Hidden Costs of Implementing RFID

Nov. 1, 2004
Burt Moore, contributing editor OK, we all know that the mythical 5-cent tag is not going to come to our rescue any time soon. And, despite what you may
Burt Moore, contributing editor

OK, we all know that the mythical 5-cent tag is not going to come to our rescue any time soon. And, despite what you may have heard about significant breakthroughs in organic plastics that promise RFID transponders at even less than 5 cents, they're still years away. (It should be noted that some of the "news" is more hype than news since the project is claiming to have invented the concept of being able to print RFID circuits with conductive inks, something that companies have been working on for at least 10 years.)

So, now that we have regained a grounding in reality, let's look at the real cost of implementing RFID.

First, what's the cost of not implementing RFID? If you're under a Wal-Mart, Department of Defense (DoD) or other mandate, you already know the answer to that. However, if you're sitting on the sidelines, the cost of not implementing RFID (or gearing up for it) will be just that — you'll be relegated to the sidelines for a good long time.

It is true that, in the short term, you might be better off having a 3PL do your RFID labeling for you — particularly if you're already using a 3PL. These companies can spread the cost of implementing RFID, and the expertise they gain, across a number of customers. Yes, they'll charge you for it. But that's a cost you can easily identify.

Let's say you want to start getting ready to do your own RFID labeling now. What's it going to cost?

Obviously, there will be the cost of suitable printers/encoders, hand-held or portal RFID readers and, of course, quantities of RFID smart labels for shipping containers and pallets or reusable tags for returnable containers. And you'll need additional middleware and integration services. These costs are something else you can easily identify.

Now for the "gotchas." Some are relatively easy to anticipate, some are not.

First, there's the disruptive nature of RFID. If you're going to profit from RFID, you have to use it within your facility. That will mean changing the way you work. And that may be the greatest benefit RFID offers. This is a topic all by itself but I mention it here as one of the big "gotchas." It's a cost in time as well as money.

Second, you need to test your shipping containers (filled) with different RFID labels. There are two reasons for this. The various manufacturers' tags have different performance characteristics. Performance also depends on what's in the shipping containers. Since liquids absorb RFID energy (shortening range) and metal can either absorb or reflect it, label selection, placement and orientation all play a role in overall performance. (AIM has just published recommendations from its RFID Experts Group that has valuable guidance on RFID in logistics applications. The document is a free download from the AIM Global Web site: www.aimglobal.org.)

Testing can be done at third-party locations or internally. Whichever way you do it, it's going to cost you time and money.

Third, there's a site survey. Site surveys identify sources of RF emissions in your facility that may interfere with RFID. High-voltage cables, motors, wireless phones, etc., all produce standing or intermittent RF signals. Avoiding these "dirty" areas is essential when placing RFID readers for optimal performance.

Finally, there's the cost of simple compliance. If you have to join EPCglobal, and most of you will, it will cost from $5,000 (if you're a very small company) up to hundreds of thousands of dollars. In fact, the smaller you are, the more of an impact it could have, proportionally, on your bottom line.

If you're an aerospace supplier, you might have to buy the ATA (Air Transport Association) Spec2000 standard, just to know how to comply with aircraft manufacturer and airline requirements. This can cost a reasonable $750 (for a single "concurrent user") up to $75,000 for large companies.

The bottom line (pun intended) on RFID implementation is that "it's not the cost of the tags." By the time RFID labels become the major cost in system implementation, the cost will have come down.

Today, the big costs are in implementing a system, not the price of its components.

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