RFID Adoption Hinges On Supply Chain's Embrace

RFID is a technology with huge potential in manufacturing, retail and other verticals. With multiple applications leading to business benefits, the RFID market is slowly starting to pick up.

But many issues around the technology have not been addressed adequately so far. Here are a few we see as key to developing a strong RFID strategy.

Barcodes Vs. RFID

RFID has the potential to completely replace bar codes in the future, but for many businesses, the existing bar-code infrastructure is hard to throw away for an expensive and relatively unproven RFID solution.

It's necessary to retain bar-code infrastructure while implementing RFID to support initial business processes. Until RFID is ubiquitous at all stages of the supply chain, it will be essential to attach bar codes to goods. This scenario will last until all partners in the supply chain are fully up and running--something that's unlikely to happen anytime soon.

Vendors and VARs alike will need to discuss with customers which aspects of their bar-code system to retire and replace with RFID. Building an RFID system that works seamlessly with a bar-code system will be challenging. Vendors and their solution-provider partners will need to learn the most cost-effective touchpoints very quickly.

Data Quality

RFID's effects as an enabling technology are fundamentally based on the data associated with tags. If data about a product or component is incorrect, RFID will only exacerbate existing problems--and at a faster rate.

Making sure that data derived from index notations correctly reflects an item's properties is paramount to extracting value from RFID. Incorrect data not only will have an impact on a company's processes; it also will be detrimental to any customer/supplier relying on the information through initiatives such as global data synchronization (GDS).

A first step for businesses is to prepare their data for RFID. While some have foreseen such requirements and tackled the issue during bar-code implementations, there's a great deal more data flow possible through the use of RFID and, therefore, a greater need to prepare.

A significant benefit of RFID depends on having effective integration with partners in the supply chain. Manufacturers will be able to capitalize on data generated by an RFID-enabled retailer by having greater insight into stock turnover, which will translate to more efficient manufacturing planning. Retailers will be able to get the exact status of goods in the supply chain and anticipate stock shortages.

All of that is feasible with RFID, but the integration required may be extensive, and, again, data quality will be paramount. A solution provider's expertise will be crucial in this area.

Wireless Security

RFID can create a security problem, yet the issue receives little attention from RFID technology vendors. Much like the advent of corporate wireless networks and subsequent "war-driving," RFID holds the potential for corporate "misdemeanor."

While there's already an unintended ad hoc protection system in place--the range at which RFID tags can be read--vulnerabilities can be introduced by RFID nevertheless.

While more expensive tags are capable of cryptography, the cheaper (and most used) RFID tags have no such functionality. The impending use of more read/write RFID tags means that rogue readers with connected antennas might be able to overwrite a tag's information, possibly leading to massive implications further along the supply chain. In addition, competitors might try to gain information regarding a manufacturer's production processes by monitoring production times.

There are few security countermeasures currently in place. One solution suggested by RSA Security is to have RFID tags use separate identifiers that they transmit at different times. Those identifiers can be picked up only by safe readers.

The Verdict

Ultimately, is all of that reason to avoid RFID? Certainly not. Simply put, solution providers that want to get into the business of deploying RFID systems need to be cautious.

None of these snags are major inhibitors to RFID adoption in any vertical industry. Much RFID strategy at this point in time will be devoted to convincing businesses of the technology's suitability in supporting business processes. Anticipating queries or issues such as those discussed above will help VARs and vendors differentiate themselves from the competition.

To penetrate the market, software VARs and vendors need to continue their RFID education campaign and reassure potential skeptical customers. Test centers, conferences and white papers are key tools to capturing a slice of the RFID market, especially in the early stages. Reputation, too, will play a big role. VARs interested in entering the RFID space should pay close attention.

Adam Jura is an associate analyst at Datamonitor's technology business unit. The research firm is based in London and has U.S. offices in New York and San Francisco.