How RFID is making headway: small niche deployments
By Howard Baldwin
When Wal-Mart commissioned the University of Arkansas to test its theory about the viability of radio frequency identification (RFID), the company's then-CIO was not shy about the results.
In Summary:
| • | Look for situations where there is a clear return on RFID investments. |
| • | Do not limit discussion solely to supply chain processes; include inventory management and inspection applications too. |
| • | Consider deploying RFID when equipment is expensive, mobile or highly distributed. |
The study found a 16 percent drop in instances when items were not stocked or available, a reduction in excess inventory, and greater effectiveness in keeping shelves fully stocked. The findings vindicated the retail giant’s support of the technology.
While 16 percent may not seem like much, any reduction in out-of-stock items can have a proportional effect on customer satisfaction. Customers who find the items they want are less likely to shop elsewhere.
So despite its doubters, RFID is making progress in small yet significant ways. While critics doubt whether it is much better than the bar codes it purports to replace, proponents argue that successful RFID deployments require creative thinking and insight into how the technology improves operational and supply chain processes.
The answer is somewhere in between: RFID is not taking off as quickly as it might, but there are some unexpected deployments and pilot projects where it is making headway.
First, look where RFID will be most cost-effective
 | Whenever anyone asks me when they should put an RFID tag on a can of beans, I'm tempted to say never. |  | | Paul Mathans, manager for emerging technology solutions
BearingPoint | |
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In both deployments and pilot projects alike, companies are searching for the specific areas where RFID is most cost-effective. "Whenever anyone asks me when they should put an RFID tag on a can of beans, I'm tempted to say never," says Paul Mathans, manager for emerging technology solutions for McLean, Va., consulting firm BearingPoint. "But the real answer is, when the additional information RFID can derive from that can of beans is worth the effort."
That is a key point, because RFID is not universally cost-effective. Generally, you should think about putting RFID tags on items that are:
| • | expensive enough themselves that the $3 cost of a tag is not an issue; |
| • | in unclean environments, such as factories, where dirt renders bar codes unreadable; |
| • | highly mobile, and can be easily tracked by moving them past readers, or by using portable readers. |
Most people think of RFID tags as part of supply chain optimization. Yet that is short-sighted, argues Steve Taylor, chief executive officer of Cathexis, a Microsoft Gold Certified Partner based in St. John's, Newfoundland.
"Supply chain applications are a small tip of a large iceberg in terms of the opportunity for RFID," Taylor says. His company manufactures a pen-shaped, wireless RFID reader called ID Blue. Cathexis customers use it in field-service and emergency-service scenarios — situations where equipment is either expensive or distributed.
(For more on how RFID works from a technology standpoint, see this related article, "How to handle RFID's real-world challenges.")
RFID pays off in tracking expensive or highly mobile equipment
One Cathexis customer is responsible for serving 32 fire stations over a 400,000-square-kilometer section of forestland in Newfoundland. During forest fires, tracking firefighting equipment with paper-based systems was too slow and bar codes got dirty. Now employees quickly scan the assets with RFID readers from Cathexis. The RFID readers transfer the information to a Web-based system that shows the location of equipment. Working in concert, Taylor says, the RFID tags and readers can update information in back-end databases about equipment usage, response time, and inventory.
According to Taylor, the firefighters have visibility into everything from their response time for incidents to how long they used the equipment (which helps them determine when to replace it). That kind of insight helps when it comes to budget requests, because they can clearly cite usage statistics or show that they might have quenched a fire faster with more equipment.
In a less urgent but no less important scenario, RFID works in the more mundane situation of fire extinguisher inspection. The inspections are usually done manually, but with an RFID tag, you could see information about when the fire extinguisher was manufactured, moved to its current location, and last recharged, Taylor says. Without having to open a case and find a label listing the extinguisher’s history, inspectors could conduct their audits much more quickly.
Similarly, RFID is proving popular in hospitals, where a lot of expensive diagnostic equipment may be highly mobile (see this article). Or consider the energy industry, which deals with costly machines in refineries or on oil rigs. This equipment, just as with the fire extinguishers, needs regular inspections, tracking and auditing.
Consider the value of a pilot project
As they seek to calculate the ROI of RFID, many companies (midsize and large) are deploying pilot projects in order to get experience with the technology. Indeed, even Wal-Mart is only conducting its RFID deployment in a single, albeit large, state: Texas. These pilots represent attempts by companies to investigate where the specific value of RFID resides.
For example:
| • | Nancy's Specialty Foods uses RFID equipment from Intermec on its pallets and forklifts in order to track different varieties of quiches that are baked and frozen on one day and collected into multi-variety packages on another day. |
| • | The city of Hoboken, N.J., embeds RFID tags in its residential parking permits and issues handheld readers to its enforcement officers to ensure cars are legally parked and to eliminate counterfeit permits. |
| • | Jena University Hospital in Jena, Germany, is using RFID to track medication between the pharmacy and intensive care, and to tally data regarding disease patterns and drug incompatibilities. |
Among most of the published material about RFID projects, it is clear that the deployments are pilots, and that the results are still pending. Even RFID’s strongest supporters concur that it is taking longer to deploy than previously suspected. This is good news, in that RFID is maturing so slowly that you can afford to take time to evaluate where it fits in your business.
Howard Baldwin is a Sunnyvale, Calif.-based contributing writer to the Microsoft Midsize Business center. His work has appeared in CIO, optimise and InfoWorld.
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