Looking at previous new technologies can help draw a few important lessons that can be applied to manage RFID rollouts.
Like most mew technologies, RFID too is not immune to riding the turbulent looking waves of the Gartner Hype Cycle. The hype around RFID is evident from the mass of written word there is on RFID. A quick google for RFID yields 57,200,000 results. The RFID vision is compelling especially so for the FMCG sector, now often referred to as the CPG or Consumer Packaged Goods sector. RFID promises to make the entire supply chain transparent. RFID also promises closer collaboration between all players in the supply chain. And as a result will lead to benefits like reduced stock-out situations, reduction in the amount of goods that are not fit to be sold either because of expiration, perishability or any other cause. The peak of inflated expectations has been scaled.
However the first few big-ticket implementations have clearly shown that the initial economics of such projects are far from favorable. Widespread standards governing the use of RFID and the sharing of data among collaborating partners have not emerged. A host of technical issues like package design, tag placement and readability continue to nag. Its not before long that the pundits and the soothsayers start to talk of doomsday and about the good money that has been burnt during the days of ascent to the peak. The number of takers for the technology will fall rapidly and those that have implemented will go slow on expansion. These are signs of the trough of disillusionment.
Making RFID Work
Before looking at the ways to scale the plateau of productivity, lets understand the lessons that previous technology evolution cycles have taught us. Even when the technology implementation has been perfected, rollouts and deployments usually take longer than expected and it is impossible to get to cent percent compliance by all in the industry.
Let’s first look at what we have learnt from new technologies that have gone up and down the Gartner hype cycle before focussing on how to make RFID a success.
One, new technology implementation is not about technology. It’s about building a robust business case (See Planned Success.) It’s not about what the RFID tag or the reader can do; it’s about what business issues will stand resolved with the implementation of RFID.
Two, measure results. An associated learning from building a business case is the measurement of results, both short-term and long-term. So it is imperative to set milestones and measure results thereof. To set short term and long term goals and then measure the RFID initiative results against them will be the only mechanism to reconcile RFID economics.
Three, be realistic about costs and benefits. And as a note of caution, it is very important for the management to be realistic about the costs and the benefits that come out of a project.
Four, instill flexibility. The driving objective to manage the speed of rollout of a technology should always be the benefits and not the speed of the roll out itself. Therefore, it is important to adopt a flexible approach. A flexible approach using best practices and technologies will yield maximum benefits and long-term viability.
Managing the Rollout
For FMCG companies to successfully manage the technology rollout and reap benefits there are several aspects that must be addressed.
One, understand drivers of benefits. Over the next several years the focus must be accelerating the benefits. This will require a deep understanding of the supply chain from the point of production to the point of sale, including aspects like replenishment and stock rotation to warehouse and delivery. The effort should be driven towards the capture of pallet and case level data and thus efficiently use the captured data.
Two, adapt business processes. An RFID rollout will lead to generation of data that had never been captured before. This will open up a host of opportunities for better inventory management, product management and even recall of products and its management. This data will also create opportunities of better management throughout the supply chain. But the opportunities can be realized only with a substantial change in the business processes of both the supplier and the retailer.
Three, data standardization. In order to completely reap the benefits of new data that is generated, companies have to drive standardization of data formats. Many companies have been slow to adopt the data formats for products as maintained in a global registry under UCCNet. As a result a lot of data reconciliation is manual, something that can and must be avoided.
Four, drive industry wide adoption. For RFID be really successful, or rocking as some of you might say, it is necessary for the entire retail industry to adopt it. That’s when the supply chain will become truly transparent. More so, for most manufacturers, one retailer (no matter how large) will not be enough to justify the expense or generate the benefit.
Five, leverage existing infrastructure. The building of RFID infrastructure should be driven by the dictat of leverage. Not only should the existing infrastructure be leveraged, (See Emulate the Internet) but other applications and uses of product tracking information must be explored. Can the information be used for merchandising opportunities, for instance, or for tracking and tracing recalled products? Considering the large initial investment in the RFID infrastructure of tags, readers, middleware and application, it is only prudent to explore new applications as that will also help reduce the pay back period.
And finally, consumer is king. Despite the best efforts, many initiatives can be hijacked due to poor communications and misunderstandings. A coordinated and active approach is required to address some of the important consumer issues and privacy concerns. For instance, addressing RFID’s ability to be a practical tool to manage counterfeits in the pharma industry will instill confidence in the consumers. Another application could be easier redressal of returns and warranty will only further the confidence.
This is fifth and last piece on RFID for Dataquest
Monday, October 30, 2006
Monday, October 16, 2006
Emulate the Internet
The RoI figures on RFID deployments are far from encouraging. Most analysts suggest a focused approach to better RoI, but the catch is in adopting the right approach to infrastructure building and then deploying the right applications, not vice versa.
Wal*Mart put all its weight behind RFID and in January 2005 mandated its suppliers to adopt RFID for pallets shipped in to its retail warehouses. That’s old hat now. More than a year and a half into the deployment, the naysayers are already writing the deployment off. A research by a leading analyst company said that Wal*Mart and other retailers that have pushed RFID might be bitterly disappointed by the results. The company researchers modeled a company-wide roll-out of RFID, used to track cases and pallets of goods throughout the supply chain, at a hypothetical, $5 billion retailer. What they found: In the best-case scenario, RFID investments pay off in nine to 10 years. That's a long time to wait.
The obvious question then is, that is RFID a waste of money? Some analysts suggest that that RFID's deployment won't be as broad as anticipated. It will be highly focused. RFID won't make it into every store. It won't make sense in every store. In other words the research company suggests that it only makes financial sense when used for tracking certain individual items, such as DVDs. If retailers expand their deployment to track everything, it will only elongate the time to positive RoI.
Common Wisdom
Going by the numbers we have today, it would not be too hard to believe what the reports says. But a large number of analysts and informed people, ten years ago, questioned the RoI of a corporate Internet mission because of the limited functionality and associated administrative sweat. And therefore the mass market for residential broadband was inconceivable. RFID projects hold great promise for the future, but face the same concerns that the corporate Internet strategy did over a decade ago. The point that I am trying to make is that CIOs must look at the evolution and the growth of the Internet to take a few lessons. These lessons can then be applied to RFID to foretell its evolutionary path.
Amongst the first candidates to be RFIDed were those applications which were developed around manual data entry or non-serialized bar code tracking. These tasks, if I may call them that, could be upgraded and enhanced with low cost, high quality, automatically captured RFID data. In other words RFID holds immediate interest in areas like store operations, inventory management, electronic proof-of-delivery, and pharmaceutical tracking. However a slew of existing applications ranging from ERP to merchandizing applications are already used to keep track of products or goods. Does this not sound similar to the times when there were no products designed to deliver reliable Internet service and manage bandwidth among multiple business users. And thus out of necessity, many small and medium sized businesses had to work with connections multiplexed though multiple low speed dial-up modems. Similarly the real potential for RFID RoI lies with applications that will be able to leverage the automated tracking of objects at low cost, high volume, and in real time without human intervention.
And its these applications that will make the RFID RoI equation easier to comprehend and faster to turn to black. To be visionary with the Internet 10 years ago was to see the potential for it to spread from universities to enterprise email to today’s Web access via cell phone or e-commerce via wireless at the corner Barista coffee shop. The changes that RFID brings will be as large and life-changing as our mobile phone and Internet technologies have become. RFID networks will evolve from an application layer to become an enabling infrastructure and the ROI will come from both enhancing existing applications and building many new ones that harness this revolutionary data source. Some day RFID tagging may be as ubiquitous as Internet access is today.
The next obvious question is how is all of this possible?
Enabling Infrastructure
The most cost-effective way to deploy RFID on a large scale will be to follow examples set by successful network-building models. Enterprise networks combining ethernet and TCP/IP can easily add more users and adopt new functionality because their layered architecture and support for standards helps to isolate the complexities of implementation, promoting scalability and growth. A layered architecture is fundamental to every successful modern networking technology. This is exactly what the early RFID solutions have lacked, focusing on stove-pipe connectivity instead of network topology. Instead of building a separate foundation for RFID, the RFID network must be welded into the enterprise infrastructure and by standards that are already in place. So the idea is not to look at RFID not as an island of experimentation but as a global plug-and-play solution that can be rolled out enterprise-wide. And this is precisely the anti thesis of products and applications one sees in the market place today. Analyst firms also suggest that the driving mantra for RFID applications must be focus.
Key Benefits
This approach establishes a few key benefits that are otherwise overlooked in most RFID deployments, pilot or otherwise. One, it follows a network centric approach wherein RFID readers belong to the enterprise network. These RFID devices are managed as part of the enterprise, not as separate experimental nodes. The point here is to leverage the existing infrastructure that’s designed for scalability and manageability. Two, this approach to RFID networks builds on standards to promote interoperability and commoditization. This may not be as important today but in times to come, most RFID users will grapple with interoperability issues as a large number of RFID solutions still depend on proprietary tag protocols, reader protocols, and custom-built middleware.
RFID has the potential to emerge as the very fabric on which the new rules of business will be written, the distinguishing factor will be to get the script write.
This is my fourth article on RFID in Dataquest
Wal*Mart put all its weight behind RFID and in January 2005 mandated its suppliers to adopt RFID for pallets shipped in to its retail warehouses. That’s old hat now. More than a year and a half into the deployment, the naysayers are already writing the deployment off. A research by a leading analyst company said that Wal*Mart and other retailers that have pushed RFID might be bitterly disappointed by the results. The company researchers modeled a company-wide roll-out of RFID, used to track cases and pallets of goods throughout the supply chain, at a hypothetical, $5 billion retailer. What they found: In the best-case scenario, RFID investments pay off in nine to 10 years. That's a long time to wait.
The obvious question then is, that is RFID a waste of money? Some analysts suggest that that RFID's deployment won't be as broad as anticipated. It will be highly focused. RFID won't make it into every store. It won't make sense in every store. In other words the research company suggests that it only makes financial sense when used for tracking certain individual items, such as DVDs. If retailers expand their deployment to track everything, it will only elongate the time to positive RoI.
Common Wisdom
Going by the numbers we have today, it would not be too hard to believe what the reports says. But a large number of analysts and informed people, ten years ago, questioned the RoI of a corporate Internet mission because of the limited functionality and associated administrative sweat. And therefore the mass market for residential broadband was inconceivable. RFID projects hold great promise for the future, but face the same concerns that the corporate Internet strategy did over a decade ago. The point that I am trying to make is that CIOs must look at the evolution and the growth of the Internet to take a few lessons. These lessons can then be applied to RFID to foretell its evolutionary path.
Amongst the first candidates to be RFIDed were those applications which were developed around manual data entry or non-serialized bar code tracking. These tasks, if I may call them that, could be upgraded and enhanced with low cost, high quality, automatically captured RFID data. In other words RFID holds immediate interest in areas like store operations, inventory management, electronic proof-of-delivery, and pharmaceutical tracking. However a slew of existing applications ranging from ERP to merchandizing applications are already used to keep track of products or goods. Does this not sound similar to the times when there were no products designed to deliver reliable Internet service and manage bandwidth among multiple business users. And thus out of necessity, many small and medium sized businesses had to work with connections multiplexed though multiple low speed dial-up modems. Similarly the real potential for RFID RoI lies with applications that will be able to leverage the automated tracking of objects at low cost, high volume, and in real time without human intervention.
And its these applications that will make the RFID RoI equation easier to comprehend and faster to turn to black. To be visionary with the Internet 10 years ago was to see the potential for it to spread from universities to enterprise email to today’s Web access via cell phone or e-commerce via wireless at the corner Barista coffee shop. The changes that RFID brings will be as large and life-changing as our mobile phone and Internet technologies have become. RFID networks will evolve from an application layer to become an enabling infrastructure and the ROI will come from both enhancing existing applications and building many new ones that harness this revolutionary data source. Some day RFID tagging may be as ubiquitous as Internet access is today.
The next obvious question is how is all of this possible?
Enabling Infrastructure
The most cost-effective way to deploy RFID on a large scale will be to follow examples set by successful network-building models. Enterprise networks combining ethernet and TCP/IP can easily add more users and adopt new functionality because their layered architecture and support for standards helps to isolate the complexities of implementation, promoting scalability and growth. A layered architecture is fundamental to every successful modern networking technology. This is exactly what the early RFID solutions have lacked, focusing on stove-pipe connectivity instead of network topology. Instead of building a separate foundation for RFID, the RFID network must be welded into the enterprise infrastructure and by standards that are already in place. So the idea is not to look at RFID not as an island of experimentation but as a global plug-and-play solution that can be rolled out enterprise-wide. And this is precisely the anti thesis of products and applications one sees in the market place today. Analyst firms also suggest that the driving mantra for RFID applications must be focus.
Key Benefits
This approach establishes a few key benefits that are otherwise overlooked in most RFID deployments, pilot or otherwise. One, it follows a network centric approach wherein RFID readers belong to the enterprise network. These RFID devices are managed as part of the enterprise, not as separate experimental nodes. The point here is to leverage the existing infrastructure that’s designed for scalability and manageability. Two, this approach to RFID networks builds on standards to promote interoperability and commoditization. This may not be as important today but in times to come, most RFID users will grapple with interoperability issues as a large number of RFID solutions still depend on proprietary tag protocols, reader protocols, and custom-built middleware.
RFID has the potential to emerge as the very fabric on which the new rules of business will be written, the distinguishing factor will be to get the script write.
This is my fourth article on RFID in Dataquest
Wednesday, October 04, 2006
Opening New Vistas
RFID holds the potential to impact our daily lives in unprecedented ways in the future. The economic impact and the business benefits can not be fathomed today. What can, is that there is no leveling off.
From Lord Kelvin to Ken Olson to the great Thomas Watson, all have tried to play oracle, but did not do a great job. However the soothsayer who warned Julius Caesar of the ides of March was bang on target. Actually he is the only one I know who looked like a professional playing oracle. Despite knowing the dangers of putting one foot in a place where it hurts, I still fall prey to the strong temptation of playing “soothsayer.” Let’s try and gaze into the crystal ball to see how the future of RFID applications will look like.
The Future
Some estimates suggest that in the very near future simple RFID tags will cost as low as five cents US or maybe less. That will open floodgates for economical widespread use. Actually at that level, they will be so cheap that you could also think of implanting them in wine glasses (Yes, you read that right!) At that place, the tag provides a novel way of sensing the level of wine in a glass and will then communicate the information to restaurant staff so that they know when a glass is almost empty and requires a refill of wine or water or any other liquid that resides in the glass. This will help the restaurant deliver immaculate and unobtrusive service and obviously create a huge potential for sales spikes. In fact wine and liqueurs are high-margin restaurant items. The dual impact of the technology will unleash a huge potential new-to-world market.
Let’s look at another application. An RFID tag can be embedded in a pizza delivery bag to create smart pizza delivery bag. The embedded tag can then use a heat and time algorithm to calculate when it should tell a base unit to stop charging the heating element. A thermal switch connected to the RFID tag can provide an additional layer to stop the heating. With embedded algorithms newer non-metallic heating elements can be tested instead of the conventional metallic heating elements. This will help create bags that are energy efficient and can be lighter considering the use of newer materials for its heating element.
The automotive sector is another area that will feel a widespread change because of RFID. Ford is actually using RFID extensively on its manufacturing lines for engines. Most cars in the future will come with smart RFID tags which will forever point out not only the location but also the health of the vehicle to readers. In a simple scenario, readers will be mounted on lamp posts and the real speed of a car zipping past two lamp posts will require just a little simple arithmetic. The RFID tag will also reveal the identity of the owner to the reader and also an associated mobile number. An electronic over-speeding challan will be generated and text messaged to the offender within a couple of seconds.
The Present
A whole lot of this will sound nothing short of wishful thinking. However some of these predictions are grounded in realities of RFID projects that are being implemented today or have been implemented in the past.
The Chicago Marathon is a mega event that has nearly 40,000 runners participating. It is a gigantic challenge to track runners over the race course and provide them with accurate running times. That’s because at a typical marathon, many runners stand behind each other at the starting line. When the starter’s pistol signals a race’s beginning, only a few runners cross the starting line in sync with the timekeeper. This means that these few runners, the race leaders, are the only ones who receive accurate split and finishing times. Under the Chicago Marathon’s previous practices, staff guided all runners who successfully crossed the finish line into chutes where race numbers and elapsed times were recorded by officials. When runners completed the race very close to one another, these chutes would sometimes get backed up, making it difficult for officials to record runners’ times accurately causing frustration for race participants and staff alike.
Enter RFID tag! A tag is attached to the running shoes of all race participants. With a few readers strategically placed along the route, Chicago Marathon staff can now record the precise start, finish and split times of each runner, giving them an accurate account of their performance.
What’s more, readers along the route ensure that all runners follow the correct course, dissuading those who might be tempted to cheat.
Hang on there’s more. Another service generated out of the RFID tagging is MarathonMessenger, an e-mail service that provides its subscribers with information on runner timings allowing friends, family and marathon fans to stay abreast of events. In its first year of use at the Chicago Marathon, the service had 15,000 registered users!
Let’s look at another one. ExxonMobil, one of the world's largest energy companies, introduced Speedpass, an RFID-based system for payment. Customers subscribe to Speedpass for free and provide a credit card number for making petrol purchases. In return, they receive a small transponder attached to a key ring. When a customer swipes the transponder in front of the petrol pump, it authorizes the pump to release petrol or diesel and charges the customer's credit card.
Speedpass creates a number of conveniences for customers. First, Speedpass purchases take about 15% less time than credit card purchases. Second, Speedpass purchases are more reliable: magnetic credit card stripes are prone to damage which can make purchasing inconvenient for customers whose damaged cards can’t be read by credit card terminals. Speedpass goes even further, allowing easier checkout at convenience stores. Research suggests that as much as 65% of the revenues of a petrol pump in the US are non-fuel related.
The results put in one word have been striking. Speedpass subscribers, on average, visit Mobil petrol pumps one more time each month and spend two to three per cent more each month than other customers. The use of Speedpass has also been extended a huge number of McDonalds outlets in the US thanks to its roaring success. Shell replicated the same with its version christened the Easypass. And all this started way back in 1996.
No Slowing Down
While history is a bad yardstick to forecast the future, nonetheless it must not be forgotten that technology is the greatest catalyst for change. From railways to automobiles, from radio to TV to computers, technology has never failed to amaze and get done the unthinkable. It’s precisely this attribute that proven all the soothsayers wrong, and hopefully me too. And I quote Prof. Harold J. Leavitt, Kilpatrick Professor Emeritus at the Stanford Graduate School of Business, “Regardless of other economic trends, technology itself has no brakes nor an OFF button, so the new world is unlikely either to slow down or to level off. Information technology has a long way to go before it comes into full flower, and other world changing technologies are ripening close behind.”
And by the way the wine glass thing I talked about is a project being developed by Mitsubishi Electric Research Labs!!
This is the third in my series for Dataquest
From Lord Kelvin to Ken Olson to the great Thomas Watson, all have tried to play oracle, but did not do a great job. However the soothsayer who warned Julius Caesar of the ides of March was bang on target. Actually he is the only one I know who looked like a professional playing oracle. Despite knowing the dangers of putting one foot in a place where it hurts, I still fall prey to the strong temptation of playing “soothsayer.” Let’s try and gaze into the crystal ball to see how the future of RFID applications will look like.
The Future
Some estimates suggest that in the very near future simple RFID tags will cost as low as five cents US or maybe less. That will open floodgates for economical widespread use. Actually at that level, they will be so cheap that you could also think of implanting them in wine glasses (Yes, you read that right!) At that place, the tag provides a novel way of sensing the level of wine in a glass and will then communicate the information to restaurant staff so that they know when a glass is almost empty and requires a refill of wine or water or any other liquid that resides in the glass. This will help the restaurant deliver immaculate and unobtrusive service and obviously create a huge potential for sales spikes. In fact wine and liqueurs are high-margin restaurant items. The dual impact of the technology will unleash a huge potential new-to-world market.
Let’s look at another application. An RFID tag can be embedded in a pizza delivery bag to create smart pizza delivery bag. The embedded tag can then use a heat and time algorithm to calculate when it should tell a base unit to stop charging the heating element. A thermal switch connected to the RFID tag can provide an additional layer to stop the heating. With embedded algorithms newer non-metallic heating elements can be tested instead of the conventional metallic heating elements. This will help create bags that are energy efficient and can be lighter considering the use of newer materials for its heating element.
The automotive sector is another area that will feel a widespread change because of RFID. Ford is actually using RFID extensively on its manufacturing lines for engines. Most cars in the future will come with smart RFID tags which will forever point out not only the location but also the health of the vehicle to readers. In a simple scenario, readers will be mounted on lamp posts and the real speed of a car zipping past two lamp posts will require just a little simple arithmetic. The RFID tag will also reveal the identity of the owner to the reader and also an associated mobile number. An electronic over-speeding challan will be generated and text messaged to the offender within a couple of seconds.
The Present
A whole lot of this will sound nothing short of wishful thinking. However some of these predictions are grounded in realities of RFID projects that are being implemented today or have been implemented in the past.
The Chicago Marathon is a mega event that has nearly 40,000 runners participating. It is a gigantic challenge to track runners over the race course and provide them with accurate running times. That’s because at a typical marathon, many runners stand behind each other at the starting line. When the starter’s pistol signals a race’s beginning, only a few runners cross the starting line in sync with the timekeeper. This means that these few runners, the race leaders, are the only ones who receive accurate split and finishing times. Under the Chicago Marathon’s previous practices, staff guided all runners who successfully crossed the finish line into chutes where race numbers and elapsed times were recorded by officials. When runners completed the race very close to one another, these chutes would sometimes get backed up, making it difficult for officials to record runners’ times accurately causing frustration for race participants and staff alike.
Enter RFID tag! A tag is attached to the running shoes of all race participants. With a few readers strategically placed along the route, Chicago Marathon staff can now record the precise start, finish and split times of each runner, giving them an accurate account of their performance.
What’s more, readers along the route ensure that all runners follow the correct course, dissuading those who might be tempted to cheat.
Hang on there’s more. Another service generated out of the RFID tagging is MarathonMessenger, an e-mail service that provides its subscribers with information on runner timings allowing friends, family and marathon fans to stay abreast of events. In its first year of use at the Chicago Marathon, the service had 15,000 registered users!
Let’s look at another one. ExxonMobil, one of the world's largest energy companies, introduced Speedpass, an RFID-based system for payment. Customers subscribe to Speedpass for free and provide a credit card number for making petrol purchases. In return, they receive a small transponder attached to a key ring. When a customer swipes the transponder in front of the petrol pump, it authorizes the pump to release petrol or diesel and charges the customer's credit card.
Speedpass creates a number of conveniences for customers. First, Speedpass purchases take about 15% less time than credit card purchases. Second, Speedpass purchases are more reliable: magnetic credit card stripes are prone to damage which can make purchasing inconvenient for customers whose damaged cards can’t be read by credit card terminals. Speedpass goes even further, allowing easier checkout at convenience stores. Research suggests that as much as 65% of the revenues of a petrol pump in the US are non-fuel related.
The results put in one word have been striking. Speedpass subscribers, on average, visit Mobil petrol pumps one more time each month and spend two to three per cent more each month than other customers. The use of Speedpass has also been extended a huge number of McDonalds outlets in the US thanks to its roaring success. Shell replicated the same with its version christened the Easypass. And all this started way back in 1996.
No Slowing Down
While history is a bad yardstick to forecast the future, nonetheless it must not be forgotten that technology is the greatest catalyst for change. From railways to automobiles, from radio to TV to computers, technology has never failed to amaze and get done the unthinkable. It’s precisely this attribute that proven all the soothsayers wrong, and hopefully me too. And I quote Prof. Harold J. Leavitt, Kilpatrick Professor Emeritus at the Stanford Graduate School of Business, “Regardless of other economic trends, technology itself has no brakes nor an OFF button, so the new world is unlikely either to slow down or to level off. Information technology has a long way to go before it comes into full flower, and other world changing technologies are ripening close behind.”
And by the way the wine glass thing I talked about is a project being developed by Mitsubishi Electric Research Labs!!
This is the third in my series for Dataquest
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