Are You Tuned into Radio Frequency Identification? From Technology Evaluation/Dylan Persaud
Radio frequency identification (RFID) has been around for over sixty years, so why does it have such negative connotations? Many misconceptions and horror stories of organizations' failed implementations have been plastered all over the press, which has contributed to the negative perceptions of this re-emerging technology. Yet these failures are often due to a lack of the correct technology, deficient information technology (IT) knowledge, budgetary constraints, unqualified business partners, and a general misunderstanding of the overall effectiveness of RFID technology and how it relates to an organization's business.
Navigating through a complicated new system that requires its own hardware, software, and infrastructure is a daunting mission. Given the complexities of evolving standards, converting today's bar codes into tomorrow's electronic product codes (EPCs), and the prospects of how all of this changes the way a company functions, it is understandable why organizations may take a long look before making the leap to RFID.
Before getting started, organizations should understand the components of an RFID system, the mechanics of the technology, and tag types and their characteristics to decide if RFID is a worthwhile investment for their businesses. An RFID system generally consists of tags, encoders, readers, and a host computer. These represent the minimum requirements for a functional RFID system to operate. Each component of the system will be defined, and an explanation of each one's use will be explored below.
Within RFID, everything starts with the tag. The tag has a computer chip that is programmed with information that uniquely identifies each item. Information is exchanged when the tag is activated.
Tags and readers each contain antennae because of the radio interaction they require. The antenna attaches to the integrated circuit (IC) to absorb and emit signals. RFID is a means of uniquely identifying an object through a radio link. A reader, also called an interrogator or "master," communicates with a tag, called a transponder or "slave." Each item has a unique identification code. Data between the tags and the readers are exchanged via radio waves, and no direct line of sight is required for this transaction to occur. The reader requests data from the tag or processes the signal being emitted by the tag, decodes the transmission, and transfers the data back to the computer system. The type of tag determines how the tag will respond to the reader. The computer may do various tasks to process the data, such as record the reading, look up the tag ID in a database to direct further action, or direct the interrogator to write additional information to the tag.
The electrical field emitted by the reader energizes the tag to trigger a read of information from the tag. The arrows indicate the flow of data among the readers, the antennae, and the server. In this example, the boxes pass through the portal (antennae), and the data captured from the tags are transmitted to the reader and then to the host computer for processing. Information is exchanged when the tag is activated, either by the energy emitted from the portal or, in the case of an active tag, by a battery within the tag that emits energy for the antenna to read.
The tags are key components of any RFID system. Understanding the properties, capabilities, and limitations of each tag type will assist in the solution design. The five different types of tags, their advantages, disadvantages, and common applications for each are as follows:
Active Tags usually contain their own power sources, are heavier, and have a large data storage capacity (upward of 1 megabyte). Given these attributes, active tags generally cost more than other tags and typically support more complicated read applications. Uses for active tags differ by applications. Active tags will alert the interrogator that further action is needed. This function enables the company to track the location of an item, as well as which stage of the process that item has reached and what the required action to execute should be. The advantages of an active tag are its longer read ranges, greater memory capacity, and that it emits a continuous signal. Disadvantages include the need to replace batteries within the tag (depending on frequency of use), the need for a battery size generally larger than that of other tag types, the cost of the physical tag, and the cost to maintain the battery within the tag.
An example of where an active tag may be implemented is in the tracking of high-value assets within an organization. Another example of an active tag application is its giving of operational instructions when it arrives at a particular station within the manufacturing process. The tag has the ability to trigger a subsequent operation, like the activation of a robotic arm, for example, and the information is updated and appended to each step within the process.
Passive Tags are generally less expensive than active tags because they have no internal power source. They also have limited data storage capacity (typically 32 to 128 bits), are read only, and have a limited read range (up to 3 meters). The tags themselves hold very little data, but they can serve to identify an object from a database containing large amounts of information.
The main advantage of a passive tag is its reasonable cost--approximately 20 to 30 cents per tag. Key disadvantages include limited read range, no tracking update feature, and the inability to rewrite to the tag. Typical uses include pallet and case level identification, as found in the retail mandates of Wal-Mart and the US Department of Defense (DoD), for example. A tag can be attached to a product that can be tracked at each stage of production. The conveyor system can then identify the item and receive routing information to be sent to the correct loading dock without human intervention.
Semi-Passive Tags have many of the characteristics of a passive tag (small, lightweight, limited memory), but it also has a battery backup to extend the answer range. Common uses include shop floor containers, pallets, kitting, and just-in-time applications.
The advantages of semi-passive tags include having a longer read range and battery life, while the disadvantages include additional expense and maintenance of the battery.
Generation 2 Tags: Within the RFID market, a lack of standards has resulted in manufacturers having different operating guidelines for tags, readers, and antennae. EPCglobal, an RFID unifying body, has established standards for vendors to adhere to in the design of infrastructure, but this has caused hardware and software to be incompatible between companies, and has made collaboration with suppliers nearly impossible. Universal, standard design, and adherence to this standard, has resulted in increased adoption within the industry. Consequently, read rates have increased dramatically. EPCglobal's standard operating specifications consist of tag, antenna, and reader standards. Adherence to this standard is easing RFID implementations. The interoperability of multi protocol readers and consistency of tag manufacturing processes have provided more consistent read rates and allowed different types of tags to be used with different readers that aid collaboration efforts.
A distinct advantage of RFID is its automation of processes. Generation 2 (Gen 2) tags, with their stable operations in read rates and information exchange, allow ease of operation. With extra stability, great gains in processing speed can be made using automated sorting and material handling by limiting or, in some cases, eliminating human intervention. Gen 2 allows the dozens of individual objects within a group to be uniquely identified at the same time because backscatter is controlled, which was sometimes a problem in the past. Backscatter control results in very stable reads by allowing multiple objects to be differentiated within the electrical scanning field.
Does RFID fit the organization or not? Before venturing down the RFID path, organizations should determine the suitability of RFID for their operations. In determining fit, organizations should evaluate existing applications and future requirements to anticipate potential stresses in their warehousing and distribution areas. Constraints that hinder business efficiency can cause the organization to consider RFID as a solution to some of its problems. If any of the circumstances below, which represent key issues when assessing the suitability of RFID, describe the business conditions that an organization faces, RFID may be the solution that fits to quell these concerns:
1. Processing speed is essential or could provide a competitive advantage.
2. Dealings are in high-value assets that need to be protected.
3. Bar codes cannot physically survive operational processes.
4. Areas of a facility need to be protected from unauthorized access.
5. More unique information is needed on each item than a bar code can contain.
6. Highly automated, minimizing human intervention is needed for greater efficiency.
7. There are benefits from knowing where products are at all times in the supply chain, in real time (inventory visibility).
8. Sharing information with business partners is difficult.
Some of the common warehouse operations listed above are where bottlenecks occur or where restraints can be seen; an RFID system can alleviate and remove these obstacles. If the response to two or more of these circumstances is "yes," then an RFID implementation should be considered. Although organizations in the same industry have very different business processes, RFID can aid in the argument to maximize efficiency.
Although prices have dropped recently due to an increase in tag production, the costs of RFID implementations are still a prohibitive issue. The case for RFID should be considered from a total cost of ownership (TCO) perspective while accounting for organizational growth, the competitive advantages of inventory visibility, better customer service due to the efficiency increased product tracking, and the ability to limit "out of stock" conditions. Other avenues for inventory visibility that can compete with RFID are also emerging, such as wireless fidelity (WIFI) and global positioning system (GPS). An organization should consider the cost of hardware, middleware (edgeware), printers, as well as the cost of the tags themselves, in relation to the benefits and the cost of the items that are being tracked. http://www.technologyevaluation.com
Does IT Matter? From The Hacket Group
Does IT Matter? While considerable difference of opinion about this issue exists among many business leaders, new research finds a conclusive answer. The best companies clearly use information technology (IT) as a strategic enabler to create competitive advantage, according to the latest Book of Numbers findings from The Hackett Group.
Author and former Harvard Business Review Executive Editor Nicholas Carr sparked intense debate among C-level executives with his 2004 book challenging the conventional wisdom that IT is a strategic business tool. His recommendation, among others, was that IT has become a ubiquitous commodity, and should best be treated as basic business infrastructure. He suggested that IT has little ability to drive competitive advantage, and companies should remain late adopters, minimizing investments in technology. The greatest IT risk companies face, he said, is overspending.
But Hackett's research, which is based on an analysis of its extensive knowledge repository of benchmark data from over 2,100 companies worldwide, finds that world-class IT organizations--those which achieve peak efficiency and effectiveness in Hackett's IT benchmark studies--spend 7% more per end-user on IT operations than typical companies. For a typical Fortune 500 company with a world-class IT function, this translates into increased IT spending of $29 million/year relative to their peers.
This investment more than pays for itself by enabling reduced cost and improved performance in finance, procurement, human resources (HR), and other areas of back-office operations. Hackett's research found that world-class Fortune 500 companies run these functions at lower operational costs of $134 million/year ($7.1 million/billion of revenue) compared to typical companies, and process automation and IT enablement play a very significant role in realizing these lower non-IT back-office costs. In addition to this efficiency impact of IT, a direct correlation was found between performance of the IT function and effectiveness in finance, procurement, and HR.
Hackett's new Book of Numbers edition, ROI in Technology: The Key to World-Class Performance, finds that in order to drive the maximum value from IT, leading companies pursue five key strategies:
STANDARDIZE AND CONSOLIDATE--They streamline and simplify, and to ensure maximum ROI they take the critical step of standardizing master data definitions as they reduce the number of ERP systems and other applications. By reducing spending through standardization and consolidation, world-class companies can increase their focused spending in areas which generate greater strategic return.
FOCUS ON HIGH RETURN OPPORTUNITIES--They take a differentiated approach to IT investment and do careful reward/risk analysis, to identify areas that can reap the greatest benefits. Generally these are areas where the gap between world-class and typical companies is large in two key ways--overall performance and also how heavily technology is used. In many cases, including transactional automation, world-class performance and maximum value can only be achieved by implementing technology in conjunction with best practices and process redesign.
DON'T INDISCRIMINATELY MINIMIZE COST--Rather than focusing on across-the-board cost cutting, these companies take a very different perspective and seek to maximize value at the lowest achievable cost, in part by reallocating spending from technology infrastructure to application management. Hackett's research clearly shows that indiscriminate IT cost cutting has a negative impact on performance in other functional areas.
MAXIMIZE VALUE OF INFORMATION ASSETS--World-class companies obtain the greatest possible return on their technology investment by maximizing the value of information assets to end-users through data standardization, rich metadata, online information access, analytical capabilities, and alignment of the information architecture with business initiatives such as enterprise performance management.
OUTSOURCE SELECTIVELY--They outsource carefully, and use outsourcing as a tool to improve effectiveness rather than efficiency. In fact, Hackett's research shows that for many typical companies the lack of an effective strategy and insufficient consideration of process and infrastructure optimization prevents outsourcing from driving reductions in IT process costs.
"It's easy for CIOs to find themselves on the defensive," explains Hackett Senior Business Advisor Erik Dorr. "They've heard from reputable experts that IT is just a support system, a cost center where the less you spend the better. It's also not hard to find tales of companies that have spent millions or even tens of millions on IT projects that have failed miserably. We agree that not all IT investments are good ones, and it's certainly true that in many cases IT investments can't be easily justified through a conventional financial ROI analysis. But that doesn't mean that the ROI doesn't exist. It's there, and the best companies know how to find it, and turn it to their advantage."
According to Hackett Senior Business Advisor Philip Carnelley, Hackett's research clearly shows that for world-class companies, IT is an invaluable business resource that helps them lower costs and reduce staffing across the back office, streamline operations, and cut the time staff spend on transactional activities. These top performers also understand that the right IT systems make them smarter, facilitating improved strategic decision-making and enabling them to gain insights into their business, market, and competition. There's no doubt that IT can deliver tremendous business benefit, if companies invest the time and energy to do it right." http://www.signup4.net
ERP Market to Reach $25 Billion by 2011 From ARC Advisory Group
The Enterprise Resource Planning (ERP) market has been viewed as mature for some time, but there is still plenty of room for innovation. Driving ERP market growth over the next 5 years will be acquisitions, emerging markets like China, penetration of new industries, increasing maintenance revenues, and exchange rate movements.
Enterprise Application suppliers are defined as those companies offering ERP, plus one or more of the following best of breed applications: Supply Chain Management (SCM), Customer Relationship Management (CRM), Supplier Relationship Management (SRM), or Product Lifecycle Management (PLM). The worldwide market for Enterprise Applications is expected to grow to $43 billion by 2011, a compounded annual growth rate (CAGR) of 8.3% over the next five years. The ERP market is currently worth $18 billion, and is expected to grow at a CAGR of 6.7%, to reach $25 billion by 2011.Traditionally, the ERP market comprised entrepreneurial suppliers, where the founder/owner exerted a strong influence on their company's direction. Most of these companies have been acquired. These days, SAP is the only large company that has grown organically, with the remaining companies adopting three types of strategies to beat SAP, according to European Research Director, Simon Bragg, the principal author of ARC Advisory Group's Enterprise Resource Planning Worldwide Outlook study. "SAP is the only large company that has grown organically, the founders still possess a major shareholding, and whose solution comprises a single code base, which sells globally into all industries."
One common growth strategy is acquisition of multiple ERP and best of breed application suppliers. The major realization driving recent acquisitions is that maintenance revenues are a stable revenue source. Most ERP suppliers achieve maintenance renewal rates greater than 90%. In fact, maintenance revenue growth is expected to account for about half of the total ERP market growth. Since maintenance revenues are profitable and stable, these revenues can be used to pay the interest on relatively low cost debt. Thus, a key measure of ERP supplier profitability is no longer earnings per share, but earnings before interest, tax, depreciation and amortization, a rough measure of the cash generated by the company, and an indication of what interest payments the company could support if acquired. In effect, the stock market, which tends to focus on new license revenues and earnings per share, under-values the acquired companies.
In the 1990s, software acquisitions were often unsuccessful because it was difficult to integrate the two solutions. However, the technological developments of service oriented architectures (SOAs) have, as one of its benefits, simplified and lowered the cost of integration between different applications. Most ERP suppliers have announced an SOA strategy which enables functionality from one code base to be integrated with, and sold to, customers using another code base. In addition, SOA platforms enable a variety of partnership strategies, so far best exploited by SAP.
Economic growth and the new locations for low cost manufacturing operations are major drivers for ERP investment. Hence, Latin America and China are expected to achieve the highest growth rates, with EMEA (Europe, Middle East, Africa) achieving average growth over the forecast period. However, growth will be patchy across EMEA, for instance, relatively low rates of growth are expected in France and Southern Europe. The EU accession countries, although relatively small markets, will achieve good rates of growth. Growth in the North American region is expected to lag the other regions. http://www.arcweb.com
GXS and Verizon Business Partner To Bring Value-Added Supply Chain Services to Market From AMR Research/John Fontanella
Verizon Business announced last week that it is teaming with GXS, a provider of B2B e-commerce applications, to extend its menu of network management services to include B2B and supply chain functionality for its customers. The idea of adding business process functionality to the network infrastructure and management services of large telecommunications companies isn't new. AT&T acquired GXS competitor Sterling Commerce with the same goal: increase value in the eyes of the customer by adding network-based offerings that enhance and streamline business process performance.
To date, the synergies that those two companies anticipated have yet to be fully realized. This, however, is a long-term play where the value proposition has to be extremely tangible and targeted.
The paths of network administrators and line-of-business (LOB) managers rarely cross. The potential buyer of combined services such as these must be able to transcend functional areas and recognize the benefit of network-based applications resting on a highly secure and dependable network infrastructure. Few exist today within the corporate world. They will have to be cultivated. Verizon initially will bring to market GXS's invoice automation services, which allows suppliers to send invoices electronically using the format and protocol requested by the customer. This is the first service offering of many that are based on GXS Trading Grid, the technology platform that is the hidden jewel in this partnership.
Verizon brings to the table what it claims are strategic relationships with large, multinational corporations, along with a sales force numbering in the thousands. Thanks in part to its acquisition of MCI in 2006, Verizon Business, the division charged with managing corporate clients, can lay claim to managing network services for over 3,600 customers in 142 countries. The sales coverage and quality of relationships Verizon brings could open up opportunities GXS could never create for itself.
Partnerships such as these typically fall apart very quickly if the rules for account control and support aren't clearly defined. That doesn't seem to be the case here. Verizon will be responsible for the prospecting and qualifying of prospects for GXS services. GXS personnel will be initially involved in application development, but even here Verizon plans over time to train its own experts on the GXS Trading Grid. All first-line support issues will be managed by Verizon Business personnel, with GXS staff acting as technical advisors.
Verizon salespeople are already presenting the expanded service menu to customers. Operating with a partner of Verizon's size and scope will create challenges as well as a need for adjustments in the way GXS goes to market. The market opportunity the partnership opens up, though, is vast enough that it would be surprising if GXS can't accommodate the business model changes that will be required.
The services both companies bring to market are highly complementary. While neither will discuss the possibility of an acquisition by Verizon of GXS, it's hard not to contemplate, particularly if this joint initiative begins to pique customer interest. http://www.amrresearch.com
