CAN GEN 2 SAVE RFID?

Julie Gallagher

The next-generation standard for radio frequency identification is here, and many believe it represents the tipping point for RFID adoption by retailers and manufacturers.

Since 1999, RFID has been groomed to be the product-identification technology that could replace the bar code. For that to happen, however, a new global standard for RFID, a decades-old technology, had to be developed. This standard would apply to RFID tags and readers, just as the standard for bar-code technology applies to bar codes and scanners.

The same organization responsible for bar-code standards -- GS1 US (formerly the Uniform Code Council), Lawrenceville, N.J. -- is also handling the development of RFID standards (through its subsidiary EPCglobal US and the international body, EPCglobal). This includes standards for the Electronic Product Code (EPC), the digital information stored on an RFID tag.

The eagerly awaited standard for RFID -- known as UHF Class 1 Generation 2, or Gen 2 for short -- was formally unveiled late last year. Now tags and tag readers based on the standard are finally available in limited quantities. But it may be some time -- perhaps until late 2006 -- before Gen 2 equipment is widely available. (Other RFID standards are also in development -- see story, Page 38.)

In the meantime, the question is whether this new standard and the equipment it spawns will lead to a substantial increase in adoption of RFID in the retail industry, which so far has been limited to a handful of pioneers like Wal-Mart Stores and Albertsons in the U.S. (See "Learning From Leaders," SN, June 27, 2005, Page 53). Despite the promise of the new standard, adoption could be hampered by the initial availability and cost of equipment and questions about its royalty-free status.

The Gen 2 standard, which applies specifically to the "over the air" interface from an RFID tag to a reader, is said to be a higher-quality, lower-cost, globally interoperable alternative to its predecessor, known as Generation 1 class 0 and class 1 RFID protocols. The Gen 1 tags, for example, did not always interoperate, or work together.

"[Previous standards] were accompanied by a lot of confusion because RFID tags made by different vendors were not interoperable with one another," explained Pete Abell, senior partner, ePC Group, Boston. "[With Gen 2] we are where we were with the bar code in 1974. Gen 2 is the beginning of a series of standards applicable for different ranges of product."

"The introduction of Gen 2 will enhance the use of RFID technology for supply-chain optimization," said John Raudabaugh, vice president of systems implementation for Albertsons, Boise, Idaho. "As Gen 2 becomes fully operational, we will work collaboratively with our suppliers to incorporate this technology into our RFID program." Albertsons is testing RFID in the Dallas market with plans to roll out a program with 100 suppliers by late fall.

METRO GETS STARTED

Last month, Metro Group, the retail giant based in Dusseldorf, Germany, became the first retailer to implement the Gen 2 RFID standard in a live retail environment. Metro's Rheinberg, Germany-based Future Store, an Extra supermarket remodeled around technology, upgraded its Intermec IF5 RFID readers and IBM RFID middleware so that they are able to read multivendor Gen 2 RFID tags.

Before its recent upgrade, the Future Store's RFID hardware and software supported Generation 1 Class 0 and Class 1 RFID tags. "The Gen 2 standard offers better performance, global availability and is cheaper as well as standards-based," said Homeyer Juergen, Metro Group spokesman.

Gen 2 standard equipment will be integrated next in Metro Group's Essen distribution center, according to IBM, Armonk, N.Y. A broader Gen 2 equipment implementation has been scheduled by Metro for later this year, though that will depend on product availability.

Availability remains in the hands of RFID tag and reader vendors. "Everyone in the game is pushing for Gen 2," Abell said. "The issue is that Gen 2 products are not available in large quantities yet."

Another question for Metro involves differences among the RF waves transmitted in different parts of the world. Although Metro is interested in receiving Gen 2 RFID tags from international suppliers, "up to now Gen 2 is not specifying a [globally interoperable] frequency," Juergen said. "In consequence, frequencies are not the same globally."

Certain areas of the world, including Europe, have yet to finalize specific frequencies for the Gen 2 standard. But to compensate for that, vendors are building Gen 2 tags and readers to a frequency range of 860 to 960 Megahertz.

"As long as the equipment is built to function in that range, it doesn't matter where on the planet it is," said Susan Luke, a spokeswoman for EPCglobal. "Countries don't have to agree on the same frequency because the equipment is being built to function within a range of frequencies."

Even so, Abell noted, "the UHF frequency [used by Gen 2] has a lot of peculiarities." This means "there will be some learning that will take place with the Gen 2 standard," especially for retailers used to the previous generation equipment.

Thus, to simplify matters, many retailers are holding out for the availability of equipment based on the Generation 2 standard, said Abell, who projected that the equipment won't be available in large quantities until the end of next year.

IMPACT ON COST

Cost remains another thorny issue for RFID. Abell believes that Gen 2 tags may initially be more expensive than tags based on previous standards, "due to their extra capabilities."

But EPCglobal predicts that equipment based on the new standard will become more affordable over time. "It is our hope and expectation that when you have a globally supported [standard], it drives costs down and becomes more affordable," said Bernie Hogan, senior vice president and chief technology officer, GS1 US.

Bentonville, Ark.-based Wal-Mart Stores, which has already made a major investment in first-generation tag technology, is now facing a transition to Gen 2 equipment. Currently receiving tagged shipments from a mix of more than 100 voluntary and mandated domestic suppliers, Wal-Mart has not set a specific date for its transition to the Gen 2 standard. But it's not expecting difficulties.

"The RFID hardware and readers we use have been selected based on functionality and performance," said Christi Gallagher, spokeswoman for Wal-Mart. "Our readers are multiprotocol and upgradeable to Gen 2 for a dense reader environment."

Wal-Mart, expecting Gen 2 tags to hit the market later this year, has not announced any Gen 2 mandates for its suppliers, Gallagher said. "We are maintaining a flexible timeline to accept Gen 2 tags with Gen 1 tags as the technology becomes more robust."

Not all suppliers are waiting for cues from their retailer customers to adopt Gen 2. Dallas-based Kimberly-Clark began formally testing Gen 2 RFID hardware last week in its 5,000-square-foot RFID research lab in Neenah, Wis. Its objective is to determine which hardware is the most compatible with its conveyor, packing, logistics and shipping systems.

ROYALTY-FREE?

One other lingering issue that may affect production of Gen 2-compliant equipment is its royalty-free status. According to Hogan of GS1 US, the Gen 2 standard specifications, at their most basic form, are royalty-free.

However, equipment vendor Intermec, Everett, Wash., claims that a portion of its patented intellectual property must be licensed in order to build quality Gen 2 equipment. "While it may be possible technically to build a Gen 2-compliant product without using Intermec IP, these products will not meet user expectations set by the original Gen 2 standard," said Chris Kelley, director of RFID, Intermec. "Gen 2 has a royalty-free protocol, but that does not equal a royalty-free product."

EPCglobal US has investigated Intermec's claim, determining that Intermec's IP "is not necessary to [comply with specifications of] the standard," Hogan said.

"[Intermec] has some very broad patents that some people find useful when it comes to creating Gen 2 products," Abell said. "Others have found ways to not use Intermec's IP. If a company wants to license the technology, it reduces their own design time."

Intermec has acknowledged that it is seeking a 5% royalty on RFID tags and a 7.5% royalty on RFID readers created through its patented IP. "When business cases were created, [retailers] probably didn't figure in the fact that there was going to be an additional incremental cost," Abell said. "[The royalty] will add a couple of pennies per case."

More Standards to Come

The UHF Class 1 Generation 2 standard -- which governs communications between RFID tags and readers -- is just one of a host of RFID interface standards that will be used to facilitate the movement of electronic product code data on the tag within and between companies via what's called the EPCglobal Network.

EPC tag data standards have recently been ratified, to be followed by a series of standards scheduled to be finalized later this year, said Bernie Hogan, senior vice president and chief technology officer, GS1 US, Lawrenceville, N.J. Tag data standards govern the assignment and encoding of identities for physical objects, locations, loads and assets, said Kenneth Traub, chief technology officer, ConnecTerra, Cambridge, Mass.

EPCglobal, directed in part by GS1 US, will soon ratify standards for communication, or interface, between RFID middleware, which collects and sends tag reads, and enterprise applications that use the data, Hogan said. This interface is known as application-level events.

Future standards include elements of the EPCglobal Network, such as EPC Information Servers (EPCIS), or servers residing at each end-user (such as retailer) that store pertinent EPC data. These servers will offer restricted access to other end users across the decentralized EPCglobal Network.

The network will also comprise two other standards -- the object naming service (ONS), which has already been developed, and Discovery Services, which is still under development. "ONS and EPCIS are at the heart of the EPCglobal Network," Traub said.

The ONS will locate the EPCIS server of the company that tagged and manufactured a particular product. Traub speculated that Discovery Services may track the complete movement of an EPC tag across trading partners and make the information accessible.

"[Discovery Services] will be the next big area, but this is a few years off," Traub said. "It's very futuristic."

"We are really waiting for the industry to define business requirements for [Discovery Services], and we're currently facilitating a comments period for specifications," Hogan said.