What is RFID?

Radio frequency identification (RFID) is a generic term that is used to describe a system that transmits the identity (in the form of a unique serial number) of an object or person wirelessly, using radio waves. It's grouped under the broad category of automatic identification technologies. Auto-ID technologies include bar codes, optical character readers and some biometric technologies, such as retinal scans. The auto-ID technologies have been used to reduce the amount of time and labor needed to input data manually and to improve data accuracy. Some auto-ID technologies, such as bar code systems, often require a person to manually scan a label or tag to capture the data. RFID is designed to enable readers to capture data on tags and transmit it to a computer system—without needing a person to be involved.

A typical RFID tag consists of a microchip attached to a radio antenna mounted on a substrate. (For more detail and for information about tags that don’t use silicon chips, read “The Basics of RFID Technology.”) The chip can store as much as 2 kilobytes of data. For example, information about a product or shipment—date of manufacture, destination and sell-by date—can be written to a tag. To retrieve the data stored on an RFID tag, you need a reader. A typical reader is a device that has one or more antennas that emit radio waves and receive signals back from the tag. The reader then passes the information in digital form to a computer system. RFID technology has been used by thousands of companies for a decade or more. (RFID Business Applications spells out some of the ways the technology has been and will be used.) The technology is not new (see The History of RFID), so why is it taking off now? Until recently, the cost of RFID has limited its use. For many applications, such as tracking parts for just-in-time manufacturing, companies could justify the cost of tags—a dollar or more per tag—by the savings an RFID system could generate. And when RFID was used to track assets or reusable containers within a company’s own four walls, the tags could be reused. But for tracking goods in open supply chains, where RFID tags are put on cases and pallets of products by one company and read by another, cost has been a major obstacle to adoption. Tags must, in effect, be disposable because the company putting them on cannot recycle them. They get thrown out with the box. (Tags built into pallets could be reused, and some companies are looking to develop ways to recycle tags on corrugated cases.)

Why RFID Is Hot
Wal-Mart's push to use RFID in the open supply chain is a big reason why the technology is hot today. But it's not the only reason. Several important factors have come together around the same time. One is the advances in ultra-high frequency RFID systems. UHF systems are able to deliver the read range needed for supply chain applications, such as scanning tags on products as pallets are moved through a dock door or scanning cases on a high shelf in a warehouse. Another factor was the efforts by the Auto-ID Center to develop a system that is low cost and based on open standards. These are prerequisites for the use of RFID in open supply chains, where a company puts a tag on a product, and it's read by other companies in the supply chain. And finally the ubiquity of the Internet is an important (and often overlooked factor). The Auto-ID Center realized that the Internet could be used to enable companies to share information about the location of products within the supply chain. Before the Auto-ID Center proposed the EPC global Network, there was no way (other than manually phoning, faxing or e-mailing) for Company A to let Company B know that it has shipped something, and there was no way for Company B to let Company A know that the product has arrived. With the network, companies can not only identify products in the supply chain, they can share information about the location of goods. Company A, for instance, could let Company B see—in real time—what is in Company A's warehouse. Or Company A could let Company B know automatically that goods were scanned leaving the warehouse and will arrive at Company B's facility the next day. It is this ability to share information about the location of products anywhere in the supply chain that makes RFID a potentially powerful technology.