RFID: Just Add VARs
Never before has the RFID (radio frequency identification) industry been more primed for channel adoption.
For years I have been writing about RFID (radio frequency identification) technology. In past articles, I've outlined the technology's benefits, obstacles to growth, and sporadic success stories. I've interviewed industry analysts, RFID vendors, and some of those few VARs and integrators that have actually sold solutions. I've visited dozens of trade show booths from RFID companies that, a few years ago, didn't exist.
And recently, just as it seemed the RFID industry was gradually progressing like a driver shifting gears from first to second, the market leaped directly to fourth gear and is rapidly revving its engine toward fifth. What caused this sudden need for speed? Unless you've been living like a castaway on "Survivor" for the past few months, you already know the answer - Wal-Mart.
Earlier this year, the mega-retailer rocked the supply chain world by announcing it would encourage its top 100 suppliers to incorporate RFID technology by 2005. This announcement received such widespread media attention I think I even heard Ozzy Osbourne mumble something about it on an episode of "The Osbournes." (Of course I could be wrong; I really can't understand anything he says.) Now, everybody thinks RFID is cool, and they all expect it to be used everywhere. "The Wal-Mart announcements have already started everyone thinking about how to implement RFID technology, whether they're in consumer goods or not," states Dan Bodnar, group marketing manager for AIDC (automatic identification and data collection) hardware vendor Intermec Technologies (Everett, WA).
Sure, there are still those few misguided fools who think RFID spells the end to bar codes, but most people realize that's not likely. Especially after Wal-Mart made it clear that its RFID initiative wouldn't include item-level tracking. "A close inspection of Wal-Mart's announcements indicates the company is carefully nursing the RFID industry through its toddling phase," says Donny Lee, chairman and CEO of RFID company Applied Wireless Identifications Group, Inc. (AWID) (Monsey, NY). "Wal-Mart is telling the industry to concentrate its efforts on manufacturing/logistics and leave the retail supply chain alone for now."
Show Clients RFID Isn't Big Brother
Indeed, using RFID in retail has caused a lot of uproar lately. Privacy advocates fear placing RFID tags on consumer items such as food or clothes will lead to a Big Brother nation where your daily whereabouts are tracked. Even if you think that type of talk sounds like a lot of paranoid bunk, it's still having an effect on the technology's progress. For instance, early adopters (i.e. clothing retailer Benetton) of item-level tracking solutions have scuttled pilot projects due to a possible backlash in sales from privacy fears. Wal-Mart simply said the technology to track each item (via RFID) as it leaves a shelf is still too expensive.
Intermec's Bodnar says RFID privacy issues stem from a misunderstanding about the technology itself. "The privacy issue is more about understanding the technology. The RFID technology being used in retail kinds of applications is passive, that is, there are no transmitters on the tags. The tags are meant to be used in a controlled area of 10 feet to 15 feet. Once they are outside that radius they can't be used to track the movement of people or items with any global positioning technology."
Bill Allen, marketing communications manager at Texas Instruments RFid Systems (Plano, TX), recommends VARs address RFID privacy issues by educating customers about what the technology can and can't do. "VARs and integrators should form close alliances with industry groups like the Auto-ID Manufacturers Association [AIM]," he says. "AIM's privacy committee recently distributed an RFID primer on privacy and is working to make sure companies and consumers have a realistic understanding about the technology and its benefits."
Don't Get Overly Concerned About Standards
If you are serious about offering RFID solutions to your clients, there's more you'll need to know besides privacy issues. Don't worry though; an in-depth knowledge of those confusing RFID standards isn't on the list. However, that doesn't mean you can ignore standards entirely. The key is to know the basics of existing standards so you can offer solutions with interoperability.
Allen recommends learning about two RFID standards in particular: ISO (International Standard Organization)/IEC 15693 and ISO/IEC 14443. ISO 15693 standard refers to contactless vicinity tags and readers. "ISO 15693 approved products will likely be used in supply chain, access control, and for wireless payment applications," Allen predicts. "These are applications that use a host-based model or need a longer read range compared with ISO 14443 products. The ISO 14443 standard is for contactless RF [radio frequency] payments. It allows higher levels of encrypted security and faster rate of data exchange [but with reduced read range] as compared to the 15693 standard."
There's More To RFID Than Tags And Readers
Although the advantages of RFID technology may be easy to grasp, implementing it is another story. To learn the details of RFID, you can attend various vendor training courses or conferences. At these events, you will learn about the read ranges and interference issues associated with the various RFID frequency bands (e.g. 125 kHz, 13.56 MHz, 433 MHz, 915 MHz and 2450 MHz). You'll learn to choose the right antenna and tag for a job and know how the material a tag is mounted on will affect the performance of the system. "We have all probably witnessed demonstrations where a pallet loaded with RFID-tagged boxes passes through a portal reader and subsequently all of the tags are read at once," remarks Lee. "However, most of these demonstrations neglect to inform you that most boxes must have their tags facing outside. Also, you cannot have liquid containers, metal containers, or even two paper boxes with two tags butting against each other."
And what about all of the data associated with RFID solutions? What kind of information will be stored on the tag permanently? Do you need a read/write tag that will be reused, and thus, continually provides data to the host system receiving the data? How are you going to integrate all of the RFID system's data into the host system? "VARs need to gain expertise in developing the middleware that controls the functionality of the RFID interrogators [readers] and feeds the appropriate data to the host system," comments Bodnar. "The potential volume of data from an RFID system is significant, so making smart data management choices is critical. In some cases, you might want to keep the transaction at the operation point and not query the host."
You are probably thinking, "Hmm, this RFID stuff is more complicated than it originally sounded." True, this is no plug and play technology. Furthermore, as all of the RFID gurus I spoke with stressed, there is no one type of RFID technology that will work for every application. You should expect to conduct thorough pilot studies and plan on sales cycles to last longer than three months.
But, there are perks to selling RFID. Namely, its complicated nature warrants the margins you've been looking for. For instance, Lee estimates closed loop, niche applications can garner 30% to 40% margins while open loop supply chain applications can offer margins in the 20% to 30% range. Allen's guesstimate is 25% to 50% margins for tags and readers.
The demand for RFID applications in the supply chain is definitely going to increase. The education you need to get up to speed with RFID is readily available. And, the margins for RFID solutions are enticing. If ever there was a time for you to start selling RFID, this is it.