By Shelia Watson
Contributing Writer

Radio frequency identification, or RFID, has become a ubiquitous technology, found in a wide range of industries, from retail and shipping to security access control to supply chain management systems.

The convenience of RFID is its ability to identify the target automatically as well as to exchange the data attached to the RFID tag through radio frequency. Unlike traditional bar-code technology, RFID can reach its target without touching it.

Although basic RFID technology has been around since the 1940s, it has been improved and has gained momentum in recent years primarily because of its use in retail giant Wal-Mart’s inventory and distribution management systems and in the U.S. Department of Defense’s logistics management programs.

The good and the bad

Wal-Mart, the most famous retailer using RFID in its supply chain management system, was the subject of a 2006 case study on RFID implementation published by Ziff Davis Media Inc.

The study noted that Wal-Mart had been responsible for driving up the use of the technology with a requirement that its top 100 suppliers begin using the technology by January 2005.

The suppliers were responsible for the implementation costs.

According to the analysis, the estimated savings Wal-Mart enjoyed by using RFID was $8.35 billion per year, with most of the cost reduction occurring through savings in labor, RFID-enabled “smart shelves” to monitor on-shelf availability and reduction in administrative errors and vendor fraud.

However, Wal-Mart’s case study is hardly the norm, according to Dublin-based Heavey Radio Frequency Data Systems Ltd., which published a report in July that referred to RFID as a “technical blunder.”

Heavey’s Managing Director Ronan Clinton urged businesses to disregard the hype surrounding the technology, pointing to security issues, lack of standards and high cost as reasons to be wary of embracing the technology.

“It is almost heresy to question the RFID bandwagon, but (because) we produced this report, I can see worrying parallels between RFID and the dot-com hype,” he said.

Although Clinton’s company installs RF technology, he more often recommends bar coding as a viable solution.

“Pretty much 99 times out of 100, companies don’t need (RFID),” he said. “Firms need to ask themselves one question: ‘Am I Wal-Mart?’ ”

Although Heavey’s report was originally targeted to companies in Ireland, Clinton noted  that the problem extends across the globe and that where a deployment of the technology in smaller Irish companies is less justifiable than in big American companies, the cost and technical boundaries remain the same.

Beyond the supply chain

RFID has been moving slowly out of the supply chain recently. Some emerging trends and applications include using it for personal identification, anti-counterfeiting and in-store inventory management. However, expanded use—especially if that use is involved in compliance mandates—may not be the most trustworthy endorsement of the product.

Earlier this year ABI Research conducted an online survey of RFID usage, and released the results in July.

The survey referred to the more public deployments of the technology—Wal-Mart and the DOD, both of which require their suppliers to use RFID to tag their goods.

The survey suggested the main driver behind RFID’s adoption has been compliance with Wal-Mart and Department of Defense mandates. However, of the 175 companies surveyed, many were not using RFID and were skeptical of its ability to secure a reasonable return on

investment.

Cost the least of the concerns

Besides the high cost of implementing the technology, RFID has been found lacking in other areas, including privacy, security and standardization.

In April, the National Institute of Standards and Technology, a non-regulatory agency of the U.S. Department of Commerce, released a report on RFID that issued guidelines geared toward retailers, manufacturers, hospitals, federal agencies and other organizations that might use RFID in their supply chains. The 154-page document outlined potential risks to data security and privacy caused by RFID technology and offered best practices on mitigating the risks.

Most of the scenarios outlined in NIST’s report center around intentional theft by competitors or adversaries.

“The example here is someone using an RFID reader to determine whether a shipping container holds expensive electronic equipment and then targeting that container for theft,” the report noted.

Because RFID can store a much larger quantity of information than bar codes can, Tom Karygiannis, senior researcher at NIST’s computer security division, suggested putting a limited amount of information on the tag.

“In some situations, the information on the tag is simply a link to a database to where you can look up more information,” he said. “This puts enterprises at risk.”

The S.C. State Ports Authority is one of the Charleston-area organizations that use RFID to enhance security and efficiency of in-transit cargo shipments. Earlier this year, an RFID infrastructure was installed at the Wando-Welch, North Charleston and Columbus Street terminals.

Bernard S. Groseclose, president and CEO of the SPA, pointed to the primary benefit of using the technology, saying that it “enhances supply chain visibility and security for shippers using the Port of Charleston.”

“Linking information about location, environmental and security status to the physical flow of cargo provides improved supply chain visibility to shippers using our port, while enhancing maritime security,” said Groseclose.

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