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RFID: An Opportunity for Business Intelligence, Part 1

  • July 01 2005, 1:00am EDT

McKnight Associates, Inc. has been following the developments in radio frequency identification (RFID), as we believe RFID will have a positive and significant impact on business intelligence. RFID will provide enterprises with the opportunity and challenge of gleaning both real-time and decision-support information from a continuous avalanche of product and product-related data. RFID tags will be used to track pallets, cases and item-level packages as they travel through supply chains worldwide from manufacturers to distributors to retailers, and possibly beyond to consumers' homes.

RFID as a technology has been evolving since World War II when the basic concept was used to identify friend or foe aircraft. More recently, advances in cost reductions driven by Moore's Law and ever-higher production volumes have brought a large of wave of interest and commitment from both RFID technology providers and technology adopters. Additionally, mandates from key commercial and government organizations using the technology along with swelling support for industry standards has led to RFID becoming a hot topic that promises to get even hotter.

In an effort to outline the big picture of RFID for our readers, I invited Michael S. Shiff, general manager of RFID Recruiters, to discuss with us some of the key dynamics driving the RFID wave. RFID Recruiters is focused 100 percent on recruiting RFID personnel for organizations providing and using RFID.

To cover RFID for business intelligence with reasonable breadth and depth, we have broken this column into multiple installments which will appear in the next several issues.

McKnight: You prefer to think of RFID tags as "very small computers with networking capabilities." Can you explain this?
Shiff: A computer is a device that can input, process and output information. RFID tags potentially have these capabilities, as well as the ability to communicate wirelessly within networks.
McKnight: Do these tags have processing power?
Shiff: Tags are still in their infancy. The most popular/prevalent tags are passive tags that have no battery (which limits their range to relatively short distances) and that simply transmit a stored serialized ID number. However, there is no fundamental limitation on processing power being added to tags; the limitations are primarily cost-driven. RFID tag manufacturers are in a race to produce five-cent tags (in very large quantities). Until this popular price point is widely achieved, enhancements to processing functionality will be minimal; however, once the five-cent tag becomes ubiquitous and Moore's Law carries tags further along the price/performance curve, manufacturers will begin to compete on value-added functionality rather than simply cost. Currently, manufacturers are working diligently to lower the price from approximately 30 cents per tag for quantities in the millions toward the five-cent target.
McKnight: What is the range in which tags can be tracked?
Shiff: Many variables must be defined to answer this question, but broadly speaking, the effective range for passive tags is generally as much as 25 to 30 feet with many installations operating at a distance of 20 feet or less between tags and readers. Battery powered active tags, which are often used for real-time location systems, can transmit hundreds of feet - and in some cases, potentially a mile or more.
McKnight: Are object and location the only data elements to be captured from the tag?
Shiff: It is important to understand how tags fit within system architectures. Today, the serial number of the item and its location (as determined by a passive tag's reader location) are perhaps two of the most important data elements captured as tagged items move from location to location. However, it's important to see both the current environment and the coming environment.
McKnight: What should we know about the current environment?
Shiff: In the current environment, a little bit of data can yield a lot of information. While tags vary in terms of the information that is stored on the tag and captured by the reader, it's important to recognize that this information is generally fed to various systems that catalog the tagged item's "experience" as it travels from, for example, a manufacturing facility to a distribution facility to a retail warehouse, potentially to a retail point-of-sale system and potentially beyond. If, for example, considerable information regarding the tagged item's manufacturing process is stored in a conventional IT system, it then becomes possible to simply use the tag's unique serial number to learn a great deal about the tag beyond its serial number and its location or history of locations. Filtering and cleaning data from initial reader-recorded events then leads to many permutations for assembling the data into useful information within warehouse management systems, enterprise resource planning (ERP) systems and many other systems.
McKnight: How do you see the RFID environment evolving?
Shiff: The evolution of RFID system architectures will in many respects be similar to previous IT evolutions which saw competition between centralized and decentralized designs. With RFID, as tags become recognized as programmable computers with finite but ever-increasing amounts of processor and memory capacity, IT architects will engage in competition to develop system solutions with the appropriate trade-offs between network-oriented and tag-oriented system designs.
McKnight: So, you see fundamental and alternative architectural paths available to RFID adopters that you refer to as network-oriented designs and tag-oriented designs?
Shiff: Yes. Both system design camps will argue that Moore's Law is driving computing MIPS closer to free while the network-oriented advocates will remind us that Moore's Law is also having a similar impact on conventional bandwidth as well as Web-based servers.
McKnight: What will dictate the direction going forward?
Shiff: Today, passive tags are clearly on the network-oriented design path with very little, if any, on-tag processing. These tags can only contribute useful functionality with a large reliance on data being processed at readers and systems upstream from readers. The focus is very much on lowering tag manufacturing costs and selling prices rather than on adding functionality.

Going forward, in addition to total system life cycle cost (one-time and recurring costs), various architectural issues including RF range, functionality, flexibility, reliability, redundancy, security and ease of use will drive the competing system designs.

Innovative and aggressive tag-oriented system architects will advocate squeezing ever-greater capabilities onto each RFID tag. This will be the course for most active tag suppliers and potentially some passive tag suppliers. The tag-oriented architecture proponents, especially the active tag suppliers, will pursue applications including relatively long range access control, high value asset management and various other applications requiring true real-time locating systems capabilities. Initially, probably more so than the network-oriented proponents these suppliers will also be the likely providers of sensor equipped tags.

Network-oriented system architects will shift as much functionality as possible to the infrastructure of Web-based networks and servers and will have a strong (huge) initial focus on passive tags. Over time, as costs fall, the network-oriented advocates will add sensors.

In effect, the network-oriented architects will say, "Why add any functionality on the tag that could possibly be put on a Web-based server? Just get the cost per tag down as low as it can go and get the volume of tags as high as possible as quickly as possible." Meanwhile, the tag-oriented architects will say, "But unless you put this or that functionality on the tag, the application won't work no matter how much you want to use Web-based servers."
In both the tag-oriented approach and the network-oriented approach, extraordinary advances in flexible miniaturization will drive impressive on-tag functionality including standards-driven, tag manufacturer-driven and user-driven data fields, programmable processes and other features.  

Michael S. Shiff, general manager of RFID Recruiters, has 25 years of information systems experience. He can be reached at

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