Monday, January 24, 2005, Radio Frequency IDentification - RFID ADVERTISEMENT Introduction We are all familiar the ubiquitous bar coding that appears on most products we purchase. The idea for bar code was described in a patent application titled "Classifying Apparatus and Method" filed by Norman Joseph Woodland and Bernard Silver in October 1949 and granted in 1952. Neither man made much money out of their idea but Woodland was awarded the 1992 National Medal of Technology by President Bush. The first attempt at an industrial application of automatic identification was begun in the late 1950's by the Association of American Railroad. In 1967, the Association adopted an optical bar code. Car labeling and scanner installation began 1967. Unfortunately, the system simply did not work and was abandoned in the late 1970's. The event that really got bar code into industrial applications occurred September 1, 1981 when the United States Department of Defense adopted the use of Code 39 for marking all products sold to the United States military. This system was called LOGMARS. A series of meetings between Grocery Manufacturers of America (GMA) and the National Association of Food Chains lead to a decision in September 1969 to seek a standard "interindustry product code." The result of this meeting and four years of research was the Universal Product Code (U.P.C.). On June 26, 1974, a 10-pack of Wrigley's chewing gum became the first item to be scanned at a grocery checkout counter. The first UPC scanner was made by National Cash Register Co (now NCR). The code is split into two halves of six digits each. The first one is always zero, except for products like meat and produce that have variable weight, and a few other special items. The next five are the manufacturer's code the next five are the product code: and the last is a check digit used to verify that the preceding digits have been scanned properly. Hidden cues in the structure of the code tell the scanner which end is which, so it can be scanned in any direction. Manufacturers register with the UCC to get an identifier code for their company, and then register each of their products. Thus each package that passes over a checkout stand has its own unique identification number. The U.P.C. has allowed supermarkets to control their inventory more efficiently, provided a faster and more accurate check out for customers, and made gathering information for accurate and immediate marketing studies very simple. The uses of the U.P.C. have spread to all facets of the food and beverage industry, the government, the industrial/commercial industry and the transportation industry. Perhaps it is not surprising to learn that the Europeans came up with a different system, namely the European Article Numbering system. The EAN association was formed in February 1977 and headquartered in Brussels. Membership was extended to companies from other continents and the name was changed to EAN International in 1992. Today EAN International has 101 Member Organizations representing 103 countries. With the exception of the United States and Canada, retail products from around the world are marked with EAN-8 and EAN-13 symbols. To sell those products in the U.S. and Canada, manufacturers must re-label with a 12-digit U.P.C. symbol. This creates additional expense and time-to-market issues. In 1997 the Uniform Code Council, Inc. (UCC) announced the '2005 Sunrise' initiative whereby all U.S. and Canadian companies must be capable of scanning and processing EAN-8 and EAN-13 symbols, in addition to 12-digit U.P.C. symbols, at point-of-sale by January 1, 2005. The term Global Trade Item Number (GTIN) encompasses all the variants of what were previously known as: EAN/UCC-8, UCC-12 (UPC), EAN/UCC-13 and EAN/UCC-14 numbers. The GTIN is used to identify any trade item upon which there is a need to retrieve pre-defined information and that may be priced, or ordered, or invoiced at any point in any supply chain. This covers services and products, from raw materials through to end user products, all of which may have pre-defined characteristics. The structure of the 14-digit GTIN includes the EAN.UCC Company Prefix, the item reference of the product and a check digit. This number forms one indivisible identification number that is read in its entirety. We have all witnessed clerks at grocery stores and other places struggle (think carpal tunnel syndrome) to orient packages for the bar code reader. It would obviously be an improvement if the object itself could somehow assist in the process even at a distance. Also bar codes do not currently contain all the desired information. Enter Radio Frequency Identification (RFID). An RFID system consists of an antenna, a transceiver and a tag (transponder - derived from TRANSmitter/resPONDER). The antenna emits radio signals to activate the tag and reads and writes data to it. Often the antenna is packaged with the transceiver and decoder to become a reader or interrogator. The RFID system is part of an automated data collection system that includes a host system or server that process and manages the data collected. An RFID transponder is characterized among other things by its - Carrier frequency - Power Mechanism - Range - Data capacity and options - Data Read rate - Physical packaging - Cost Carrier frequency ranges can be grouped as low, medium and high. Low frequency (100-500kHz) devices are inexpensive and have low reading speed and a short to medium read range. Medium frequency (10-15MHz) devices are somewhat more expensive and have medium reading speed and a short to medium range. High frequency (UHF 850-950 MHz and Microwave 2.4-5.8 GHz) devices are expensive and have high reading speed and a long range. Also they require line of sight. A low frequency system would be used in applications like access control, inventory control and animal identification. Medium frequency systems would be used in applications like smart cards and access control. High frequency system would be used in applications like highway toll collections and railroad car monitoring. Allowable frequency ranges are generally set by government agencies for different applications. The carrier frequency greatly determines the data transfer rate. The range of an RFID system is determined by the power available at the reader and within the tag as well as by environmental conditions. In a space free of any obstructions or absorption mechanisms the strength of the field reduces in inverse proportion to the square of the distance. Reflections from obstacles and the ground can further reduce the strength. The transponder memory may comprise read-only (ROM), random access (RAM) and non-volatile programmable memory for data storage depending upon the type and sophistication of the device. The ROM-based memory is used to accommodate security data and the transponder operating system instructions. The RAM-based memory is used to facilitate temporary data storage during transponder interrogation and response. The non-volatile programmable memory used to store the transponder data. Some tags can be programmed infield while attached to the item being identified or accompanied. Tags are classified according to a scheme by the Auto-ID Center as Class 0 Read-Only; Factory Programmable Class 1 Write Once, Read Many Class 2 (2) Fully Re-Writable Class 3 (2) Active Tag (Fully Re-Writable) Class 4 (2) Relay Tag - Can Communicate with Other Tags With respect to power tags are either active or passive. Active tags are powered by an internal battery and are typically read/write devices. Passive tags operate without an internal battery source, deriving the power to operate from the field generated by the reader. In general terms, active transponders allow greater communication range than can be expected for passive devices, better noise immunity and higher data transmissions rates when used to power a higher frequency response mode. Passive tags are much lighter than active tags, less expensive, and offer a virtually unlimited operational lifetime. They have shorter read ranges than active tags and require a higher-powered reader. Passive tags are also constrained in their capacity to store data and the ability to perform well in electromagnetically noisy environments. RFID tags come in a wide variety of physical forms, shapes sizes and protective housings. Animal tracking tags, inserted beneath the skin, can be as small as a pencil lead in diameter and ten millimeters in length. The anti-theft hard plastic tags attached to merchandise in stores are also RFID tags, as are heavy-duty 120 by 100 by 50 millimeter rectangular transponders used to track inter-modal containers, or heavy machinery, trucks, and railroad cars for maintenance and tracking applications. The cost of both transponders and reader/programmers are influenced by the complexity of circuit function, construction and memory capacity. Packaging can be a significant part of the total cost especially if the device is intended to function in harsh environments. The cost of tags will obviously depend on the type and quantities purchased. In very high volume applications, the unit cost is measured in cents not dollars. RFID has been around for decades. During World War II, British attached RFID transponders to their own aircraft to enable their radar system to differentiate between their own planes (friend) and incoming German aircraft (foe). Such systems were called IFF for Identification of Friend or Foe. In the late 1960s, RFID technology was used to identify and monitor nuclear or other hazardous materials based upon work at Los Alamos National Lab. In the 1990s, proponents began developing tag and reader products using RFID technologies. Millions of RFID tags were sold into applications including container tracking, toll roads, anti-theft devices and entry access cards. According to Intel data collected through RDID can be used to Improve product availability Reduce theft and counterfeiting Increase inventory accuracy Streamline logistics efficiency Improve business forecasting and planning Measure supply chain efficiency and highlight problem areas Reduce inventory stuck in the supply chain Reduce service costs Identify location of specific items Allow focus on costly process exceptions RFID received an enormous push when the Department of Defense and Wal-Mart separately issued mandates requiring their suppliers to use EPC open standard RFID tagging on pallets, cases, containers and parts, by January 2005. These strange bedfellows see significant benefits to be able to uniquely identify products in their inventory, manage and track that inventory, realize lower costs and increase supply chain efficiencies. Through their enormous buying power these two organizations have enormous influence on their suppliers. The Department of Defense (DoD) has spent $100 million over the last 10 years on active RFID implementation. On July 30, 2004 the Acting Under Secretary of Defense for Acquisition, Technology, and Logistics signed a memorandum outlining policy for the use of RFID within the DoD (see website http://www.acq.osd.mil/log/rfid/index.htm). - The policy directs the adoption of specific business rules for the active, high data capacity RFID currently used in the DoD operational environment to ensure continued support for ongoing Combatant Commander in-transit visibility requirements and operations. - The policy states that DoD will be an early adopter of innovative, passive RFID technology that leverages the Electronic Product Code (EPC) and compatible RFID tags. The policy will require suppliers to put passive RFID tags on lowest possible piece part/case/pallet packaging once the supplier's contract contains language regarding the requirement (any date in January 2005 or beyond). RFID tags will be mandatory in DOD contracts issued as of Oct. 1, 2004, for delivery of material on or after Jan. 1, 2005. The final policy guidelines were published on August 9. The Defense Logistics Agency (DLA) is installing RFID readers and supporting infrastructure at strategic distribution centers in San Joaquin, Calif., and Susquehanna, Penn. The tagging of deliveries to the DOD will be phased in by procurement method, type of goods, location and layer of packaging. Beginning Jan. 1, 2007, all cases and pallets of all commodities shipped to all DOD locations should be tagged. In November 2004 the Department of Defense announced that it is pushing back to at least February the effective implementation date for when companies must start shipping supplies with RFID tags due to a lack of documented specification for RFID tags by the Office of Management and Budget and the Defense Department. Wal-Mart (Wal-Mart Stores, Supercenters, Neighborhood Markets and SAM'S CLUBS) is the world largest retailer. Internationally, the company operates in Puerto Rico, Canada, China, Mexico, Brazil, Germany, United Kingdom, Argentina and South Korea. In the quarter ending October 31, 2004 the firm had revenues of $69 billion and net income of $2.3 billion. At Retail Systems 2003 industry conference in Chicago Wal-Mart threw its weight behind RFID by announcing that it was requiring its top 100 suppliers to begin using RFID tags in their shipments by January 2005. The experiment began with 137 suppliers in 104 Wal-Mart stores, 36 Sam's Club warehouse stores and three distribution centers in Texas. In addition to the top 100 suppliers, 37 smaller suppliers volunteered for the Wal-Mart RFID program. In April 2004 Wal-Mart and eight product manufacturers begin testing electronic product codes, or EPCs, at select Supercenters and one regional distribution center in the Dallas/Fort Worth metroplex. The suppliers participating in the North Texas pilot are: Gillette, HP, Johnson & Johnson, Kimberly-Clark, Kraft Foods, Nestle Purina PetCare, Procter & Gamble and Unilever. Initially, a total of 21 products out of the more than 100,000 products carried in a typical Supercenter will be included in the trial. Wal-Mart is targeting 100 percent readability of pallet tags through dock doors and 100 percent readability of case tags on distribution center conveyor belts. In January 2005 Simon Langford, Wal-Mart's director of global RFID strategy. said during the Pro-Mat 2005 materials handling show that 53 suppliers started shipping RFID-tagged cases and pallets to Wal-Mart's distribution center in Dallas on January 1. He also that the retailer is on schedule to expand the initiative to 12 Distribution Centers and 600 stores by October and that Wal-Mart expects its entire supplier base of some 20,000 suppliers to be involved in RFID in some capacity by the end of next year. RFID readers are currently installed at 104 stores. In November European-based retailer the Metro Group, the world's fourth-largest retailer with a turnover of more than ?54 billion, became the first retailer in the world to bring RFID out of trial mode and into commercial deployment. Some 20 of its suppliers have equipped goods pallets with what are known as smart chips, and selected warehouses as well as outlets of the Metro Cash & Carry, Real and Kaufhof sales divisions are participating. Another 80 suppliers are scheduled to follow next year, and by January 2006, Metro Group plans to have 300 suppliers sending RFID-tagged pallets and cases to its distribution centers. The firm recently reported that RFID read accuracy in its distribution center in Unna, Germany is at 99 percent. So far, METRO has used RFID to read over 50,000 pallets at that distribution center. Given the enormous number of tags needed to support just the DoD and Wal_Mart one can reasonably expect the average cost of tags to drop. One can also envision a marriage between RFID technology at the start and termination point and GPS to track inventory while on route. Industry analyst firm IDC said it expects RFID spending for the U.S. retail supply chain to grow from $91.5 million last year to nearly $1.3 billion in 2008. The majority of spending will come from the hardware side, which covers RFID tags, infrastructure and systems integration. This will reach $875 million in 2007, mostly coming out of the pockets of manufacturers and distributors. RFID-related services will grow to about $270 million in 2007 before leveling off, IDC projected, while software spending will not begin to grow until about 2006, when more companies will start to need RFID middleware. According to high-tech market research firm, In-Stat worldwide revenues from RFID tags will jump from $300 million in 2004 to $2.8 billion in 2009. During this period, the technology will appear in many industries with significant impact on the efficiency of business processes. "By far the biggest RFID segment in coming years will be cartons/supply chain," said In-Stat analyst Allen Nogee. In-Stat has also found that the widespread adoption of the technology will take a couple of years to really ramp up, as tags are still relatively expensive. Privacy concerns may be the biggest obstacle to spread particularly in consumer products areas. A Few of the Players in RFID The main beneficiaries of the RFID shopping spree are hardware suppliers, including Intermec Technologies, Alien Technology and Matrics (now a division of Symbol Technologies). Consultants and software companies, including Hewlett-Packard, IBM, Microsoft, Sun Microsystems and SAP, are also looking for a slice of the action. Intermec Technologies is a combination of: Intermec, Norand Corp. and United Barcode Industries and part of the Automated Data Systems business segment of UNOVA Inc., a $1.1 billion industrial technologies company. Intermec develops, manufactures and integrates wired and wireless automated data collection, Intellitag RFID (radio frequency identification) and mobile computing systems for companies worldwide. Intermec was formed in 1996 and acquired in 1991 by Litton Industries, Inc and later spun off as part of Western Atlas which in turn spun off UNOVA. In 1997 Intermec acquired RFID semiconductor technology from IBM, Inc. On Nov. 3, 2004 Intermec and EPCglobal Inc announced that Intermec has offered to temporarily suspend its recently announced RFID intellectual property RAND (reasonable and non-discriminatory) licensing program for the EPCglobal Generation 2 RFID standard for 60 days to allow validation of the candidate specification. Alien Technology Corporation is a provider of reliable, high-volume, low cost, EPC compliant RFID products. Using Fluidic Self Assembly (FSA), a patented manufacturing process, Alien manufactures electronic product code (EPC) class 1 tags and readers used in a variety of applications including supply chain management, logistics operations and anti-counterfeiting or brand authentication to improve inventory management and reduce operating costs. Alien Technology Corporation is an active member of EPC Global. The company manufactures both tags and readers. The privately held company was founded in 1994 as Beckmen Display and changed its name in 1999 to Alien Technology when the focus of the company shifted to RFID. Alien raised $38 million in private equity financing in 2003 followed by an additional $18 million in April 2004 bringing the total equity financing for the company to $143 million. The firm employs 160 people. Alien Technology has developed and holds exclusive patent rights to a manufacturing assembly technology called Fluidic Self Assembly invented at UC Berkeley by company founder Prof. John S. Smith. FSA allows for the efficient placement of very large numbers of small components across a surface in a single operation. With FSA specifically shaped semiconductor devices (ranging in size from ten to several hundred microns) are suspended in liquid and flowed over a substrate that has correspondingly shaped "holes" or receptors on it , into which the devices settle. The shape of the devices and the holes is designed so that the devices fall easily into place and are selfaligning, creating RFID chips. The FSA process allows a manufacture to package tiny integrated circuits (NanoBlock ICs) for assembly into EPC tags at rates upwards of 2,000,000 per hour, versus the approximately 10,000 per hour possible with conventional methods capable of handling much larger and more costly ICs. This is essential for reducing the cost of tags, but is also important for the economical production of EPC tags in quantities of billions or even trillions. Matrics, Inc. was founded in 1999 by NSA veterans William Bandy and Michael Arneson, who worked on RF technology at the intelligence agency. In January 2002 Matrics announced $14 million VC investment followed by a $20 million round of Series C financing from a group of financial and strategic investors in July 2003. The company has approximately 60 employees. Matrics has developed EPC-compliant RFID systems for retail, defense, transportation and other vertical markets. The Matrics product portfolio features RFID systems including multi-protocol, EPC-compliant fixed readers; readers designed for embedded applications, such as RFID printers and mobile computers; high-performance antennas for RFID tag reading; and EPC labels that can be attached to items such as containers, pallets, cartons and more. The RFID tag family includes both read-only and read/write functionality to address a wide range of asset visibility applications. The firm has partnerships with TSMC, National Semiconductor to provide volume capacity. Matrics has had particular success with airports. McCarran International Airport in Las Vegas has ordered 100 million tags from Matrics to attach to passengers' luggage. The deal will generate $20 million in revenue for the company. Matrics negotiated a $3.5 million deal with the Hong Kong International Airport to install readers in its baggage-handling facilities. Delta Airlines has said it will spend up to $25 million to tag luggage and it is testing Matrics' technology on flights from Jacksonville, Fla., to Atlanta. In July 2004 Symbol Technologies, Inc. purchased Matrics for $230 million in cash. Symbol was founded in 1975 and is a leader in secure mobile information systems that integrate application-specific hand-held computers with wireless networks for data and voice and bar code data capture. Symbol had revenue $1.5 billion in 2003 and expects revenue of ~$1.75 billion in 2004. The firm has 5,600 employees. Before the acquisition of Matrics, Symbol's revenue breakdown was Mobile Computers 58%, Scan Engines 6%, Scanners 25%, Wireless 10%, and other 1%. Over the last few quarters Wireless has grown a few percentage points at the expense of Mobility Computers. The sources of revenue were channel 58%, direct 33% and oem 9%. The plan is for channel to grow to 76% while direct shrinks to 16%. EMEA accounted for 26% of revenue, AP 8% and TASS 66%. The deal jumpstarts Symbol's efforts to offer RFID products to its huge customer base, and the company believes that the combination of Symbol and Matrics would create a large-scale, established RFID company that could help speed the uptake of RFID. William Nuti, Symbol president and chief executive officer "We believe that in order for RFID to be deployed successfully, it needs to be deployed as a system -- a system that allows customers to capture, move and manage critical information to and from the point of business activity. By incorporating the Matrics EPC-compliant RFID products into Symbol's portfolio of industry leading mobile computing, advanced data capture and wireless technologies, Symbol can help customers in key market segments gain operational efficiencies and realize competitive advantage." In September 2003 IBM introduced an RFID service. IBM's RFID offering comprises consulting and implementation services, as well as specialized software. It has developed a three-PHASE approach. Phase one includes consulting and development of the business case for RFID. Although dependent on the scope a company's plans, IBM estimates this will cost its customers from $200,000 to $500,000. Phase two involves deploying a 12-week pilot. Pricing, again, depends on scope, but IBM estimates that phase two will cost less than $1 million. The final phase is the full rollout of the RFID system. Here, too, the cost is based on the size of the company and the extent of the implementation. Relevant Standard Organizations AIM is a global trade association comprising providers of components, networks, systems, and services that manage the collection and integration of data with information management systems. Serving more than 900 members in 43 countries, AIM is dedicated to accelerating the growth and use of AIDC technologies and services around the world. AIM members are manufacturers or service providers of technologies such as radio frequency identification, bar code, card technologies (magnetic stripe, smart card, contactless card, and optical card), biometrics, and electronic article surveillance (EAS). The Uniform Code Council, Inc., a 25-year old not-for-profit standards organization, administers the Universal Product Code (U.P.C.) and provides a full range of integrated standards and business solutions for over 250,000 member companies doing business in 25 major industries. The UCC together with EAN International, co-manage the EANUCC System and the EAN.UCC Global Standards Management Process (GSMP). The UCC functions as a primary resource for business and industry, developing worldwide standards for identification codes, data carriers, and electronic commerce. The EANUCC System enables companies of any size, industry, or geography to communicate in The Global Language of BusinessT in over 140 countries worldwide. Collectively, over one million member companies around the world utilize these innovative business tools to drive costs out of the supply chain and improve business productivity and efficiency. The UCC operates two wholly-owned subsidiaries, UCCnet and RosettaNet. EAN International is the global not-for-profit organization that creates, develops and manages the EANUCC standards jointly with the Uniform Code Council, one of its Member Organizations. These are open, global, multisectoral information standards, based on best business practices. By driving their implementation, EAN International and its Member Organizations play a leading role in supply and demand chain management improvement worldwide. EPCglobal is a joint venture between the Uniform Code Council (UCC) and the European Article Numbering (EAN) Association. This is the main organizational body involved in the standardization of the electronic product code (EPC), which is widely used and accepted for RFID systems. As an open standard, EPC serves two important purposes. Suppliers of the technology can develop products-tags and readers-to one standard, which makes it more affordable to deploy. Customers have more vendor choices and are assured that the products conforming to the EPC standard are truly interoperable. In December 2004 EPCGlobal officially approved the royalty-free Gen 2 standard for radio frequency identification. The point of the Gen 2 specification is to improve the baseline performance of RFID, e.g. by improving the accuracy, speed, and distance of tag read rates. Companies require detailed information about their products and supply chain, and the ability to share that information with their trading partners in order to facilitate commercial transactions and the movement of goods and services. In order to serve various needs for information, two distinct information networks have been developed: the Global Data Synchronization Network (GDSN) and the EPCglobal Network. The GDSN ensures the quality of Static Information about commercial entities and product/service groups among partners for collaborative trading. The EPCglobal Network provides access to Dynamic Information about the movement of individual items as they pass through the supply chain. The combination of the EPCglobal Network and the GDSN can provide a comprehensive, integrated approach to electronic collaboration. Static Information about commercial entities might typically include location information about a warehouse, store, distribution center, sales office, etc. Static Information about product/service groups might include trading unit, selling unit, item dimensions, etc. Dynamic Information conveys data specific to an individual instance of an object including its history. The EPCglobal Network and the GDSN both utilize a mechanism to associate a global identification number with the related information, as well as a mechanism to manage access to information within the network. The EPCglobal Network is a method for collecting and sharing information about the physical movement of individual items. The goal of the EPCglobal Network is to provide access to Dynamic Information for collaborative logistics using Internet technology to create a network for sharing that information among authorized trading partners in the global supply chain. In contrast, the GDSN is a method for sharing Static Information with trading partners in order to facilitate commercial transactions. The goal of the GDSN is to ensure the quality of Static Information among partners for collaborative trading. Founded in 1999, the Auto-ID Center is a unique partnership between almost 100 global companies and five of the world's leading research universities; MIT in the US, the University of Cambridge in the UK, the University of Adelaide in Australia, Keio University in Japan, and the University of St. Gallen in Switzerland. Together they are creating the standards and assembling the building blocks needed to create an "Internet of things." The Auto-ID Center is designing, building, testing and deploying a global infrastructure - a layer on top of the Internet - that will make it possible for computers to identify any object anywhere in the world instantly. The Auto-ID Center is designing the critical elements of the new network. These elements include: Electronic Product Code or EPC, specification for cheap tags and cheap agile readers, Object Naming Service or ONS, Product Mark-up Language or PML and Savant software technology. The Center is also developing the standards needed to ensure that products can be identified regardless of which manufacturer tags them, and building some of the software that will help manage the flow of data. In May 2003, the UCC announced that it had reached an agreement with MIT to license EPC technology, which was developed by the Auto-ID Center, thus giving the UCC exclusive rights to the technology. In accordance with this agreement, both bodies intend to form a joint venture called Auto-ID Inc. Auto-ID Center sponsors, including Coca-Cola, Gillette, Target, Home Depot and Wal-Mart, have poured about $20 million into the project since its start. Auto-ID Center as a federation of research universities linked by the common vision of an "Internet of things," will continue to research and develop new technologies and applications for revolutionizing global commerce as Auto-ID Labs.