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Exploring the Potential—and the Drawbacks—of RFID Implementation An increasingly widespread technology promises increased efficiency and reduced cost in the supply chain. Recent mandates to incorporate radio frequency identification (RFID) tags in the supply chains of the U.S. Department of Defense (DoD) and retailers such as Wal-Mart have prompted many commercial and government organizations to investigate the potential of RFID for improving their own operational efficiency. An industry leader in RFID technology, Booz Allen Hamilton is providing the DoD with strategic services to help them not only implement the mandate, but also maximize the value of RFID data in the supply chain. Says principal Joe Sifer, “RFID is being integrated into DoD’s logistics process to provide a richer dataset of the supplies that agencies have now and will receive later. We’re creating infrastructure to read the data, and a data management system to make use of it.” RFID systems feature electronic tags which store data that identifies or tracks the items to which the tags are attached. Data is read via radio signals transmitted to or from a network device called an interrogator or reader. When developing and implementing RFID systems, however, challenges involving data integration, networking, training, and extraction of business intelligence often consume far more resources than the purchase and placement of tags and readers, says associate Eric Tsibertzopoulos. “Clients rely on Booz Allen’s interdisciplinary skills to solve complex business challenges that go beyond compliance.” The firm’s diverse RFID expertise includes working with a Defense Medical Logistics Standard Support (DMLSS) program to investigate the automation of four primary business processes: Receiving, breakdown/assembly, shipping, and receiving at tactical field locations using RFID technology. Booz Allen also designed and implemented an RFID-based asset management system for a classified federal agency. Among other services, the system provides virtual supply chain visibility to reduce the time and resources needed to perform a full asset inventory of the agency’s IT equipment. In addition, the firm also helped design the world’s first nationwide RFID consumer payment systems for a major petrochemical company. “Booz Allen’s expertise in RFID, supply chains, and logistics is providing DoD with a mastery of both technology and enterprise operations,” says Sifer. “We’re showing DoD how RFID can solve business problems by improving efficiency and cost effectiveness.” Automated Identification Technology with Strategic Advantages RFID technology can identify and manage assets anywhere in the supply chain, and provide logistics data on items as diverse as weapons, lumber, or breakfast cereal. Tags can be configured to store a wide range of information, from the status of a library book to the name, breed, and vaccination record of the family pet. RFID tags can hold more data than barcodes, carry tamper-proof pedigree information for high-value objects, and provide data without being in close proximity to a reader. Supply chains, automated payment systems, and asset management functions are classically suited to RFID. Today, the market supports over 500 types of RFID technologies in three categories: Passive, active, and hybrid. Passive tags are small, easy to affix, and inexpensive to manufacture, and are applied to shipping cartons, pallets, “smart cards,” library books, and livestock. They do not have their own power source and sit idle until interrogated. Active RFID tags are self-contained, using a battery to transmit information over a distance. They may also contain large quantities of onboard memory for storing data such as shipping manifests and maintenance records. Hybrid tags combine features of passive and active tags and are used for specialized vertical applications such as toll road payments and temperature monitoring for perishable goods. All RFID technologies support total asset visibility—crucial in events such as Hurricane Katrina, when monitoring the location of critical assets was essential so they could be rapidly deployed to a safe area. In the first Gulf War, the use of active RIFD tags to track military supplies saved the armed forces an estimated $300 million. This advantage has created an interest in RFID by other federal agencies, pharmaceutical firms, and electronics manufacturers, which are exploring its potential to eliminate redundancy and theft, authenticate and validate item identification, and enhance supply chain efficiencies. With such a broad range of benefits, achieving RFID’s potential in any given application demands experience that goes beyond simple hardware and software installation. Says associate Ken Waldrop, “Booz Allen understands the client’s mission, business processes, and challenges so we can provide an end-to-end perspective. We provide holistic answers, not a cut-and-paste solution.” The Challenge of Making a Business Case for RFID Booz Allen joined other top analysts and technology providers in Chicago for a December 2005 panel discussion on the market impact of RFID. Panelists included Sifer and industry experts from Michigan State University, Cisco, Intel, Accenture, and others who shared experiences and insights, and reached consensus on several issues, such as the need for:
They also concurred that RFID technology is evolving quickly and will be broadly implemented by 2015—becoming as common as barcodes are now. At DoD and throughout the commercial markets, however, the process of implementing broad RFID applications has slowed as the technology moves from the fringes of development to more mature, next-generation technology and stable architecture. At DoD, Booz Allen’s projects are also working their way through the funding process. Booz Allen continues to develop and refine RFID architectures and legacy system integration strategies, while it also focuses on market, technology, and capabilities development and end-to-end data security, among other initiatives. Says Sifer, “We’re testing the system to show the DoD end-to-end proof of concept for defense military logistics.” There is one concern with which the industry continues to struggle: Making the business case for RFID. “The cost of implementing RFID versus maintaining a company’s current technology does not always favor RFID implementation,” says Sifer. “At times, Booz Allen must advise clients to wait for costs to decrease.” There is also some controversy about RFID. For example, the purchaser of an item may not be aware that the item has an RFID tag. Because tags can be read at a distance without the individual’s knowledge, privacy concerns have been raised. Sifer believes these concerns will be put to rest, however, as the technology is more widely adopted and the benefits of the information available through RFID increases. In the long term, RFID is more likely to prove to have significant economic, security, and social advantages. story posted June 20, 2006
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