Compliance boosts RFID adoption

The market for RFID technology may see increased uptake over the next three years as Canadian manufacturers and distributors begin to feel the pressure of complying with mandates from big retailers and the U.S. government, industry observers say.

And with compliance as a driver for RFID adoption, many manufacturers and distributors will be looking at acquiring hosted RFID services, according to George Goodall, research analyst at Info-Tech Research in London, Ont.

Hosted RFID services would allow companies to quickly set up a “slap-and-ship” RFID tool in order to “play the game” of big retailers like Wal-Mart and Target, which have mandated suppliers to use RFID tags for shipping goods, said Goodall.

“Short-term, hosted RFID is a stop-gap measure, so I think over the next three years it will increase in popularity, but after that point, some of the more core technology will become more available,” he said. IBM and Seeburger are two major vendors that offer hosted RFID services ideal for manufacturers “struggling with RFID mandates from key customers,” read an Info-Tech research note.

IBM launched its Expressed RFID Services in the fall of 2005 in anticipation of an expected increase in RFID adoption this year, said Ray Paskauskas, RFID solutions manager for IBM Canada in Markham, Ont.

“RFID adoption in the U.S. is ahead of Canada [but] right now we are preparing for a lot more activity in 2006…for major retailers in Canada,” said Paskauskas.

The IBM executive pointed out that managed services would allow small and medium-sized manufacturers to “fulfill the minimum requirement at a much lower cost.” The hosted service involves customers entering product information by scanning product barcodes. This information is electronically sent to the hosted software that converts it into EPC (electronic product code), the global standard for RFID codes. RFID tags are then printed by the customer and placed on the case or palette before shipping.

“There isn’t a less expensive [RFID] solution in the marketplace and we are seeing a range of between $60,000 to $100,000 [to invest] in an on-premise RFID technology,” he said. Startup cost for IBM’s RFID Express Service is under $35,000, which includes the barcode reader, RFID printer, access to the application and services, as well as help desk support and equipment monitoring. The succeeding monthly fee is less than $1,000, said Paskauskas.

Seeburger’s IDnet, meanwhile, is a hosted component of its RFID Workbench product priced at about $500 per month, according to Info-Tech. Both Paskauskas and Goodall agree, however, that managed services may not be a viable alternative for larger enterprises looking at RFID deployment to improve business processes. In its research note, Info-Tech pointed out that hosted service does not offer “advanced analytics that help companies leverage RFID investments into supply chain efficiencies.”

While there seems to be an industry consensus about the potential benefits that RFID could bring to business processes, a big issue that may hinder its full deployment among organizations is cost, said Stella Yoon, president and CEO of wireless technology developer cStar Technologies Inc. in Toronto.

“Right now everybody is focusing on [RFID] to prove [the benefits of] the technology. But once it’s proven, does it make ROI sense? These two should come together — the technology and price points,” said Yoon, whose company has developed patent-pending RFID technology using passive, low-cost tags specifically designed as a security application for low-risk cargo shipments.

One market need that cStar hopes to address with its RFID development is cross-border cargo security using paper-based disposable RFID tags, called “stealth tags,” containing read/write data and a thin film “break-away” antenna. The tag is buffered by sponge layers designed to take up surface variance and contains an outer wrapper with adhesive that can attach to any cargo or package, essentially serving as a security seal.

If the shipment is tampered or opened after leaving the point of origin and before reaching the border or the point of destination, the tag would stop functioning and the RFID reader would not be able to detect a signal. This would cause a red flag to be raised on a particular shipment and would require further inspection, either at the port of entry or at the point of destination.

The cStar tag, which costs anywhere from $5 to $20 apiece, serves as a tamper-detection tool aimed at expediting cargo shipments entering the U.S. in light of increased security at the border resulting in shipment delays, said Yoon. The stealth tag caught the attention of the U.S. Department of Homeland Security, which invited the Toronto company to conduct a briefing in 2004, said Yoon.

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