Proponents of radio frequency identification technology have a lot riding on the success of a new generation of systems now being deployed. Although their initial findings look promising in terms of accuracy, cost and compatibility, questions remain among some users about RFID's maturity and business value.
Many first-generation RFID systems suffered from disappointing read rates and a lack of universal standards. So it's not surprising that adoption of so-called RFID Generation 2 technology has been relatively swift. Mandates to suppliers from heavyweight users such as Wal-Mart Stores and the U.S. Department of Defense have also spurred the quick shift to Gen 2.
According to users who have gone live with Gen 2 tags, the improvement in read-rate accuracy that they provide over first-generation RFID technology is significant. However, they noted that Gen 2 is still new and that there are limits to its current capabilities, as well as questions about how to apply the technology to business problems.
Still, Gen 2 adoption is progressing quickly. Wal-Mart has so far this summer moved all but two of its approximately 300 RFID- enabled suppliers to the technology, according to Simon Langford, the company's director of global RFID strategy and transportation systems.
Langford said the RFID readers in place at Wal-Mart needed only a firmware upgrade to work with Gen 2 tags.
Similarly, retailer Metro Group rolled out some Gen 2 systems last month. And the Pentagon has set a provisional sunset date of Sept. 30 to phase out its first-generation RFID technology, although a spokeswoman said that the DOD has yet to fix an exact deadline.
One upbeat Gen 2 adopter is Beaver Street Fisheries, a seafood distributor that supplies Wal-Mart. The company went live with a Gen 2-based system in June. The new tags have increased the company's read rates from the low 90 percent range to closer to 100 percent, according to CIO Howard Stockdale.
However, there are some limits to what the company can do with the Gen 2 technology, Stockdale said. For instance, Beaver Street has Gen 1 scanners from Matrix Systems, and although they can read the new tags, they can't write to the Gen 2 chips or use features that let scanners work well together in close proximity. Stockdale said Beaver Street has added newer-generation ALR-9800 readers from Alien Technology, giving the company a blended RFID environment with mixed capabilities.
Stockdale said Gen 2 will also require updating of his company's homegrown ERP and warehouse management systems to handle new data that can be captured by the second-generation tags.
Overall, Gen 2 costs less to implement than the earlier technology did, according to Stockdale. Beaver Street initially paid roughly US$0.11 for each Gen 2 tag, he said, noting that the company paid US$0.31 cents for first-generation tags. The new scanners cost about US$300 less than prior-generation ones did, Stockdale said.
The cost of a Gen 2 pilot facility retrofit was about US$15,000 for Unilever North America, said Simon Ellis, supply chain futurist at the consumer packaged goods manufacturer, which is a major supplier to Wal-Mart. "Not too bad," he observed.
Unilever switched to Gen 2 in July to comply with EPCglobal standards, Ellis said. Although the technology is still relatively new to Unilever, its read rates have improved by 10 percent, he said, indicating that Gen 2 products are "quite a bit more robust" than first-generation devices were. Nevertheless, "RFID is still immature," Ellis added.
According to an e-mail from a Metro Group spokesman, the Dusseldorf, Germany-based retailer's read accuracy rates have risen since it began using Gen 2 tags. However, he said it was too early to pinpoint any concrete improvements from the new technology.
"We are not aiming at a quick amortization [of the cost of RFID] but rather at the innovation leadership in the retail sector and a healthy margin regarding the experience with new technologies," the spokesman wrote.
By improving read rates and following EPCglobal standards, Gen 2 won't become obsolete as quickly as first-generation RFID systems have, predicted industry analyst John Fontanella in late June. At the time, Fontanella worked at Boston-based Aberdeen Group, although he has since left the consulting firm.
According to a recently released Aberdeen report on RFID adoption written by Fontanella, in a survey the firm conducted, 75 percent of the respondents had better read rates using Gen 2 technology.