Issues with RFID - 1

The RFID technology has been touted as one of the most promising future technologies which will be as omnipresent in the real world as there are ‘Google’ and ‘Facebook’ on the web today. In spite of such projections there are many complications in the actual implementation of the technology, therefore stifling investments.

Majority of investments are justified by the model of Return on Investment and this, is exactly where the RFID technology fails.

In this series of articles we shall discuss various aspect involved in implementation of RFID and investment in RFID.

Price-Utility Ratio :

The cheapest RFID tags cost around 15 US cents on an average*. But the utility of these is minimal.

For an RFID tag with sophisticated sensors the cost may be as high as 100 US $. They have great utility but are impossible to produce in high volumes.

This is where the buyers of the tags discard the value proposition of RFID tags. The existing technology of bar-codes in retail is as cheap as zero US cents.

Recently two statements have been published suggesting that because the price of a barcode is so low, it is unlikely that RFID would be a viable replacement

In the one case the statement was:

"I see RFID tags replacing bar codes in [more expensive] garments, for instance. But I don't see it happening in the supermarket. People have talked about replacing U.P.C. code with RFID, but I don't think it will ever happen:  Because nothing's cheaper than zero. And it literally costs nothing to put a U.P.C. code on a package. You just integrate a bar code into your artwork and print it; it doesn't cost anything. And they're never going to bring an RFID tag down to a hundredth of a cent, or even less. Anything that it costs is going to cost more than zero."    -Trolley Scan (Pty) Ltd

While the other read:

"It’s highly unlikely that the technology will ultimately replace bar code- even with the inevitable reduction in raw material costs coupled with the economies of scale, the integrated circuit in the RF tag will never be as cheap as a barcode label."                - Trolley Scan (Pty) Ltd

Both of these commentaries seem to be based on the premise that because a barcode label is integrated into the display packaging of the product, it is very cheap. Surely the real issue is what are the productivity benefits by using an RFID tag, versus a barcode, versus a simple numeric tag?

Bar-codes have made their presence felt in society almost solely around potential productivity benefits they offer. However barcodes do not cost only the cost of the ink on the packaging. The user needs to buy sophisticated scanning equipment, information systems, and communication systems and manage databases just to be part of the user group for benefiting from machine readable labels.

On the other hand, RFID benefit not just the retailer, but all parties from the manufacturer, distributor, logistics operator, retailer and the user.  RFID is going to win its major position in these applications through real productivity enhancements and benefits for the users, which will completely outweigh that it might cost more than the price of the ink on the barcode label. The rollout of RFID as a viable replacement however is not without its hurdles, particularly the size of the project that will require many players involvement and initially only allow leading/forward-looking retailers to be involved.