RFID Strategy -- Unglamorous, Unheralded ... And Yet Profitable

April 29, 2006
RFID profitability far away from publicized compliance programs.

I get an inbox full of press releases each week from RFID and supply chain companies. Most of them come from publicists employed by the big players (and would-be big players) in the retail RFID compliance field.

This week, an unusual coincidence occurred that turned my attention to a little-noticed fact: that really big money is being spent on the RFID field by organizations outside the retail and consumer products space. One example of this is the February issuance of the largest single contract in the history of RFID technology. This contract was from the U.S. Department of Defense (DoD) to Savi Technology, Incorporated. The amount of the contract -- which was reported as $424.5 million dollars -- is more frequently associated with DoD purchases of advanced weaponry, but in this case was for active RFID tags and related services.

New Tricks For Old Problems

Now, here comes the coincidence. The press release about the Savi contract came into my office on the same day that I was asked to evaluate a client's business processes related to tagging of shipping containers. The client was using an older version of Savi's active tags. The process required simply attaching an electronic bill of lading to a shipping container by means of an active RF tag. The steps included using an Excel spreadsheet to format the bill of lading into a form suitable for loading onto the tag. It was a decidedly low-tech approach to getting the job done, but it worked.

The DoD purchase from Savi was for the same purpose -- tracking containers. Savi makes highly rugged active tags for use on standard ISO metal shipping containers. The February purchase will help the DoD track supply shipments to and from the Middle East in support of Operation Iraqi Freedom.

After looking at the size of the number on the press release (we consultants are fond of large numbers), I recalled a prior meeting about active tags held in our Emerging Technology Center. This vendor carried, among other things, active tags suitable for use in the cattle industry. The tag was a rugged plastic capsule that would be swallowed by a cow, but would stay lodged in one of the cow's several stomach chambers. It would cause no discomfort or harm to the cow, but would help the ranchers track the movement, health status, and feeding patterns of each animal using readers distributed around watering stations and other areas. A handheld reader was also available that looked like a sturdy, flattened baseball bat -- to help "convince" a stubborn cow to move when required. My subsequent internet investigation turned up several providers of such veterinary tags, with Allflex USA, Inc. as a market leader for simple passive tags attached to the ear of each animal.

Cows and shipping containers share one significant characteristic: there are huge numbers of them to be tracked. Tracking can be time consuming, expensive, and subject to inaccuracy. Both Savi and Allflex identified a technological approach to the problem, got into the field early, and currently enjoy dominance in their niche market. As the Savi purchase order shows, some niches can be very large indeed.


The efforts of Wal-Mart and other retailers to create RFID systems have received a lot of attention from the general media, as well as form specialty publications. While the emerging technologies grab most of the spotlight, older RFID applications such as active-tag technology have continued to mature and expand their presence in the marketplace. The practical lesson to be learned is that not all supply-chain RFID solutions will come with an EPC logo attached. If your business can benefit from rugged and reusable tracking devices, consider the capabilities provided by established RFID technologies such as active tags.

Paul Faber is a principal with Raleigh, N.C.-based Tompkins Associates, a supply-chain-solutions consulting firm. As the chief manager of RFID equipment implementation at Tompkins Emerging Technology Center, Paul possesses extensive experience in material handling solutions, systems integration, and installation. He has managed field integration and operations activities at material handling sites around the world.

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