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Thursday, December 02, 2004

Full-Scale RFID Could Take a Decade

Jacqueline Emigh of eWeek reports but full-fledged RFID deployment across outbound shipments, inbound deliveries and manufacturing for a whole product lineup could easily take not just one year, but a full decade or more, according to one early user. As the year 2004 winds down, many product suppliers are looking to launch their first implementations of RFID sometime in 2005. But full-fledged RFID deployment—across outbound shipments, inbound deliveries and manufacturing for a whole product lineup—could easily take not just one year, but a full decade or more, according to one early user.
"This is not a one-year model," Rich Morrissey, director of e-business strategy at American Power Conversion Corp. (APC), said in a recent Webcast called "Getting Ready for RFID: A User Speaks." Instead, full-fledged implementation of RFID (radio frequency identification) is "in the 10- to 15-year-plus category," he told a Webcast audience made up mostly of initiates to RFID. APC, a major producer of back-up power products and services, recently completed an RFID pilot at a couple of warehouse locations involving 18 to 25 products out of its total of 33,000 SKUs. Before final deployment, the company will spend considerable time on gaining an understanding of how to achieve ROI (return on investment), and on how to deal with business process and integration issues.

Morrissey pointed to three main drivers behind the rollout at APC:
- mandates from trading partners Wal-Mart and the U.S. Department of Defense;
- interest among four senior-level executives in evaluating the technology;
- and a "drive for continuous improvement of our business processes and capabilities, leading to delighted customers."

During the WebcastMorrissey gave the RFID newbies a number of tips about piloting the wireless technology, which is geared toward improving inventory control and streamlining the overall supply chain process.

-Planning is critical. For one thing, the reported shortages of RFID hardware such as tags, readers and antennae are definitely real. "From order to receiving took over two months," he said.

-Morrissey also suggested that product distributors obtain outside expertise from consultants if needed. "Spend some money upfront," he said. APC's technology partners on the RFID rollout included IBM Global Services (IGS) and Odin Technology.

-During the planning process, companies should decide which products to test, while also determining test locations. Other issues to be considered include which process areas (receiving, inventory management, shipping, etc.) will be involved; what kinds of data to collect; and how to store the data and integrate it with other IT systems.
Yet some decisions about RFID will take time to reach, according to Morrissey. After about 15 months of RFID involvement, APC has "just started some of [the] discussions and thoughts," he said. "RFID generates a lot of data. All that information needs to be updated. [You also] have to decide what to do with it," Morrissey said.

The products chosen for APC's pilot were "primarily those that fall into a mandated category," he said. APC opted for a "live" test rather than a "lab" test, in that real warehouses are "dirty, cold in the middle of winter, and noisy." APC configured and built four test station configurations: a shipping and receiving portal at the dock door, a pallet wrapper station, a conveyor station and a tag placement/tag performance station. But pilot testers should be prepared for some bumps along the way, Morrissey warned. During its own pilot, APC determined that "the more dense the pallet, the more unlikely it is that you'll be able to read the tag." The company is doing further analysis on how to place and orient the RFID tags, as well as which kinds of tags tend to work best. Radio frequency interference, on the other hand, hasn't turned out to be problematic. "We did pick up a signal from a business next door that had a wireless network," he said. "There was some concern that it would interfere, but so far it has not."

"RFID is disruptive technology," he said. Still, Morrissey is optimistic over ultimately achieving ROI. This hasn't happened during year one, he said, given "the cost of the tags and the volume of business" associated with RFID. "But we certainly do have an RFID opportunity," Morrissey told the Webcast audience. "Initial assessment provides ROI in year 4, or 2009. Some [ROI] may be very specific to a particular customer mandate, and some may be more general."
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