RFID: Barcode replacement comes in from cold

Breaking the code of silence
One of the few companies willing to talk publicly about its RFID strategy is medical and surgical products supplier Owens & Minor.

The company, which is working to meet the Department of Defense's mandate to put RFID tags on shipments beginning in 2005, is working on figuring out how the company can coordinate other technologies, such as enterprise software systems, to garner the greatest returns from RFID.

Owens & Minor has for years used other radio frequency tools to track inventory in its warehouses -- which gives the company a substantial head start, said Patrick Caine, the company's director of business systems development.

Still, Owens & Minor has had to work on building its business plan for rolling out and utilising RFID -- a task Caine that feels may be among the toughest steps in adopting any technology.

"We're looking at DOD as more of a reactive opportunity, in that they're going to come out with requirements, like Wal-Mart, that are going to drive some sort of value internal to the DOD process," Caine said. "Beyond that, we think RFID has a much more powerful business case, when you look at the entire supply chain. That being: How can we facilitate driving value throughout the supply chain and look for commercial opportunities, as well?"

On the commercial end, Owens & Minor is hoping to market extended RFID services to some of its hospital customers. In such a scenario, RFID tools would be distributed throughout a medical facility to give workers and the distributor insight into inventory levels. These tools would also be tied back to Owens & Minor's systems to allow for immediate ordering and refills. Owens & Minor would roll out, maintain and manage these customer RFID networks.

Steep learning curve
With the exception of advanced players like Owens & Minor, it may simply be too early for most companies to say anything about RFID, other than that they are working hard to understand the technology and its implications, said Sue Hutchinson, product manager for EPCglobal, a Belgium-based organisation working to develop RFID standards that will support the electronic product code, a sort of electronic barcode that is to be used with RFID.

Hutchinson contends that reticence on the part of suppliers is as much linked to inexperience and the complexity of the RFID challenge as it is to fear or secrecy.

"More than anything, everyone is working flat-out, getting ready to turn on their first (RFID) pilot implementations within next six months," she said. "People are pushing extremely hard on all the practical things they need to do to get these trials going. They're in down-and-dirty mode and probably don't have much time to talk about anything."

The executive also pointed out that, given the unique nature of RFID's adoption -- it's being driven by customer mandates -- the technology is pushing its way into companies' operations in a manner different from perhaps any other IT initiative in the past.

"RFID is really unusual in the way it is rolling out," Hutchinson said. "Typically, a technology is developed by technologists and goes out to find a market, but here we have a market where everyone is waiting for the tools to mature and become usable, so the dynamics are different. It's also scaling very rapidly, and the pace we're all moving at is a little different than with any other technology's adoption."

There are also plenty of growing pains associated with RFID's rapid evolution. Owens & Minor's Caine says a major issue is the lack of sufficient middleware for linking RFID systems and enterprise applications.

"Middleware is a tremendous void in the industry right now," he said. "Some (vendors) are out there trying to build relationships with (customers) to get a better idea, as business users won't be creating the middleware necessary to gather and interpret the tremendous amount of data generated by RFID. That's another big challenge we're currently looking at."

Caine said Owens & Minor recently passed a milestone by signing on a major customer for a pilot program for the company's RFID services business. Under the arrangement, Caine said, the company will be making "minimal" up-front investments, while proving the technology, and then become more aggressive later. However, the executive is quick to point out that RFID won't have the desired impact until more companies adopt the technology.

"It's not just about looking internally for results," he said. "You also have to look externally, aggregate a number of events and build an ability to develop a proactive inventory model across your supply chain. RFID is just one of a number of enablers to achieving better communications."

Caine said some of the reluctance on the part of companies to discuss their RFID progress is rooted in anxiety. "I've found that over the last few months, going out to RFID conferences, people often feel they're behind the curve when, in fact, that's not the case," Caine said.