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RFID Solutions Practice
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RFID Whitepaper Series

RFID Roadmap: From Slap and Ship toIntelligent Integration December, 2004

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Table of Contents

RFID-Enabled Supply Chain ...............................................................3

Short-Term Compliance Fix – Slap and Ship ......................................7

Long-Term Solution – Intelligent Integration......................................9

Conclusions ...................................................................................12

Corporate Profile and Biography .......................................................13

author:

Paul Pocialik Chief Technology Officer

Noblestar

[email protected]

© 2004 Noblestar. All rights reserved. 2

RFID-Enabled Supply Chain

Radio Frequency Identification (RFID) is a powerful form of auto-identification technology that can be used to uniquely identify, locate, track and analyze inventory within the traditional supply chain by using electronic tags and wireless interrogation capabilities. The tag is typically a transponder that can store pertinent digital information, which can then be read by an interrogator or reader when positioned within the read field of that device. There are many types of tags and readers with a multiplicity of different features and capabilities, affording lots of possibilities for deployment. Suffice it to say that the most appropriate tag and reader combination for a particular product category, packaging and environmental scenario is highly variable, and involves a fairly deep understanding of physics to fully appreciate. Unlike bar codes, RFID is not subject to a line-of-sight requirement, and expands the identification scheme to include a unique serial number known as an electronic product code (EPC), which incorporates an instance identifier in addition to the product category. When effectively applied to supply chain processes, RFID can provide near real-time visibility that can be leveraged to deliver a number of important benefits, including reduced out of stocks, reduced safety stock levels, increased inventory turns, increased labor efficiencies and productivity, lower theft and shrinkage, as well as many other benefits.

What is it?

The RFID-enabled supply chain refers to a collaborative scenario in which product is uniquely tagged at the point of manufacture and then automatically tracked as it moves through the supply chain, from the supplier to the manufacturer, transportation provider, distributor, retailer and customer. Tagging can occur at the item level or the trade unit level (pallet, case, tote, container, etc.). Item level tagging provides much more granular information, but the degree of difficulty for industry-wide adoption is significantly high that this is viewed as something that may take some number of years to be broadly implemented. Trade unit tagging, however, is being actively pursued by many organizations and industries today, as a near-term solution to many of the problems that plague supply chain operations and processes. The traditional supply chain includes many different participants, some of which can be identified in the following illustration. It is important to note that the manufacturer is located “upstream,” and the retailer or customer is located “downstream” in the supply chain, so that any such directional reference can be readily translated to the relevant participants. Since there may also be several forms of transportation (plane, train, truck, ship, etc.) involved in the movement of materials and product from producer to consumer, the traditional supply chain can quickly become challenging from a planning view. This typically leads to a bloated, inefficient and sub-optimal situation overall.


Supply Chain Participants RFID can provide near real-time visibility into the movement of materials, WIP, and finished product across the supply chain, in order to optimize performance for the supply chain as a whole. It is important that the introduction of RFID as an enabling technology not be viewed as a zero-sum initiative for the various participants, and that return is garnered by all participants in order to maximize the collaboration and total overall return. RFID is not a new technology, and has been used in various forms since World War II, when British aircraft were first fitted with transponders to mitigate the possibility of friendly fire. However, certain recent advancements in the ultra-high frequency (UHF) category, position RFID as a good fit for auto-identification requirements in the supply chain, and possibly as a longer-term replacement for bar codes.

RFID is a Key Technology Enabler

RFID has some important characteristics that provide an advantage over bar code in many situations. In general, RFID…

does not require line-of-sight in order to read the tag

includes a unique serial number for instance level identification

can be successfully read in environmentally harsh conditions

can be electronically written to, as well as read.

These characteristics make RFID a compelling platform to apply to supply chain processes. The real question is not “if” RFID will be adopted in this domain, but rather a question of when, how, and to what degree. Many of these considerations are inter-related, but suffice it to say that RFID for trade unit tagging of pallets and cases has significant momentum to believe that it will be universally deployed.


RFID Across the Supply Chain

By providing near real-time visibility at a very granular level, the RFID-enabled supply chain can reap significant top and bottom-line benefits. Moreover, the whole supply chain domain can shift from a push-based paradigm, to a pull-based one that is much more efficient and effective, overall.

Drivers of Adoption

Although technological breakthroughs continue to expand the possibilities for deployment of RFID in the supply chain, the real drivers of adoption include dominant retailers as well as the defense community, that are far downstream. More specifically, retailers such as Wal-Mart, Target, Best Buy, Albertsons, Tesco, Metro AG as well the Department of Defense (DoD), Food and Drug Administration (FDA) and other governmental entities have issued mandates or guidelines specifying the use of RFID by suppliers to tag product at the trade unit level (pallets, case, totes, containers, etc.) as a requirement for doing business with them. The Wal-Mart mandate is perhaps the most widely publicized edict; calling for their top 100 suppliers to ship RFID tagged cases and pallets to three Texas distribution centers by January, 2005. This will expand to the next 200 suppliers for compliance by January, 2006, and the expectation is that the scope will eventually increase to all Wal-Mart and sister company distribution centers and stores. These mandates have spurred RFID investment and initiatives in a number of areas, giving impetus to the expansion of an industry and value chain around this technology platform, to include tag and reader manufacturers, middleware software vendors, application vendors, consultancies, outsourcing providers, and others. Much of this has taken on a life of its own, in anticipation of tremendous growth of RFID within the supply chain, and even more pervasive adoption if and when item level tagging materializes.


It may be helpful to note that these RFID mandates are an outgrowth of work originating from the Auto-id Center at MIT, a consortium of industry, government and educational organizations established to define and propagate standards for RFID adoption. This work has recently been assumed by EPCglobal, a joint venture of UCC and EAN International, that is now front and center in the RFID standards setting process.


Short-Term Compliance Fix – Slap and Ship

Given recent mandates laid down by a growing list of retailers and DoD, many suppliers, transportation and logistics companies and distributors are trying to determine the best course of action to achieve compliance and meet rapidly expanding customer requirements. A common strategy at this time is to support these compliance requirements with an approach referred to as “slap and ship”. Slap and ship is the process of applying RFID tags on cases and pallets right before products leave a warehouse and are shipped to the customer, rather than further up-stream and nearer to the manufacturing process. This represents the minimalist approach to RFID, requiring the minimum in capital investment, little to no enterprise IT integration, and marginal if any process enablement.

How it Works (or Doesn’t)

In its crudest form, slap and ship is a totally manual process involving the tagging of cases at the furthest point downstream in the supply chain, as close to the retailer or customer as possible. In many scenarios this is in the manufacturer’s warehouse, in a segregated pick, pack and ship area located near the outbound docks. The slap and ship concept is as simple as it gets, as illustrated below.

Slap and Ship

In this example, the RFID labels are manually applied to each case by a special work crew, engaged to ensure that compliance requirements are met before the product leaves the door for the customer ship-to location. In some cases, existing pallets may have to be broken down, in order to affix an RFID tag to each case and then the pallet as a whole. This represents the worst of slap and ship, and is obviously sub-optimal in the grand scheme of things. A close variation of this involves the use of automated labeling equipment to apply the tag in the form of a “smart label,” eliminating the manual application. This can provide better consistency in the placement on the case, which can improve downstream read rates.


Why Do It?

This may be viewed as a pragmatic strategy to minimize the capital investment associated with a full-blown RFID implementation, when the buyer is concerned about issues such as lack of standards and industry direction. It also represents an expedient course of action that may be used to satisfy compliance requirements when the supplier has simply run out of time, and the deadline is at hand. Slap and ship provides the quickest route to meeting a looming compliance mandate while also providing a valuable learning and testing exercise when it comes to the physics of RFID. It usually requires lower initial costs to gain compliance in comparison to a fully integrated systems approach, that also involves changes to the operation and processes. Additionally, some industry analysts have recommended that the alternative, referred to as source-tagging, which includes integrating RFID technology into the heart of the manufacturing processes, could be “prohibitively costly at the moment for the average supplier.” Additionally, some industry analysts warn that the technology is not ready and there is a lack of deep consulting expertise in the industry to make this work, arguing for a more conservative slap and ship approach for starters.

Breaking Points

The slap and ship approach is workable where there is a minimum number of customers, products, shipment volume, and ship-to locations involved. It starts to break down quickly when any of these parameters are increased. For example, each new customer requirement for RFID tagging might create the need for another segregated pick and pack operation that runs in parallel to the set-up for the first customer. Each additional side-bar process simply adds to the clutter, chaos, and expense that this approach represents. At some point, the organization becomes swamped by these side-bar processes, and reaches the breaking point. The same scenario quickly arises when the tagging requirement extends to multiple products or ship-to locations, or the shipment volume simply swamps the operation. That said, for some suppliers the tagging requirement may represent a marginal piece of their business over the long run, and slap and ship may be the best approach longer-term. In any case, the slap and ship approach drives the need for additional warehouse labor to operate the segregated pick and pack activity. This can quickly become very expensive, considering that profit margins in many of the affected industries or verticals are razor-thin to start with. At the end of the day, slap and ship is not a scalable or sustainable approach. It represents an expense without any ROI, becoming a tax or levy on the supplier that needs to be offset by cutting costs in other areas.


Long-Term Solution – Intelligent Integration

Intelligent integration as an approach to deploying RFID in the supply chain is the antithesis of slap and ship, and implies automated and seamlessly integrated business processes that are RFID-enabled. It consists of a fully integrated RFID and enterprise IT approach, tying together RFID on the edge of the network with enterprise application systems that are hosted in the back-end of the enterprise IT environment. In this scenario, the real-time visibility afforded by RFID is complemented with business event recognition and response systems in the form of automated workflows and business processes, historical data retention and analytics, and information services that complement a closed loop system.

What Does This Include?

Integration refers to the electronic interfacing of the RFID system with the enterprise IT environment. There are a lot of reasons to do this as well as ways to accomplish this. Intelligent integration is focused on supporting near-real time visibility into the supply chain activity, to improve the top and bottom line performance of the organization. The intelligent integration approach includes the use of specialized middleware as the gateway to enterprise applications, and is clearly a better and more elegant solution to the problem at hand than slap and ship. This architecture is illustrated below. As you can see, this represents more of an enterprise class solution, and therefore can support the adoption of RFID-enabled business processes in a significant way.

source: webMethods

RFIDmiddleware

EAImiddleware

Intelligent Integration Architecture


This is a pragmatic and long-term approach to RFID adoption within the supply chain. It affords simplicity and flexibility, but also supports the unique requirements of both sides of the integration equation – the RFID side on the edge of the network, and the enterprise application side behind the firewall. RFID introduces its own set of unique middleware requirements that must be effectively merged with general enterprise application integration (EAI) requirements in a form of “hybrid middleware.”

Implications and Requirements

Integration opens the door to a number of considerations as opposed to the stand-alone approach of slap and ship. At the most basic level, the integration of RFID into the enterprise IT environment is fraught with the complexities associated with the need to orchestrate a lot of component parts. Since standards are fluid at this stage, the weaving together of the various technology components can be challenging and not for the weak of heart, technically speaking. In addition, there is an inherent mismatch between the kind of raw, tag read event data generated by the RFID platform, and that which is maintained in the enterprise IT environment. At a minimum, the tremendous volume of tag read data threatens to swamp the network and storage capabilities of the IT world. Additionally, other data related issues create a need to minimize the movement of data and maximize the opportunity by deploying light business logic to the edge of the network. The answer to these issues involves the use of hybrid middleware, specially adapted to the needs of both RFID as an auto-identification technology as well as enterprise IT systems. The hybrid middleware solution refactors the many-to-many relationship between RFID and the enterprise application systems into two more distinct and manageable parts; a many-to-one relationship on the reader device side, and a one-to-many relationship on the enterprise application side. General enterprise IT integration middleware functions support a multiplicity of devices interacting with a multiplicity of enterprise application systems. This has traditionally been the scope of EAI middleware. In summary, EAI middleware accommodates source and target system mapping, including different data formats and protocols used by various enterprise systems, to support process automation spanning many different enterprise applications. Keep in mind that a good integration solution for RFID and enterprise application systems extends these more general functions to include more RFID specific functions as well. The total package needs to address the integration issues and challenges specifically associated with RFID. The RFID centric middleware functions that need to be added to the general purpose EAI middleware functions enumerated above include the following;

reader/writer device support read event data management and persistence buffering of I/O activity


EPC commissioning and handling business event recognition automated workflows and business processes.

Reader/writer support refers to neutralizing the diversity on the device side and providing a management capability to support the activity of numerous concurrent devices on the edge of the network. The tag read event data management requirement characterizes the need to filter, smooth, and cleanse the RFID data and to massage and store it in a way that it can be used to recognize and respond to business events. Buffering of I/O activity recognizes the potential tidal wave of tag read event data and the need to present this sequentially for enterprise processing, as well as the need to update RFID data stores with staged enterprise data. EPC commissioning and handling supports the provisioning of unique serial numbers and format negotiation across a number of tag data formats. Business event recognition is differentiated from tag read events and speaks to the ability to correlate enterprise data with raw tag read event data to provide actionable context around a business situation that needs to be addressed. Finally, task management provides the ability to host light business logic using rules, workflows and automated processes that can handle business events at the edge of the network as opposed to a more centralized approach.

Why Take This Approach?

In many cases the slap and ship approach will crumble under its own weight, as the number of customers, products, unit volumes, and ship-to locations multiply. In other words, it is simply not scalable. The intelligent integration approach, however, marries the RFID platform to the enterprise IT systems, to support RFID based process enablement. In this approach, the “what, where, and when” represented by the RFID tag read event is complemented by the “why” or the business context that is buried deep inside the enterprise IT systems, to create actionable intelligence that can be used to engineer a better business result in a responsive fashion. In summary, intelligent integration supports the design and implementation of RFID-enabled business processes that can provide a significant ROI, as opposed to simply implementing RFID as a cost of doing business, as in the slap and ship approach.


Conclusions

It is inherently clear that RFID as deployed in the slap and ship approach, is nothing more than a new and eccentric auto-identification technology, falling short of the mark in terms of delivering real business benefit. The cost of slap and ship is an additional tax that comes straight off the bottom line for suppliers, and will ultimately drive the need for these organizations to find a way to generate financial returns that offset these costs. This is based on the premise that the RFID-enabled supply chain is in its infancy, and will continue to expand in scope and scale as a requirement for suppliers and other participants farther up stream. In this case, the slap and ship approach quickly breaks down as a viable approach, becoming operationally impossible to support across a growing number of customers, product categories, and ship-to locations or with any significant shipment volume. The real benefit and ROI can be unlocked by integrating the real-time visibility that RFID affords with enterprise data locked in the enterprise IT environment, to support all of the dimensions of the real-time enterprise – business event recognition, automated workflows and processes, analytics, and closed-loop style feedback. We refer to this as intelligent integration, and contrast it from slap and ship as the best long-term approach to deliver the ROI promised by the adoption of RFID in the supply chain.


Corporate Profile and Biography

Noblestar Corporate Profile

Noblestar is an innovative professional services firm known for effectively applying strong business and technological expertise, as well as process and architectural rigor to promising digital technologies, to solve challenging business problems and enable sustainable advantage. The company, which has a reputation for “doing the hard stuff,” has also successfully applied this mix on its own accord - having incubated some high profile start-ups including Riverbed Technologies, a mobile middleware company which was sold to Aether Systems in 2000 for more than $1 billion. Pioneering emerging technologies for over 17 years, Noblestar rigorously engineers successful digital business today, to power the classic businesses of tomorrow. The company, which specializes in high-end custom software engineering, enterprise package solutions, and mobile/ wireless strategy and development, is headquartered in Reston, Virginia, and also has branch offices in Austin, Boston, Houston, London, Warsaw, and Vilnius. Information about Noblestar can be found at www.noblestar.com .

Paul Pocialik, Co-Founder & CTO, Noblestar

Paul is Noblestar's digital business and wireless visionary, driving the firm’s strategic technology direction and guiding Noblestar teams across the United States and Europe in delivering high-end system solutions to clients. Paul’s mantra is “digital business in NOT a destination or an end state – it’s a process.” He believes that there is a constant wave of next generation technologies that have the potential to radically change existing ways of conducting business. Through his guidance, Noblestar has successfully capitalized on these opportunities and established itself as a leader in technology enabled business transformation. Prior to co-founding Noblestar in 1987, Paul worked as a principal for Cap Gemini America in their National Management Consulting Group, where he provided strategic information technology consulting services to major corporations throughout North America. Before joining Cap Gemini, Paul held senior positions at Science Management Corporation, Price Waterhouse and IBM. Paul holds a BS in Business Administration and an MBA, both from the University of Illinois.
