Recent reports tout increases in RFID equipment sales and Wi-Fi real-time location systems. This growth is echoed by our clients at the Emerging Technology Center in Orlando. More and more, company technology leaders are inquiring about real-time tracking of inventory via RFID. However, these inquiries demonstrate market confusion between the capabilities of EPC Gen 2 passive RFID tags and the potential of systems based upon the Wi-Fi standard most commonly used for personal computer wireless networking.

Two independent research firms published positive analysis of the RFID market in October. The influential monthly report of R.W. Baird & Co. noted optimistic trends for purchases within the UHF EPC Gen 2 hardware market.

Baird reports that sales will double this year and then double again next year for a projected 2008 hardware revenue of $125 to $150 Million. Baird also rightly noted that last year, a tag order was considered substantial if it was 100,000 units, whereas purchases of one million tags at a time are increasingly reported this year. They attribute this growth to a shift in the emphasis from firms pursuing Wal-Mart and other retail compliance mandates, to closed-loop asset tracking projects with a defined return on investment.

At the same time, In-Stat research published an update to their RFID market analysis addressing growth in real-time location system hardware designed around the 802.11 (a, b, or g) Wi-Fi standard.

They estimate that shipments of such tags will grow by 100% for each of the next three years, with the total volume of tags shipped last year at 135,000 units. According to my estimate, that would place the size of the Wi-Fi tag sales at roughly $16 million by 2009.

I am already seeing evidence of this growth in the type of questions that we get from clients. They are looking for solutions to tell them where their inventory is located in their warehouse or stock-room. And keep in mind that these are companies that don't typically have (or are not properly using) a sophisticated warehouse management system. They are looking to RFID to provide an easy way of increasing inventory accuracy and ease of physically locating an item.

These questions demonstrate that the technological developments within the RFID industry are gaining mind-share in the general industrial market. Unfortunately, these inquiries also show confusion about how passive and active RFID technologies differ in application and cost.

All RFID technologies, of course, are designed to increase the accuracy of physical item tracking. But they approach the problem in different ways, depending upon the application. The most common RFID tags are passive EPC Gen 2 UHF tags designed around the ISO 18000-6 standard (available from vendors Intermec, Alien, and others). These tags are available for as little as seven cents each. They work with dedicated readers, such as embedded in-shelf antennas or dock-door portals, and only transmit data when they are energized by the signal from a reader.

They also depend on the number of readers to provide accuracy of physical location. One reader at a dock-door portal will identify that a tagged item is in the warehouse; a reader at each rack location will tell you which bay contains the item. But strictly speaking, you don't know the location of a passive RFID tag at this very moment; you only know the location where it was last seen by an RFID reader.

Real-time location systems are different. They utilize an active RFID device that is programmed to broadcast a signal at a given time interval. The tags are designed around several standards. The most common systems make use of the common Wi-Fi 802.11 standard (either a, b, g, or the emerging n standard) originally developed for wireless computer networking. Ehaku is a leading vendor of this technology.

Other systems are built around ISO 24730 (ratified earlier this year), which was originally championed by WhereNet. The systems assume that one or more readers are arranged throughout a storage location (warehouse, stockroom, or office).

The active tags broadcast a signal that is received by different access points at a different level of signal-strength or time signature. The systems then use these differences in received signals to triangulate the location of the tagged item. The location accuracy is typically between five and ten feet, and tags for these systems range from $25-$55 and up.

The cost differences between the two systems drive how they are used in real-world applications. If clients are thinking about item locations, they usually have a cost figure of pennies per item in mind and aren't considering the infrastructure costs of installing fixed readers, software, and re-engineering their processes to take advantages of RFID. Unfortunately there are still no quick-fixes for passive RFID.

Other clients are savvy enough to realize that their existing warehouse or office Wi-Fi system is itself an RFID technology, so they seek to leverage that investment to gain inventory accuracies by adding Wi-Fi tags. They are usually shocked, however, to discover that the cost per tag is so high, and the accuracy is within a meter at best. But both passive and active RFID technologies are useful for item-location systems for the proper applications.

Wi-Fi based systems are obviously very attractive for an office environment due to the build-out of wireless IT infrastructure within most buildings. They are most useful when the system is closed-loop (so the tag is re-used) and the item to be tracked is valuable, time-critical, or both.

Hospitals, for example, use Wi-Fi based RTLS systems to track equipment as it moves throughout the building. Other uses of active-tag RTLS systems (either Wi-Fi or ISO 24730) include yard management and tracking of manufacturing fixtures through a facility.

Passive-tag systems are useful for situations in which tags can't be reused but the items to be tracked can be managed by passing them through fixed control points. The most talked-about application is tracking of boxes as they move through the supply chain. Passive tags are also used in office environments to track files and in retail sales for security tracking of items.

But they are not very effective for applications in which you don't know the exact location of an item but would like to use RFID to go find it. That application is still owned by the much more expensive active-tag technology.

The market demonstrates good news in sales growth and application diversity for RFID technologies. Also a positive, customers are thinking about RFID technologies in many different applications, as opposed to the previous year's focus on retail RFID-mandate compliance. The industry still has a way to go, however, in educating people about the differences in application and cost between the various types of RFID devices.

Paul Faber is a Principal with Raleigh, N.C.-based Tomkins Associates, a supply-chain-solutions consulting firm.
http://www.tompkinsinc.com