The emerging use of radio frequency identification (RFID) to locate and track goods in the supply chain is focusing increased attention and resources at the point of execution-the distribution centers, transport hubs and commercial vehicles on the "edge" of the enterprise. Terms likes "edgeware" and "edge infrastructure" are fast becoming part of the arcane vocabulary of the supply chain, even as many complain that it is pushing them to the "bleeding edge" of technology.

While central to this trend, RFID is only the latest breakthrough in an evolution that has been going on for 10 to 15 years, according to Bryan Tracey, chief architect at GlobeRanger, Richardson, Texas. First came computers in the warehouse, he says, followed by the introduction of mobile computing. "All of a sudden software was actually living on handheld devices that were a few inches from the products that were in motion, which meant that decisions could be made in near real time," he says. "Someone on the dock actually could see if something wasn't the right order because it was not in his handheld computer."

With the pervasive automation of RFID and other sensor technology, he continues, "we reach a point of intersection between the world of computing and the actual physical world where the two become essentially indistinguishable. So when we talk about the edge we are talking about the distribution of business logic both temporally and physically close to the point of action in the supply chain." GlobeRanger provides a leading edgeware platform, iMotion, which Tracey says enables companies to monitor and control edge devices, manage networks and transform data into actionable business information.

While edge infrastructure is not limited to RFID, it certainly is where all eyes are focused today. Mandates from the Department of Defense, Wal-Mart and other major retailers have started a march toward RFID adoption that few companies will escape. According to a survey last spring of 350 technology executives by BearingPoint, CIO magazine and the Software and Information Industry Association, 58 percent of respondents described RFID as "important" or "very important" to their company's business strategy. The same percentage expected to begin a trial or test project within the following 12 months, while 16 percent already had projects under way.

Momentum currently is being driven not only by mandates but also by progress in the development of standards. RFID in the supply chain passed a major milestone in December with ratification of a global standard for a UHF protocol defining how readers and tags talk to one another. This Generation Two air interface protocol, commonly known as Gen 2, was developed by more than 60 companies under the aegis of EPCglobal Inc., the standards organization entrusted with driving adoption of Electronic Product Code (EPC) technology. The electronic product code is the unique number that allows every tagged item to be identified individually instead of generically, as is the case with barcodes.

Gen 2 is important for a number of reasons. First, it provides a foundation upon which RFID infrastructure elements can be built, ensuring interoperability on a global scale. It also enables significant operational improvements over the Class 0 and Class 1/Gen1 readers and tags now in use with faster read rates and less susceptibility to interference. Additionally, security is improved by the use of advanced encryption technology, password protection and authentication.

Many hope that the biggest impact of Gen 2, however, will be mass production of the hardware needed to deploy an RFID infrastructure, especially tags, and a resulting decrease in price.

Even with the limited nature of pilot projects so far undertaken to test RFID in the supply chain, most users had anticipated that prices would be on the decline by this time. In some cases, a tag shortage has caused the opposite to happen. During a recent webcast sponsored by Consumer Goods Technology, one Wal-Mart supplier said his price for RFID tags was higher than it had been six months earlier, averaging 75 cents per tag. Other unconfirmed reports indicate that some suppliers are paying as much as $1.

With Gen 2, this situation is expected to improve. Texas Instruments and Philips Semiconductors, two major manufacturers that have been waiting for a ratified standard before entering the market, have indicated they now will ramp up production. It will be the second half of this year, however, before Gen 2 tags reach the market in any number.

"For us the challenge is to develop a UHF version of our tags," says Tony Sabetti, UHF/retail supply chain director for Texas Instruments RFid Systems, which already produces large quantities of different frequency RFID tags for other uses. "But our biggest challenge in manufacturing right now is in scaling from the hundreds of millions of tags we make today to the billions of tags we need to make tomorrow."

Just how fast demand will grow to billions of tags remains a big question mark. IDC Research, Framingham, Mass., estimates that RFID spending for the U.S. retail supply chain will increase from $91.5m in 2003 to nearly $1.3bn in 2008, including tags, infrastructure and systems integration. This figure is expected to reach $875m in 2007. RFID-related services will grow to about $270m in 2007 before leveling off, IDC projects, while software spending will not begin to grow until about 2006, when more companies will start to need RFID middleware.

Whatever the speed of adoption and investment turns out to be, most companies will eventually have to make a decision about RFID deployment. Understanding the elements of an RFID framework will enable them to look beyond mere compliance toward using the technology for competitive advantage.

RFID Framework
An RFID system consists of tags, printers, readers and middleware. Tags include a chip and an antenna embedded in a label. RFID printers simultaneously print labels and write to the electronic tag. Readers, which can be stationary or mobile, collect data from the tag and may apply a first level of intelligence, filtering out duplications and noise. Middleware turns the raw data into useable information and transmits it to back-end systems.
Tags are a large and recurring expense, which is why there is so much concern over their price. There also is concern over yield. Early trials generated complaints about tags that were dead on arrival or that failed to stand up to the rigors of a distribution environment. While acknowledging the existence of such problems, vendors say yield issues are being resolved.

Tag Technology
Scot Stelter, director of product marketing for Alien, a tag and reader manufacturer based in Morgan Hill, Calif., says a lot of the early failures were caused by tags, readers and printers that were not designed to work together. Such problems are common to any new technology, he says, and "going forward they are diminishing rapidly."

Most supply chain pilot programs use rolls of adhesive-backed paper shipping labels that are inlaid with a plastic-enclosed chip and antenna. The labels are printed and the tags encoded by an RFID-enabled printer in the warehouse before being attached to a case or pallet.

Converting RFID tags into printable labels is a multi-step process that has required a learning curve. "As we have learned more, the number of bad tags has gone down markedly," says Dan Bodnar, director of RFID at Intermec, a full-service provider of wireless data-collection solutions based in Everett, Wash. Bodnar notes that Intermec performs testing when the inlay is put into the label. "We are able to validate whether a tag is good or bad," he says. "We identify the bad tags; the printer will not print to them and the customer is not charged for them."

Many smart label printers, such as those from industry leader Zebra Technologies, Vernon Hills, Ill., also have this intelligence built in. "Our printer/encoders automatically void or reject a smart label or inlay that fails to respond properly to a reading or encoding instructions," says Matt Ream, general manager, RFID Systems. Zebra's integrated systems also offer the ability to write to tags outside the primary RFID printer and to verify that applied tags are correct by means of a downstream reader.

Sabetti of Texas Instruments blames the problem with poor tag yields on the fact that "most of the tags being shipped into the supply chain today are being shipped by startup companies that have no understanding of what is required to produce at Six Sigma quality levels." He says that TI has manufactured more than 100 million RFID tags for other industries with yields in excess of 99.7 percent. "There is nothing that would prevent us from achieving those same rates in supply chain applications."

	"When we talk about the edge we are talking about the distribution of business logic both temporally and physically close to the point of action in the supply chain." - Bryan Tracey of GlobeRanger

Of course, the smaller manufacturers disagree with this assertion. Stelter says that Alien's proprietary manufacturing process, knows as Fluid Self Assembly (FSA), is what will make tag production affordable. Because RFID chips needed for inlaid tags are so small, he says, it is difficult to use traditional assembly techniques. "FSA is different. It allows you to assemble many thousands of tags simultaneously," he says. In this process, he explains, the chips are mixed in liquid very much like grains of sand in a glass of water. This slurry is then poured across a material that has little holes in it that are shaped exactly like the chips. "The chips fall into the holes in precisely the right orientation and then it is a simple process of sealing the chips into a plastic matrix and cutting out the tags. This enables much higher capacity with much lower capital costs and per-unit costs and it will make RFID economically viable going forward," he says.

Another factor that contributes to poor tag yield is incompatibility between labels and printers/encoders. Some printers require the chip to be in a certain position on the label and a mismatch can result in damaged chips or smeared printed copy. Avery-Dennison, a printer and label manufacturer based in Pasadena, Calif., has attacked this problem with what it calls "jump-the-bump" technology. Users alert the printer to the chip location during setup and the print head then senses the chip location and "jumps" over it.

Tag placement also is an issue in determining how well an RFID system performs. "With RFID, you are constrained by basic physics of the radio wave," says Bob Goodman, director of supply chain services and RFID at Yankee Group, Boston. "When you are dealing with metal and liquid and longer distances, it is not necessarily going to work."

The marketplace is providing research environments to help companies understand what is the best tag and best tag placement for their individual operations. Alliance Lab, Lawrence, Kan., is one such facility. Formed by the University of Kansas, Rush Tracking Systems and RFID World, it is issuing a series of reports based on tests that compare the performance of various tags. "Manufacturers want the cheapest tag that will perform as they need it to," says Toby Rush, president of Rush Tracking Systems, Lenexa, Kan. "We want to be the Consumer Reports of what tags can do in comparison with one another by testing and reporting in an unbiased and credible manner." The lab's first report looked at the read range of tags and the effect of different orientations. The second report will look at read rates and a third will evaluate tag durability.

Software developer Acsis uses its state-of-the-art RFID laboratory, located at its headquarters in Marlton, N.J., to help companies understand their RFID readiness. An objective evaluation covers product readiness, shipping environment readiness and ERP readiness. A written report indicates point-by-point issues to address as a company moves toward first-phase adoption of RFID in the supply chain, says Steve Brown, executive vice president of marketing and business development.

Warehouse management systems vendors also are offering expertise to help companies get started with RFID. Milwaukee- based Catalyst, for example, has a consulting practice dedicated to assisting companies in determining the best approach to deployment. It also offers EPC Compliance in-a-Box as well as a more extensive RFID solution and middleware designed to work with existing and future versions of SAP R/3. Radio Beacon, Toronto, Ont., offers two "pilot kits" particularly designed for smaller companies seeking to comply with mandates. "These products provide a quick way to get started with RFID," says Tom Berend, director of technical services.

Types of Readers
Tags operate in conjunction with readers that collect the raw encoded data. "One of the things still being flushed out within industry is how best to create a hands-free scanning solution," says Bodnar of Intermec. Portal readers positioned over conveyers and at dock doors are two frequently used options, he says. "But from an economic standpoint and a business case standpoint the best solution may be a forklift reader." It is much less expensive to outfit a few forklifts instead of multiple dock doors, he says, "and these assets will be used much more." Moreover, he says, it is an easy migration for customers that already have computers mounted on their forklifts. As a result, forklift-mounted systems currently represent "a major portion of our data collection business," he says.

Another form of mobile reader is a handheld device similar to ones now used to read barcodes. For example, Psion Teklogix, Mississauga, Ont., offers a tethered RFID reader that plugs into its existing handheld and vehicle-mounted barcode readers. "Customers benefit from investment protection with a device that meets EPC compliance requirements while connecting to existing hardware infrastructures," says Todd Boone, senior product manager. Mobile readers are part of an RFID Development Kit offered by Psion Teklogix that also includes a stationary reader, printer/encoder and middleware as well as comprehensive professional services. "Most customers at this stage are testing the technology to understand where it will fit and deliver value to their business," Boone says. "The best way to do that is to start small and get a good feel for it and our development kit is a great way to do that."

Readers also need to be compatible with the type of tags in use, but lingering issues here should be resolved as Gen 2 standards become the norm. Many readers already in the market are designed to be upgradeable to Gen 2 with a simple software installation.

Another issue with stationary readers is that some engineering expertise is required to ensure that they are positioned correctly. Symbol Technologies, Holtsville, N.Y., is working to make its readers easier to deploy with a packaged dock-door solution. "Instead of providing a customer with separate readers and antennas to mount, we are providing two catapults with all of the readers and antennas and cables pre-mounted," says Alan Melling, senior director of product development. "All you have to do is literally bolt the pedestal down on either side of the dock door and you are done." Once in place, the readers should require little or no tweaking, he says.

Device Management
As systems expand, however, companies will need a way to keep track of the health of edge devices like RFID readers. This need is giving rise to a new category of application solution known as device management. "When this thing is fully blown and you don't have one or two readers but thousands or tens of thousands, the question becomes, 'How do I manage those?'" says Melling. "How do I know if one is not up and running or is malfunctioning? A very important feature for any RFID reader is the ability to be managed over a network."

Symbol last year introduced a device management solution called Mobility Services Platform that is designed for RFID as well as other devices like mobile barcode readers. "MSP allows you to manage a large number of terminals or other devices from a central, web-based console," says Melling. The result is greater management efficiency and a dramatic reduction in deployment, management and support costs, he says. This is part of Symbol's comprehensive edge infrastructure, called CM2, which stands for Capture, Move, Manage.

Intermec has partnered with Cisco Systems to develop device management solutions. "Right now our network-based readers are capable at the very initial phase of being identified on a Cisco network," says Bodnar. "That is step one. The next step will be to pursue firmware upgrades to the readers that can be done via the network as opposed to having someone go out and do that to each reader individually. The third activity we are spending time on is a definition of reader health."

Bodnar believes that readers will become increasingly intelligent, taking on much of the edgeware or middleware that now resides on servers. "Right now we have an intelligent reader that is equipped with a power PC and a Linux operating system capable of running IBM's edgeware and of supporting SAP's auto-ID infrastructure," he says. "Ultimately, more of that will migrate to the reader, negating the need for separate servers."

For now, the middleware or edgeware that takes data from edge devices and brings it back to enterprise systems in a useful format is server based.

"Edgeware started out as a pretty light application that allowed you to capture an RFID event, synthesize it and indicate where you wanted the information to go," says Brian Higgins, director of global RFID solutions at BearingPoint Inc., McLean, Va. "It now has evolved to the point where most applications include some pretty robust workflow management tools as well as analytic tools and tools for device management."

This capability represents the real "meat and potatoes" of a successful RFID implementation, he says. "At the end of the day, RFID is an information management play. It is not just a question of whether you can get accurate reads, but what do you do with that increase in visibility."

RFID middleware must contend with two primary challenges: the high volume and speed of incoming data and the style of that data. "With RFID systems, you have lots of incoming streams of event data that require a new type of solution," says Mark Palmer, vice president of marketing and RFID technology at ObjectStore, Bedford, Mass. ObjectStore calls that new solution type "event-oriented processing."

"The trick is to filter out the wheat from the chaff using techniques of optimization and pattern matching," says Palmer. He likens this capability to the human body's nervous system. We are constantly barraged with sensory input, he says, but our minds look for patterns and filter out the rest. Similarly, an RFID reader will repeatedly read tags within its field and may overlap with another reader's field. Repeat and duplicate reads must be identified and filtered out. "This is a fundamentally different requirement for IT moving forward that a lot of people are not yet familiar with," Palmer says. ObjectStore's RFID Accelerator filters and stores in memory RFID data streams, enabling event-based queries and other processing operations, he says.

OATSystems, Waltham, Mass., has developed an edgeware server specifically for supply chain applications of RFID. The OAT EPC-IS Edge Server collects data from hardware devices and integrates it into enterprise applications, including ERP, supply-chain management, warehouse management and manufacturing execution systems. Of the eight suppliers that went live with Wal-Mart last April, four use OAT, as do three of the six retailers that have issued RFID mandates.

Jon Karlen, director of product management, says OAT's RFID framework is designed around four "Cs"-capture and control the data, provide consistency and add context. "It is the level of context that surrounds the basic EPC that allows you to get real value," Karlen says. "Context is what turns data into understanding-this product left this dock door headed for this customer at this time, which was 10 minutes late."

Context also is very important in operations involving pallet reads. Because of the materials involved or the placement of tags, readers often miss one or more cases on a pallet. "If you know a pallet has been built with 84 cases and the reader is not seeing some of the internal cases, you can infer that the cases are there because the system knows that all 84 were picked and shrink-wrapped," he says. "You might want an alert if more than two or three are missing, but otherwise you let it go."

New York-based Accenture has tested this concept in work it has done with a group of consumer electronics manufacturers, says partner Ed Starr. The working group built a prototype and tested its capabilities with a company's media and entertainment division. "We were receiving cartons of CDs, 200 to a case," he says. "If you have received a notice ahead of time telling you what to expect in a shipment, which gives you the context you need, then the technology is effective enough today to be able to balance multiple reads against that expectation," Starr says. "We are optimistic that with the right business processes you can make it effective."

Having retailers accept this approach is important to suppliers' need for a return on their RFID investment. They hope RFID data eventually will eliminate a lot of the chargebacks they now receive because of discrepancies between what the supplier says was shipped and what the retailer says was received.

"The most innovative suppliers and their retail customers have converged on this as a great opportunity for a business case for RFID," says Karlen. "At OAT, we are now building solutions for those Wal-Mart account teams and claims management teams to actually identify and resolve chargebacks and deductions with an electronic proof-of-delivery."

Even so, payback will continue to be a big concern for suppliers, says Steve Banker, service director for supply-chain management at ARC Advisory Group, Dedham, Mass. A compliance program typically costs suppliers about $1m in infrastructure and an additional half million in added labor costs, he says. In addition, a major supplier might expect to spend $8.5m on tags, for a total outlay of $10m. "If Wal-Mart cooperates a little, maybe they can get $1m in payback," he says, "but they are still down $9m."

"Will other payback buckets become available as RFID becomes more widespread?" he asks. "Yes, but many of those buckets will depend on the technology working better than it does today, and I still don't think they will get to break-even."

Not everyone agrees. Many predict that tag and other infrastructure prices will come down and that companies will discover opportunities that are not now evident.

"I tell you, there is a magical, aha moment when one of our customers' suppliers goes to the Wal-Mart extranet for the first time and sees its products moving through the Wal-Mart supply chain," says Karlen. "As they are able to begin to model out how their inventory is moving, get an electronic POD, then integrate that data into the OAT framework and start getting some interesting reports-now all of a sudden, instead of moaning about the cost of everything, they start dreaming about the real value here. That's when they start getting pretty excited."