Industry Leaders Gather to Discuss RFID Standards, Cost

Interest in RFID spiked last November when giant retailer Wal-Mart of Bentonville, Ark. mandated its suppliers to tag all cartons and pallets with RFID sensors by Jan. 1, 2005. In Europe, major retailers have called upon suppliers to do the same, some with even tighter deadlines. The U.S. Department of Defense has also announced it will require tags on parts, cases and pallets. In fact, much of the equipment and supplies being sent to Iraq are being tracked by RFID readers.

The benefits of implementing RFID tags in products promise to go well beyond those already achieved with bar codes, according to market research firm, Aberdeen Group, of Boston. Because RFID systems can identify the individual instance of a product (not just its stock-keeping unit, or SKU), as well as ?´watch’ when a product physically moves via continuous monitoring, they bring a new level of detail to product tracking. Accordingly, RFID adoption will drive improved inventory management, process efficiencies, data accuracy, enhanced asset utilization, and reduced leakage.

Texas Instruments Inc. (TI) of Dallas, and Royal Philips Electronics of The Netherlands, two of the RFID market’s major players, were on hand at April’s conference, to bring Canadian companies up to date on the RFID market.

David Slinger, vice-president of TI’s RFID division reported brisk business, noting the company is shipping 100 million tags a year, mainly for automobile anti-theft, livestock, and library applications.

“We’re on the threshold of a pervasive adoption of RFID; it’s not an emerging technology anymore,” Slinger said.

Slinger says with the market poised for a new generation of supply chain products, RFID will have the same impact on the electronics business as the integrated circuit.

Bob Moroz, president of R. Moroz Ltd. speaks at RFID conference.

“RFID is a disruptive technology and business will have to re-engineer the enterprise to reap the benefits,” Slinger said.

The VP said he is also encouraged that Intel is getting into the game with a processor for readers. “The big players are getting into the market, which is a relief for those of us who’ve been slogging away at it for years.”

That doesn’t mean there aren’t challenges for the industry to deal with, though. According to Edward Gonsalves, RFID business development manager with Philips, there remain two main obstacles for the industry to overcome: the establishment of standards and the price of individual tags.

The standards for data content and structure, as well as the RF communications technology, have not been finalized or accepted within the consumer goods/retail industry, Aberdeen Group reports. The good news is that the mandates agree on the same electronic product code (EPC) standard. The bad news is that the exact content to be on the tag, including its format, is still being negotiated. The possible result could be a change in the amount of data on the tag, driving a change in the memory requirements for the tag, impacting the unit cost of each tag.

The target price for each RFID tag is five cents, Gonsalves says. And he agrees with that goal. “I would argue yes, because in the logic market, the average selling price is currently 17 cents and we’re driving costs down. But we need orders,” says Gonsalves, alluding to the catch 22 situation the industry finds itself in.

Global RF standards must also be established. Initially, the North American standards – Classes 0 and 1 – have been used in the pilot projects that have been executed. However, until recently, no manufacturer had successfully complied with Europe’s requirements with Class 0 or 1 equipment. Only the UHF Generation 2 standard, a superset of Classes 0 and 1, promises to win global acceptance and will not be officially ratified until Q3 2004.