Government/Military Trends
March 2004
RFID and the Department of Defense (DoD): Impact on DoD contractors
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By January of 2005, the Department of Defense will require all of their contractors to mark all items delivered to the DoD with RFID unique identifiers. At this point, the DoD’s specification requirements are only partially defined. Many contractors worry how the DoD’s specification will impact their businesses – they want to know, what is the cost to implement an RFID infrastructure? How much do identifier tags cost? Will these requirements negatively affect my margins?
With the deadline looming less than a year away, and elements of a firm specification still in process, it’s difficult to know if a contractor should start work on implementing RFID or not.
Though many elements of the mandate are undecided, there are some known factors in the DoD mandate, including allowing the use of EPC Global specifications. EPC Global, a private industry partnership, is working towards developing the use of Electronic Product Code (EPC), a unique number that identifies a specific item in the supply chain (the EPC number goes on to an RFID tag). EPC Global’s specifications will either be part of the ISO standard or will be compatible with the ISO standard when it is complete.
The ISO organization takes a rigorous approach to standards with a goal of creating a standard that works worldwide. As a paid membership organization, EPC Global isn’t concerned with the global interoperability issues – it’s main concern is developing specifications that will work for its membership. The ISO process moves issues through industry and country-specific working groups to resolve international operability issues, working through all the difficulties before approving a standard.
The main hurdles that exist for the development of universal standards are:
- Open vs. proprietary: EPC Global initial specifications (Class 0 and Class 1) are proprietary (yet royalty-free) and use the specs from two companies, Alien and Matrix. How will open standards and proprietary technology co-exist?
- National vs. global consistency: Within the US, there needs to be industry level consistency as well as national consistency in regards to the numbering system. How will the standards handle the extra complexity of a numbering system that potentially needs to cope with unique numbers for every individual item manufactured globally?
- Read/only vs. read/write: Current EPC standards cover read only tags. Some applications of RFID will require read/write tags, which are more expensive to produce. EPC released the initial standard as part of an initiative to meet industry demands of a lower price point of a $0.05 per tag cost.
Even with these outstanding issues, there are good reasons to begin preparing now for the DoD’s requirements, according to Steve Halliday, President of High Tech Aid, a consulting group that specializes in educating organizations on auto ID, or RFID technology. Both RFID consultants and supply chain vendors agree that federal contractors who worry about the negative business impact are taking the wrong approach. “RFID technology enhancements have many applications to the supply chain that will make a company’s business more efficient,” remarks Halliday. Charles Milligan, Senior Technical Staff Member at IBM and Carey Hidaka, Market Development Executive for IBM Global Services, agree with Halliday’s assessment.
“Basically,” states Hidaka, “contractors can take a myopic view of the RFID requirement by just adding it onto to their supply chain process – what’s being called ‘slap and ship,’ where you slap the tags on to the pallet or products, then ship it off. This brings no added value to the contractor.” Halliday, Milligan and Hidaka all agree that contractors would be much smarter to ask the question: How can my organization benefit from using RFID tags? How can tagging help me run my business better, more efficiently? IBM sees RFID tags as a promising application for visibility within the supply chain that brings business value both to the DoD as well as contractors. Some examples of these benefits include:
Warehouse Management: unless your company already invested in an automated warehousing system – an expensive proposition – RFID technology has the potential to bring the benefits of automated warehouse management to a typical warehouse. Because of problems with lost parts and supplies, companies conduct physical inventory of warehouses – a demanding, intensive and physical process. Workers have to open cases, line up the barcodes, scan, then manually enter the quantity of each into an inventory management system. With RFID technology in place, no boxes need to get opened and moved around the warehouse floor. Using the RFID reader, all inventory gets scanned where it is and delivers input straight into an inventory management and tracking system. Lost parts and supplies can get found simply and easily, preventing organizations from re-ordering extra parts because they’re lost somewhere in the warehouse.
Streamline shipping processes: In today’s barcode-enabled shipping environments, barcoded products and shipping containers need to be lined up to facilitate the line-of-sight requirement of barcode readers. RFID tagging of shipped products and shipping containers allows automation of the shipping process.
Lifecycle management: Because each part has a unique identifier – unlike barcodes, which have a SKU only for the product item, not the individual product – you know exactly how much of a particular product you currently have in inventory and where it is in your distribution center.
Product shelf-life: Do some of the products you sell have a maximum shelf life? With RFID tags, you can be sure that the oldest product goes out the door first, reducing spoilage. Also, by knowing exactly what’s in your distribution center at all times – with accurate tracking of items going in and out – you can reduce the size of your distribution centers and even do more ordering in real-time, keeping less inventory on the shelf.
Transform IT infrastructure: RFID simply delivers more data; what organizations do with that data has many possibilities. Something to consider when implementing an RFID system is how it fits into legacy systems and how it could help to update those legacy systems to make them more efficient and useful.
With the government still deciding how they will roll out the RFID requirement, companies have an opportunity to really evaluate how, where, and at what cost RFID makes the most sense in the supply chain. To help the decision process, Halliday, Milligan and Hidaka offer these ideas:
- Find out about RFID: Read up on the technology and find out what other organizations are doing. Because the standards are not finalized, there are still different options that may or may not make sense for your organization. Ways to find out more about RFID include getting information from EPC Global and ISO and attending relevant conferences and/or trade shows to see what RFID vendors are talking about.
- Evaluate your network: With RFID readers added at various points, your current network may not be able to handle the extras of implementing RFID (systems management, firmware and software updates). Learn how your network will be impacted and whether or not an upgrade is in order.
- Check out a test lab: Some of the RFID manufacturers, as well as technology consultants (such as IBM) have set up RFID test labs where companies can test RFID equipment based on their needs and requirements. Tests can help identify what the most appropriate tags and readers are for your organization’s needs.
The most important consideration is to take on RFID with your eyes open, agree Halliday, Milligan and Hidaka. Learn how the types of products you sell will use the technology. Waiting to act isn’t a good idea, especially in competitive marketplaces. Think of RFID as an opportunity to change your business operations to improve your bottom line. Get buy-in from every level of your organization to make sure that all people, from warehouse employees to senior executives, understand that RFID will make their jobs easier.1
1 References:
www.rfidjournal.com
www.epcglobal.com
Interview with Steve Halliday, President of High-Tech Aid www.high-techaid.com on 1/30/04
Interview with Charlie Milligan and Carey Hidaka from IBM, on 2/4/04
www.defenselink.mil/news/jan2004/no1092004_200401094.html: “DoD tests supply tracking technology,” 1/9/04