The state of RFID

Lauren R. Hartman

January 29, 2014

7 Min Read
The state of RFID

Similar to bar-code technology, RFID technology is not new. Developed back in the 1940s, the noncontact technology, in very basic terms, uses radio waves to transmit and receive data. The tags have antennae and electronics embedded into them that communicate with the tags by reading information from or writing information to the tags and activate the tags. A controller links the antenna to a host system. Fairly small compared to what they used to be, today's tags measure about 1/3 mm wide, and act as transponders (transmitters/responders) that "listen" for radio signals transmitted by transceivers or RFID readers. When a transponder receives a certain signal, it responds by transmitting its unique identification code back to the reader and to the controller.

Read-only tags are similar to bar codes in data content and can be programmed by the manufacturer and occasionally by end users. Read/write tags allow data to be read as well as written and can store larger amounts of data.

Most tags are designed to be read from distances of a few inches away up to several hundred feet, depending on the size of the antenna and the power driving the RFID tags. Tags can be either active, using battery power to transmit or receive data, or passive, getting power from the antenna (many of the more costly units are powered by batteries, but less expensive passive, battery-free tags are a popular choice). To increase the distance, it's possible to use a more sensitive RFID receiver. Software is also part of the equation, with reader software for the tag/reader interface and middleware for reader/ERP (enterprise resource planning) interactions as well as user-specific software. Other factors that influence the cost of the technology include consultant assistance, design, installation and system integration/installation, as well as operator training.

The market

While there are increased concerns over consumer privacy, consumer profiling and other sensitivities over personal data, RFID is currently being used in many ways. The U.S. Department of Defense has already moved to deploy RFID in order to trace military supply shipments. And RFID is gaining use by seaport operators, at toll booths and gas stations (Mobil's SpeedPass, for example), embedded in vehicle tires, apparel and credit cards, in medical/pharmaceutical applications to prevent counterfeiting and in many anti-theft and security applications.

According to an executive summary complied for an upcoming study called the 2004 Global AWAreness Report, prepared by Alexander Watson Associates BV ( to outline the background and benefits of RFID technologies and indicate its current status and future prospects, in 2002, the market value worldwide for RFID technologies was estimated at $900 million to $1 billion, with about 44 percent located within North America. Asia Pacific accounted for approximately 20 percent, with the balance consumed in Europe, the Middle East and Africa. The annualized rate of growth is estimated at up to 20 percent.

Catalyst for evolution?

The summary states that by 2007, the estimated market size worldwide for RFID will be $2.5 billion, with growth occurring in two distinct phases: By 2005/2006, implementation is expected at the case and pallet level by major retailers—which also may plan to commercially adopt available formats of electronic product coding—and expected by 2008/2009 at the item level by major retailers. The summary points out that the most rapidly growing sectors are point-of-sale, rental item management (library, audio/video, for example), baggage handling, real-time logistics and supply chain management.

It's no wonder then, that RFID adoption is expected to surge this year. According to a pulse survey produced by Packaging Strategies ( and Cap Gemini Ernst & Young ( studying the responses of 275 participants attending the 17th annual Packaging Strategies Summit conference in March, 54 percent believe that Wal-Mart's 2005 supplier mandate will be a "catalyst" for the evolution of RFID adoption in the industry, compared to 15 percent who feel it's "overrated." More than half of the respondents (51 percent) said they believe RFID is "a major business driver this year," or are initiating a program and action plan in 2004.

And while 58 percent of respondents agree that retail will be most impacted from the first wave of RFID adoption by 2010, nearly one-third (31 percent) believe that the health and pharmaceutical industries will be "transformed by RFID," leading to improved security of prescription drugs and reduced shrink/grey market losses. Not surprisingly, half of all respondents (50 percent) believe that globalization and off-shoring will be the 2004 business imperative that will have the greatest impact on the future of packaging strategies during the next three years (further survey results are available at the websites of Cap Gemini Ernst & Young and Packaging Strategies).

How much?

Getting into the nitty gritty, how much does it cost to implement an RFID program? That's the "Who Wants to be a Millionaire" question and is really the biggest factor when it comes to exploring RFID. A two-month study conducted by Forrester Research, Cambridge, MA (, into what it will cost manufacturers to comply with retailer mandates, indicates that startup costs alone and one year of maintenance are priced annually at approximately $9 million for a typical supplier with three distribution centers.

Talking with dozens of vendors, Forrester found that only 25 percent of suppliers will actually meet Wal-Mart's challenging January 1, 2005, deadline. Says Forrester's senior analyst, Christine Overby, "There's no business case for most suppliers in the short term. The technology isn't ready, and there is a lack of deep expertise in the industry to help suppliers implement RFID."

The largest costs remain constant from supplier to supplier, she adds, with key challenges that will impede deployment being tags, at more than 80 percent of a supplier's cost, based on today's production processes and projected volumes.

The study recommends that those implementing RFID programs should plan to add supply chain labor to their budgets in the first year because vendors have to perfect solutions for automating tagging and embedding RFID in packaging material.

Based on today's tag production processes and project volumes, Forrester emphasizes that suppliers shouldn't build a near-term business case on any price lower than 40 cents per tag.

While many manufacturers and retail suppliers agree that RFID tags must continue to come down in cost in order to encourage more widespread use, Forrester adds that to gain the benefits of product tracking, businesses need to begin implementing RFID at the manufacturer's level instead of at the distribution center. The report also suggests that perhaps Wal-Mar should redefine the scope of its RFID mandate, by narrowing the range of products to those with limited amounts of metal and liquid.

However, it also says that today, "source tagging" cases at the manufacturer end is too disruptive for many companies to implement. The process would require significant re-engineering and budgeting. "Early RFID adopters like Gillette are the only companies that will attempt this approach in the next twelve months," the report says. "In the short term, a 'slap-and-ship' approach is the most realistic scenario for a majority of suppliers."

But while some companies are still looking for answers, and a good share so far have looked only slightly beyond manual RFID tag application, most indicate that automation is a must, despite the study's comments about the cost. Also that hiring professional assistance can be high and may only increase. For additional details, visit

More information is available:

Market study:AWA Alexander Watson Associates, 31 20 676 2069.

Cost analysis study:Forrester Research, Inc., 617/613-6000.

Pulse survey:Cap Gemini Ernst & Young, 917/934-8735.

Pulse survey:Packaging Strategies, 800/524-7225.

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