1. PSC White Paper
Evolution or
Revolution?
Bridging The Gap
Between Bar Code
Legacy Systems
And RFID In The
Retail Supply Chain
Ready For Retail’s Future
3. Contents
Technology Today and Tomorrow 4
From Relative to Absolute Measurement 6
Evolution or Revolution 7
Bridging the Gap: Professional Grade Mobile Hybrid Readers 8
The PSC Approach 9
About PSC 10
References 11
4. It seems you can’t pick up a business magazine or technical journal these days without headlines screaming out
news about the next technology revolution. More often than not, the “revolutionary” change either doesn’t happen
at all, or eventually shows up as a costly evolutionary nuisance you weren’t prepared for, but wish you had been.
But there’s a fresh wind blowing across the retail supply chain landscape, and its name is RFID, which is shorthand
for Radio Frequency Identification. Here are just a few of the more recent relevant headlines:
“It’s Only a Matter of Time Before Bar Codes Become Obsolete.”1
“RFID Picks up Momentum”2
“RFID Finds its Place”3
“Wal-Mart Expands RFID Mandate”4
“Timing is Everything in Making Jump to RFID”5
Handled properly, a RFID systems solution can result in an evolutionary change incorporating legacy systems with
the real-time supply chain management of tomorrow. Forestalled or worse yet, ignored, this inevitable upgrade in
your retail supply chain system
may mean years of lost sales
to your competitors. Today’s
evolutionary technology can easily
become tomorrow’s revolutionary,
disruptive change.
And, like other disruptive
technologies such as the printing
press, television and the Internet,
early adopters were the ones
who realized the greatest ROI and
resulting exponential profitability.
According to a recent issue of Information Week5
, “the decision to act now—right now—versus late this year or
sometime next year, will be a huge factor in determining whether a company can remain or perhaps even become
an innovative and nimble leader in its field over the next several years.”
Evolution or Revolution?
Bridging the Gap Between Bar Code Legacy Systems and RFID
In The Retail Supply Chain
Page 1
5. Wal-Mart not only correctly identified the winds of change, but also has been a prime force behind it, with its
decision requiring 100 key suppliers to be ready to implement RFID by January 2005, and all suppliers by 2006.
Companies such as Coca-Cola, Gillette, Johnson & Johnson, Kraft, Pfizer, Procter & Gamble, Unilever, and others are
all climbing on board.
Just as the European marketplace led adoption of digital wireless cellphone technology, so too has been the case
with early adoption of RFID in retail supply chain systems. United Kingdom retailer Marks & Spencer last year started
adding RFID tags to the 3.5 million reusable plastic containers used to deliver produce, calling it the largest supply-
chain application of RFID technology in the world.
IT experts must make and justify choices today, and determine how to integrate RFID with existing Supply
Chain Management (SCM), Customer Relationship Management (CRM), and Enterprise Resource Planning (ERP)
applications with the entire system. Whether it is bar code technology, RF tags, smart labels, real-time locating
systems, embedded chip solutions, or other major types of RFID, smart choices will increase corporate ROI while at
the same time improving retail supply chain communication.
Smart IT managers are insisting on vendor solutions that are more open, flexible, less risky, are easier to integrate
with existing systems, and have faster ROI with a lower total cost of ownership. No longer will savvy clients accept
proprietary closed systems from a single supplier that locks them in to long-term, and supposedly seamless
solutions.
The challenge is to bridge the gap between what’s working today and extending the role of Auto-ID technology into
a fully integrated, open system that incorporates the most appropriate devices and IT architecture to suit customer
applications.
According to Accenture, a global management consulting, technology services and outsourcing company, an RFID
open systems solution can increase inventory turns by 10 to 15 percent. Greater inventory turns facilitate capital
resource optimization, increased margin procurement and significant reductions in obsolete inventory levels.
Supply chain metrics postulate that every month inventory remains on the retail shelf 5%-10% of its resale value
and 7%-20% of its revenue contribution is lost. Retailers must manage on-hand inventory as diligently as their
constrained inventory to optimize profitability. Supply chain managers today must be better informed with accurate
real-time data to stay competitive.
While managing inventories to lower levels, care must be taken to avoid out of stock (OOS) situations. Consumer’s
can’t buy what isn’t there, resulting in brand switching and store hopping both of which reflect negatively on the
retailer. RFID is an enabling technology that promises to help minimize OOS by affording full and accurate visibility
of inventory levels in all parts of the retail supply chain. See Figure 1 for other potential benefits of RFID technology
throughout the supply chain.
Page 2
6. Function / Activity Potential Benefits
Manufacturing
Warehousing
Transportation
StoreOperations
Demand Planning Reduced out of stocks C C, P P, C C, I
Decreased order lead time C C, P P, C C, I
Sales driven replenishment C C, P P, C C, I
Increased inventory turns C C, P P, C C
Decreased safety stock C C, P P, C C
Item/Batch/Lot Tracking Reduced sale of counterfeits C, I C, P, I P, C, I I, C
Increased contract compliance C C, P P, C C
Increased product quality C, I C, P P, C C
Security Reduce theft C, I C, P, I P, C, I I, C
Reduce chances for product tampering C, I C, P, I P, C, I I, C
Procurement & Material Storage Reduced order lead time C, I
Increased raw material availability C, I
Higher capacity utilization C, I
Production Higher capacity utilization C, I
Reduced order cycle time C, I
Increased quality C, I
Receiving Decreased unloading times P, C P, C
Increased accuracy of accepted shipments P, C P, C
Order Selection Increased accuracy of orders C, I, P
Increased order fill rate C, I, P
Exception Product Location Fewer misplaced items C, P, I
Decreased time to locate specific items C, P, I
Loss Prevention Reduced shrink C, P, I I, C
Asset Management Increased productivity of assets P, C
Reduced loss of assets P
Pricing based on actual use of assets P
Yard Management Increased productivity of assets P
Increased visibility of drop shipments P
Contract Compliance Decreased exceptions management P, C
Increased customer satisfaction P, C
Routing Dynamic routing P, C
Checkout Increased accuracy of checkout I, C
Increased checker productivity I, C
Returns and Reverse Logistics Increased accuracy of returns acceptance I, C
Increased accuracy of refund amounts I, C
More efficient recycling or disposal I, C
Post-Sales Service Increased warranty compliance I, C
Faster warranty and repairs processing I, C
RFID and the Supply Chain
Explanation of P, C, I symbols:
Tagging at various packaging levels (Pallet, Case, Item) in order of
significance to achieve named benefits.
Adapted from: Auto-ID Center ACN-AUTOID-BC-001 pages 16-21
Figure 1
Page 3
7. Technology
Today and Tomorrow
The idea of automating the retail enterprise is not new. “In 1932 a business student named Wallace Flint wrote a
master’s thesis in which he envisioned a supermarket where customers would pierce cards to mark their selections.
At the checkout counter they would insert the cards into a reader, which would activate machinery to bring the
purchases to them on conveyor belts. Store management would also have a record of what was being bought.”6
The lowly bar code has been identified as one of the most significant automation technologies ever put to work. A
study conducted by Hewlett-Packard over a decade ago on the effectiveness of automation technologies found that
bar codes boasted the best return on investment of all technologies studied.
Bar codes have made a significant contribution to productivity since their general acceptance more than 15 years
ago. They have grown steadily in use and usefulness. Bar codes are so ubiquitous that they are virtually transparent
to users as they track parts and products through
manufacturing processes, distribution channels,
supply chains and retail operations.
The value of the bar code as a basic ID tag
has increased as its use has grown. Dr. Robert
Metcalfe, chief designer of the Ethernet, observed
that new technologies are valuable only if many
people use them. Specifically, the usefulness,
or utility, of a network equals the square of the
number of users, a function known as Metcalfe’s
Law.7
A similar relationship can be seen with the
use of bar codes where their quantifiable value
has made qualitative change in the systems they
serve.
Because RFID tags (Figure 2) can hold more data,
individual packages and items can be uniquely
tracked and accounted for. Because RFID tag data
can change and be rewritten as the product travels
the supply chain, routing and status information can be recorded and accessed without network connections.
The universal use of bar codes, and the later combination of bar code and RFID tags, will have an enormous impact
on producers, distributors and retailers around the globe. Once RFID is fully integrated into the retail supply chain bar
codes will serve as a back up in the rare event that a tag or reader fails to perform.8
Figure 2 - UHF RFID Tags
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8. Page 5
RFID tags are similar to bar codes as each employs an identifying code for tracking purposes, but bar codes are
limited in that they must be in the line of signt and individually scanned with a reader.
RFID uses wireless radio transmissions to readers with a variety of ranges and material penetration characteristics.
In general, the larger the antenna, and the higher the power, the longer the read range. In all cases, the maximum
power levels are capped by regulatory and safety limits.
1. Low-frequency (125-kilohertz or 134-Khz) RFID will penetrate most packaging material, but have a short read
range – usually from 1 to 30 inches depending on power levels and antenna sizes.
2. High-frequency (13.56-
megahertz) RFID is somewhat
capable of penetrating packing
materials and generally has an
operating range of 4 to 40 inches.
3. Ultra high-frequency (UHF) RFID
is unable to penetrate many
packing materials, and is greatly
attenuated by water. In free
air, UHF RFID tags operating
at around 915MHz can be
read at ranges from 5 to 20
feet depending on reader and
antennae, creating a large read
envelope. (Figure 3)
“If barcode scanning is like spear
fishing, then RFID is like fishing with a
net. You scoop everything under your
boat, whether you can see it or not.
Then, you sift through the results to
see if you want to keep what you’ve
captured.”
Clarke McAllister, PSC RFID Solutions Manager
Reaping the full benefit of RFID technology requires a seamless integration of RFID readers, middleware, and
ERP systems. Due to the extensive read range offered by UHF, many more tags will be read and processed
simultaneously than with systems based on bar codes. This, combined with the need to store and reference
server-based information associated with those tags, requires significantly higher system throughput. The result is
increased profitability from a system with the highest achievable degree of inventory management, utilizing less
labor with greater accuracy than bar code based systems.
Figure 3 - Worker nets entire pallet load of UHF tagged
goods at one time
9. Page 6
RFID tags and readers are beginning to show up in more places than just the warehouse and shipping dock.
Ski passes, toll cards, and employee access cards are becoming more commonplace. Advancements in both
technology and standards, coupled with falling prices, are resulting in a rush to incorporate RFID into existing
systems.
There are also those who will resist change because implementation of RFID will require very costly changes to
legacy information systems. There is significant risk in not planning to make changes to legacy systems.
Ultimately, all automation becomes a management information tool.
From Relative
to Absolute Measurement
Bar codes are best suited for supporting transactional operations while moving goods from a DC to a store, or
tendering a sale at POS. As such, inventory accounting is driven largely by transactional changes in inventory.
Wall-to-wall inventory counts, although error prone, are an absolute measurement of inventories. Retail businesses
typically stop all trading once or twice a year to send hoards of people into warehouses to count each and every
item in stock. Annual inventory counts result in an absolute measurement of stock levels per SKU. From that point
forward, relative measurements are made to dynamically adjust account for inventory changes like sales and receipt
of goods. Understandably, errors are cumulative.
Absolute measurements can achieve +/-0.5% accuracy and are calculated as:
Quantity in stock = Quantity actually counted
Relative measurements have a acceptable standard deviation of +/- 3% accuracy, thus accounting for shrink and
human error, and result in the following calculation:
Quantity in stock = Quantity physically counted six months ago –all sales + all goods received.
RFID, like bar codes, can support transaction-based accounting to make relative measurements. RFID promises to
go beyond that someday, enabling accurate real-time measurements of inventory levels. (Figure 4) It’s the difference
between making relative and absolute measurements.
Inventory moving through your business is either sold, lost, stolen, or was never received in the first place… only one
of those possibilities makes money for you.
10. Page 7
Evolution or
Revolution?
Why are we so fascinated by each new technological wave that promises to change the world? From fire, to the
wheel, to the printing press, to steam power, to the telephone, TV, computers, robots, the Internet and now RFID
— all have or promise to take us to a far better place. And in fact the world is a better place thanks to advances in
science and technology.
The 1939 New York World’s Fair marked a
turning point in the way Americans’ viewed
the wealth creation and labor savings
potential of modern science and technology.
However with the exception of the rapid
and total annihilation of the slide rule by the
electronic calculator most technologies, even
the most aggressively disruptive of them
happily coexist along with its elder brethren.
So, even after decades of factory automation
we are still a long way from “lights out
manufacturing” just as we will not see the
“paperless office” anytime soon.
Both bar codes and RFID can be viewed
as disruptive technologies9
in that both
are distinctly different from their preceding
technologies, and by the fact neither initially satisfy the demands of high-end users in and of themselves. For
instance, the 10-key keypad was the primary technology for data entry prior to bar code scanning. It took many
years before bar code technology was readily adopted in the mass marketplace. Eventually, bar code pricing,
performance and broad acceptance led to its domination of the data capture market.
RFID’s advantage over the standard bar code is the ability to modulate radio signals instead of light. This simple
innovation — that of shifting functionality to the lower frequencies in the electromagnetic spectrum — affords
users the ability to read through many conventional packaging materials without line of sight. It also allows a large
population of tags to seemingly be read at once.
As with other disruptive technologies, the price performance criteria of RFID have initially proved unsatisfactory for
the mass market. It has found acceptance in niche markets where the high costs of tags could either be amortized
over many uses in closed loop applications, or in military deployments where cost is not a primary concern.
Figure 4 - RFID technology promises accurate
real-time measurements of inventory levels.
11. Page 8
Companies serving these early adopters have had a chance to understand the economics of disruptive technology,
scale an organization to the current market size, and make a series of sustaining innovations to improve RFID price
and performance to eventually meet the demands of the mass market.
It is important to understand that the disruptive nature of innovations in RFID were measured in a completely
different value network than retail supply chain management. RFID’s commercial start began in an arena where
$5 tags, which could only be read from a few inches away, proved valuable to European ski resorts, automobile
manufacturers, industrial engineers, and access control companies. Driven to improve business methods, the retail
supply chain has only recently defined a value network that can be aligned with product requirements familiar to
mainstream automatic data capture manufacturers.
The challenge is to adapt quickly to new retail supply chain management demands, without discarding proven bar
code legacy systems that will maintain value into the future.
Bridging the Gap:
Professional Grade Mobile Hybrid Readers
Is it possible to bridge the gap between bar code
legacy systems and the impending conversion
to RFID?
Passive bar codes will be around for a long time,
because conversion to RFID is time consuming
and capital intensive. Even though RFID will grow
quicker and have more value for the information
hierarchy, there will still be a place for the
traditional bar code in the foreseeable future.
RFID is a disruptive technology, but it is possible
to effectively merge it with legacy systems.
The enabling technology is an instrument that
incorporates legacy systems with tomorrow’s
requirements for RFID into a single handheld unit
designed for retail supply chain applications.
This instrument is a portable “hybrid reader” (Figure 5) that can read both bar code and RFID tags. It can read or
write to a variety of RFID tags using standards-based protocols. One such device, called by PSC a “Professional
Grade Hybrid Mobile Reader”, is the bridge that connects yesterday’s scanning technology with tomorrow’s.
Figure 5 - Hybrid RFID Reader
12. When pallets and cases of supplies come off the truck and into the warehouse, one device can read both regardless
of the tag type. This product and shipping information is then uplinked via wireless connections to corporate
databases that track shipping, delivery, inventory and locations of goods.
Others may become pocket-sized, ruggedized units carried by anyone from a truck driver to the warehouse
manager and purchasing agent who wishes to receive real time updates on the location and status of any item in
the retail supply chain, including a wayward tagged package sitting right in front of them.
Such readers and complete systems are not Star Wars technology. Professional Mobile Hybrid Readers are available
for pilot programs this year from PSC.
The PSC Approach
Whether you view RFID technology as evolutionary or revolutionary, PSC is the company that can help you get
from today to tomorrow. It has taken decades for UCC bar codes to have become commonplace in the supply chain,
but RFID will be widespread in less than one-fourth of that time. Fortunately, there are companies like PSC and its
partners that can help quantify how RFID will help improve productivity and inventory tracking over the next 3 years.
With over 30 years of experience in automated solutions for the global supply chain, PSC is uniquely positioned
to act as designer and implementer of open hardware and software systems that allow clients to manage the
transition from bar code to RFID.
PSC helps clients view the coming changes as evolutionary in nature, and part of a predictable, step-by-step
sequence of changes as RFID begins to play a larger role of coexistence with bar codes.
PSC’s priority is to support solution provider’s need for best-in-class rugged Mobile Hybrid Readers. These Mobile
Hybrid Readers are to withstand extreme conditions, applicable across multiple classes of trade. Yet product
requirements for those readers are not mature, and must be developed utilizing multiple prototype testing cycles.
PSC structures alliance partnerships to iteratively develop and verify RFID solutions. This is to successfully harness
the power of RFID technology. A series of short evolutionary prototyping cycles allows alliance partners to learn
through beta testing and field trials. Managing rapid evolution is a preferred alternative to the distress of an
unmanaged revolution.
A range of EPCmobileTM
Evaluation Program offerings feature access to early prototypes of Mobile Hybrid Readers,
software upgrades, service and support, and slotting for next generation products. PSC’s open system approach
assures IT managers will have the most freedom in choosing systems and devices best suited to existing systems,
and provide the flexibility to add more advanced technology as it becomes available.
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13. About PSC
Founded in 1969, PSC is perhaps known best as a bar code technology company. It is important to note that
PSC also develops mobile and wireless solutions for warehouse applications, and it is within this aspect of PSC’s
expertise that RFID will initially be adopted. As the technology matures, PSC will grow to meet the needs of RFID
tracking.
PSC partners with many of the world’s most respected companies to assure a system that is right for the job today,
and provides the freedom to explore future advances in technology.
PSC is a global provider of integrated data-collection solutions for next-generation retail supply chains. The Company
has a long legacy of providing “smart” technology to meet the demands of a changing marketplace.
PSC offers a wide range of mobile and wireless data-capture terminals , fixed-position and handheld bar code
scanners. Our products improve operating efficiency, offer inventory transparency and help optimize the overall
speed and accuracy of global retail supply chains while enhancing customer service.
Since installing the first supermarket bar code scanner in Troy, Ohio in 1974, PSC has been introducing innovative,
industry-leading products. Today, the company is leading the industry into the future with cutting-edge data-
collection solutions that meet the dynamic application needs and challenges facing today’s retail supply chain,
where technologies such as bar codes, Reduced Space Symbology (RSS), Electronic Article Security Tags (EAS) and
RFID coexist.
Page 10
14. 1 – “On the Cutting Edge,” Kiplinger’s Personal Finance, Sept. 1, 2003
2 - “RFID Picks Up Momentum, Furthers Efficiencies in Supply Chain, Says ABI.” Online. World Wide Web.
Available http://www.abiresearch.com/abiprdisplay2?pressid=169
3 - “RFID Finds its Place.” Online. World Wide Web.
Available http://www.reed-electronics.com/eb-mag/index.asp?layout=article&articleld=CA304133&text=rfid
4 – “Wal-Mart Expands RFID Mandate.” Online. World Wide Web.
Available http://www.rfidjournal.com/article/articleview/539/1/1
5 - “Business Technology: Timing Is Everything In Making Jump To RFID>” Online. World Wide Web.
Available http://www.informationweek.com/story/showArticle.jhtml?articleID=10818110
6 - “The History of Barcodes.” Online. World Wide Web.
Available http://www.basics.ie/History.htm
7 - “Metcalfe’s Useful Equation.” Online. World Wide Web.
Available http://www.killer-apps.com/contents/booktour/metcalfes useful equation.htm
8 - “How the EPC Network will Automate the Supply Chain.” Online. World Wide Web.
Available http://www.audoidcenter.org/media/xplane/laarge/xplane-theepcnetwork-A.pdf
9 - “How to Succeed with Disruptive Technologies.” Online. World Wide Web.
Available http://www.computerworld.com/softwaretopics/software/appdev/story/0,10801,71467,00.html
References
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