yet – may never be – to get
this technology off the ground.)
2. What other components are involved in interoperability with this technology?
3. In what generation are the components that are required for interoperability?
|This stage has been completed. |
Demonstrated most notably by the feasibility analysis at the MIT AUTOID lab. Wal-Mart and the Department of Defense (DoD) started their pilots while RFID was still in Stage 2. Their alpha tests have proven the technology's feasibility in the supply chain business application. The industry has introduced a few early products that are compliant with the latest standard version (EPC class 1 gen2).
Stage 3: Alpha Pilots
|Questions a CTO asks at this stage||RFID Comments|
1. How does one vendor's product differ from another – which feature set best matches our requirements?
2. Which vendor has the best upgrade policy?
3. What new lessons learned appeared with the broader base of business applications, and are any of those lessons applicable to our company?
4. What is the cycle time between standards version definitions
|This stage has been completed. |
This is the stage at which we now find RFID. Pilots are well under way at Wal-Mart, DoD, and BestBuy.
Some readers already read class 1 and class 2 tags. CTO's should consider which vendors support firmware upgrades that will read emerging class standards. CTO's should also be tracking the outcome of Intermec's intellectual property claim. If you currently employ gen1 tags and readers, do you need to upgrade to gen2? The answer will depend largely on whether your application is international or domestic.
Stage 4: Beta Pilots
|Questions a CTO asks at this stage||RFID Comments|
1. How similar are the business applications to my own? How are they the same and how are they different?
2. Do the differences pose any unique challenges to applying the technology in my environment?
3. Do the harsher environmental conditions meet my operational situations?
4. Does employing the technology affect my existing interfaces to other business? Do I need to begin negotiating with them regarding this technology?
|RFID has not reached this stage yet. |
What has to happen to move RFID into Stage 4? A critical next landmark is the point at which two or three additional classes reach standards definition. More importantly, Stage 4 will be a reality when actual products are developed as a result of more mature standards definitions. Another critical landmark will be actual production implementations based on accessing the ONS root. Some pilots are just beginning in this area.
It is important to note that the current real world pilots are not implementing use of the RFID ONS root at this time. The ONS root architecture feature is described in the RFID Overview. It is an important RFID architecture feature that is required for RFID to reach its full potential. In addition,in order to use the ONS root effectively companies need to work out exactly how they synchronize their data and how they decide to use networking technologies to communicate to the ONS root and each other. For example, in the current Wal-Mart trials suppliers communicate with Wal-Mart over Wal-Mart's private network called "RetailLink".
As a result of these factors RFID will probably continue to cycle through additional Stage 2 and 3 type pilots to work out the kinks in using the ONS root and resolving issues in data synchronization. It would be premature at this time to discuss when and how RFID will evolve through "Stage 5: Standard Pilots", "Stage 6: Mainstream Operation Deployments" and "Stage 7 Technology Reaches Commodity Price Levels". Some elements of the RFID architecture (e.g. readers and tags) will likely proceed to Stages 4, 5 and so on ahead of the networking components such as application of the ONS root and full data snchronization processes.
Using the information we have just discussed in the Landscape and Stages sections for your company's particular application is not meaningful without understanding factors within your company as they relate to this information. A company's industry and its philosophy toward adopting new technology play a large role in RFID implementation. For instance, a company made up of many divisions whose common denominator is the precision engineering of various products might derive multiple benefits from being an early adopter of new technology because of the technology's applicability throughout the company's many product lines. In addition, this type of company has a rich pool of scientific and engineering resources to call upon to help handle the hiccups and sometimes major technical hurdles to get the technology up and running in its particular environment.
In the case of Wal-Mart, its reliance on its high volume supplier distribution chain is intrinsic to its operation, and any improvement in that area has immediate impact on its ROI. Wal-Mart's degree of control over its suppliers (lower risk) and the extensiveness of its supply chain (higher reward) made a compelling case for early adoption of RFID and even made sense for them to have some in-house RFID technology specific talent either brought on board and/or groomed from the inside dedicated to managing the pilot projects.
Companies that have ownership of an RFID technology talent pool are in a position to influence the standards and the technology products under development because they speak the same language as the technology developers and standards folks and are capable of making a persuasive technology case/argument for their point of view. (Normally, it would not make sense to have expensive bleeding-edge technologists on staff of a company like Wal-Mart, but it does make sense for this application because its impact on their ROI is so great.)