New Technology Ventures

New Technology Ventures

A report on

Market Feasibility Study on RFID and Baggage Handling

(This report contains 25 pages in total)

CONTENTS

INTRODUCTION

What is RFID?

History of RFID and adoption

Why is RFID exciting?

How does RFID work?

RFID technology advantages over barcode

Applications

Technology showstoppers? What factors might limit adoption?

Tag Reading

Tag Manufacturing Cost

Is the timing right from a technology perspective?

THE RFID MARKET

Market Size & Growth

Macro-trends

Socio-cultural trends

Technological trends

Regulatory trends

Market segments

RFID baggage handling submarket analysis

Baggage handling segment growth

IATA contribution towards standardization

THE BAGGAGE HANDLING INDUSTRY

Introduction

The major players

Competitive environment for RFID baggage handling solutions

Industry Summary

Is the timing right from the industry perspective? What is happening?

Current projects for RFID handling systems

Appendix 1

Appendix 2

Key players

INTRODUCTION

What is RFID?

RFID stands for Radio Frequency Identification. Quite simply it describes the method by which a subject can identify itself, on request, by the transmission of identification information through the medium of radio waves. The subject can be either

• Animate: such as Humans, Dogs or farm animals etc, OR
• Inanimate: packaged foods, cars, or consumer goods

History of RFID and adoption

RFID was first discovered and used in the Second World War to allow the British to differentiate between friendly and enemy airplanes. The British warplanes were fitted with a transponder that woke up when a British Radar signal was detected and then transmitted a friendly signal back towards the source, indicating that the plane was friendly.

Though invented in wartime, in more peaceful times RFID research and development has been driven forward by the promises of significant cost reduction and a multitude of exciting value added services. In its early commercial manifestations each item to be tagged had a small electronic assembly (a transponder) fitted to it that would respond with a burst of radio frequency (RF) carrier modulated identification data when interrogated by a RF signal (on a different frequency) from either a hand-held scanner/reader, or one mounted, say, in a doorway. This burst of identifying data was intercepted by the scanner, decoded and used to both identify the tagged item and for it to be counted. The early RFID tagging means were battery powered (so called active devices). These were not only costly, but also relatively bulky. Since then RFID use, and potential, has greatly increased in large part due to the unit cost, size and power needs, of the essential ‘tag’ having decreased by many orders. Despite the duration of its history RFID technology is still in its application formative years. Chart 1 gives a sample overview of the development of RFID applications with time, and some of the major activities that have lead to the current rapid uptake of the technology.

In many applications RFID tags replace barcodes, which have proven excellent for tracking products through checkpoints for more than forty years (i.e. at the point of sale on the way out of the supermarket for instance). However, the humble barcode suffers from a number of drawbacks. More specifically barcodes

• are limited to the data printed on them and cannot be updated, other than by replacement or sticking a label over them (which may be labour intensive).
• need to be substantially flat for reliable reading.
• are typically (but not always) paper labels, or printed on paper based packaging, and therefore prone to damage.
• typically provide inventory data to the level of product category.
• are very unlikely to show through which distribution depots and transport means the product arrived at the point of sale.

As will be seen later in this paper, RFID technology overcomes the limitations of barcodes. But as with barcodes, to gain wide international acceptance as the preferred means for inventory control systems there will have to be open standards for their use. Further if RFID technology is to become as ubiquitous as barcodes in the distribution chain, then the unit cost of the ‘tag’ will need to be substantially as cheap as the printed barcodes. Arguably, an RFID tag may never become as cheap as the printed barcode incorporated on the ‘cereal box packaging’, but because of RFID’s advantages they may become the preferred inventory control means for consumer durables, and high value capital goods etc.

Why is RFID exciting?

RFID addresses and resolves all of the limitations highlighted above and with fantastic prospects for further technology development offers a multitude of new and exciting applications. Imagine for instance your clothes containing miniature RFID tags that when placed in the washing machine, could tell the product how best to wash and care for it. Or forget reading the instructions on the back of a microwave ready meal, with RFID tags on the packaging the microwave could just read and follow the instructions automatically, only informing you when you need to take action. These are just two of the value added services that might enrich the world through the adoption of cheap RFID technology.

So, where is RFID on Gartner’s Hype Curve in 2005?

This figure shows that Gartner believe RFID to be 5 to 10 years from mainstream adoption. However, by this placement, it would seem that RFID is on the verge of emerging from the hype surrounding the technology and starting to deliver on some of its extravagant claims. To understand this reasoning, it is necessary to fully examine the current status of RFID development.
TECHNOLOGY

How does RFID work?

The RFID ‘tag’ is essentially a memory device with a means of revealing and communicating its memory contents, when prompted (scanned) to do so. The memory consists of a plurality of binary (two state) digits, also known as bits, and the communication comprises RF reception and transmission means. The binary data (bits) are formed into binary words comprising typically 8, or 16 or 32 bits that can make up letters and numbers in the same manner as in computing, the Internet and ‘texting’ on a mobile phone. There are two broad categories of RFID system: Active, and Passive.

Active RFID tags contain a power source (normally a battery or are solar powered) and are able to transmit a radio frequency wave with the identification information contained in the tag’s microchip. If there is sufficient memory available, the microchip might contain additional information (such as the washing/care instructions should the tag be from an item of clothing).

There are two types of Active RFID tag: Active Transponder and Active Beacon.

An active transponder tag transmits information only when awoken by a reader, whereas a beacon tag transmits its information at certain preset intervals (to conserve power).

As these devices have their own power source, they are able to transmit a strong radio wave over relatively large distances (20-100 meters).

In contrast, passive RFID tags do not contain a power source. These tags are designed such that they are able to draw a small amount of energy from an incoming Radio Wave, which awakens the Microchip and piggy backs its unique identification signal onto the reflected wave, which is emitted from the antenna.

As passive RFID tags contain no power source the range over which they operate is quite small (0.05-10 m). The following table summarises the differing properties and performance of the two different categories of RFID tag.

The data in the RFID tag memory may be pre-loaded (determined at time of manufacture) as a Read Only Memory (ROM), or may be dynamically variable (Static Random Access Memory) and take up the status of the last write/read cycle. The data is always read out serially so that it can be correctly parsed. The information contained in the RFID tag memory is deliberately kept to a minimum, and typically, dependent upon the data format (its syntax, numerical format – decimal, hexadecimal etc) requires translating into a human readable form via a host system.

RFID technology advantages over barcode

Compared to barcode inventory control systems RFID technology has significant advantages, many of which are outside of product manufacture and distribution chain applications. Some of these include

• Not requiring line of sight access to be read.
• The tag can trigger security alarm systems if removed from its correct location.
• Scanner/reader and RFID tag are not (so) orientation sensitive.
• Automatic scanning and data logging is possible without Operator intervention.
• Each tag can hold more than just a unique product code.
• Each item can be individually ‘labelled’.
• Tag data can be comprehensive, unique in parts/common in parts, and is compatible with data processing.
• With the right technology a plurality of tags can be concurrently read
• It can be read only or read-write.
• There is a very high level of data integrity (character check sum encoding).
• Provides a high degree of security and product authentication – a tag is more difficult to counterfeit than a barcode.
• The supporting data infrastructure can allow data retrieval and product tracking anywhere provided the scanner/reader is close enough to the tag.
• Combined with its authentication is the ability to monitor shelf life – a societal advantage in the pharmaceutical and food industry.
• Since each tag can be unique they can act as a security feature if lost or stolen e.g. a stolen smart travel card can be cancelled.
• The technology is rugged and can be used in hostile environments such as down oil wells (heat and pressure) to carry data to remote equipment.
• The technology lends itself to being updated, for example, as a car goes through its life its service record can be electronically logged with the car.
• The technology could be adapted to a range of circumstances for instance a chip could be inserted within a suit so that when it is sent to the cleaners it automatically gets the right cleaning procedure applied to it.
• The technology can be used to increase security for instance monitoring if a child leaves a school in an unauthorised manner.

Applications

The applications for RFID tags are numerous and some of the most innovative and successful may yet to be identified. However, initially the applications fall into the following sub divisions.

• Manufacturing
• Supply Chain Management
• Security Access & Control
• Asset Tracking
• Payment

Manufacturing

Within the manufacturing environment RFID tags have been used for the past decade to greatly improve operating efficiencies. Individual parts can be monitored as they pass through the process and throughput times calculated. In this way bottlenecks can be discovered and inventory build-ups identified. RFID also allows for easier tracking of parts usage and re-ordering of components can be timed to minimise the costs of holding unnecessary inventory. Therefore providing support for JIT manufacturing processes.

Supply Chain Management

In a bid to boost efficiencies and reduce costs, companies are seeking to employ RFID to further streamline their operations. The large supermarket chains, such as Walmart, are at the forefront of this development. The reasoning is that a deeper knowledge of where exactly products are in the supply chain should help the company to identify areas where unnecessary costs or inefficiencies are occurring that could impact the companies costs and thereby their profit margins. For example, real-time knowledge of which products are selling well on the shop floor can easily be linked to the companies ordering system placing up-to-the-minute demand data in the hands of the supplier.

Security Access & Control

RFID tags have been used for some time to replace swipe cards in gaining access to restricted access areas of buildings i.e. entry doors to a commercially sensitive area of an R&D company for example. However, more recently RFID has been touted as a possible replacement to the information contained in paper passports. Electronic passports could carry personal data about the individual such as fingerprints and other biometric data as well as any convictions that person may have received.

Asset Tracking

RFID tags can be used to track the location of all kinds of physical assets from cars to library books. The principle purpose behind this application is the desire to know the whereabouts of an asset whenever the information is required. In a library for instance a misplaced book could be lost indefinitely causing lost revenue in rentals and perhaps even unnecessary replacement. As a proportion of revenue, this can cost Libraries a small fortune. However, with the advent of low cost RFID tags in books a systematic sweep of the library with a suitable reader should determine the exact locations of all of the books and those that were misplaced could be easily identified. Likewise RFID tags can be deployed to track stolen goods such as cars.

Payment Systems

There are many areas where the time taken to receive payment for goods or services can be a major bottleneck in the process and cause major delays and queuing. Two examples of this would be road toll payments and at the supermarket checkout. In these areas RFID can offer significant reductions in the bottleneck, reducing queuing times and thereby improving efficiency. RFID tags in cars allow the driver to drive straight through the toll crossing without slowing down, knowing that the payment with be automatically deducted. At the supermarket if all the items in the basket have RFID tags the user can simply push the trolley through a reader, which will scan the goods, calculate the price and deduct the money from the customer’s bank account by way of the RFID chip in his/her wallet.

Technology showstoppers? What factors might limit adoption?

There are a number of technological barriers, which must be overcome for many of the above applications to become a reality:

• Problems with Tag Reading

1. Location/position of tag
2. Interference
3. Signal absorption
4. High tag Manufacturing Cost

Tag Reading

One technological problem that may inhibit the take up of passive RFID tags in many markets such as the supermarket business is the difficulty of reliably reading tags on all products.

Metal packaged products reflect radio waves and these reflections can cause serious interference. Similarly, packaged liquid products such as soups or bottled drinks can absorb the radio frequencies and limit the useful read range of the products. These problems are exacerbated by the orientation of the tag on the product relative to the reader.

Products on shelves are rarely assembled with a consistent orientation and this can cause the reader to fail to pick up certain products.

Tag Manufacturing Cost

Large capital investments are required to set up the capability to make passive RFID tags in large quantities. As a result, large order quantities are required to recover the upfront investment in the manufacturing technology.

Therefore, it has been a goal of the industry to find a single generic tag design, which can be used, in as many different applications as possible. Driving up the potential market size for that product and thereby reducing the tag cost.

As a corollary to this, it is possible to overcome some of the tag reading issues mentioned above by using smart tag design. However, custom designed RFID tags tend to be expensive and they also reduce the market size for that particular tag design.

Is the timing right from a technology perspective?

Currently there are many companies engaged in R&D activities with similar goals of reducing tag cost and improving reading accuracy/reliability. As a result of this, no consensus on the various standards that lie behind these different variants has emerged.

As a result, it seems that the technology is still not quite mature enough to move forward to the mass adoption phase for passive RFID tags.

Lessons learnt from the take up of barcodes would suggest that the technology needs to be mature enough that industry standards can be adopted before a technology will achieve the mainstream.

THE RFID MARKET

Market Size & Growth

The global market for RFID tags and equipments is big. Such a market has already reached $1.7 billion in 2004 and is expected to reach $5.9 billion by 2008[1]. Venture Development Corporation predicts that the market will grow by 36% annually through 2008[2].In 2004, the global market has grown 23.5% from 2003. A survey of 500 companies by AMR Research further supports the positive trend: it expects corporate RFID spending to increase by 16% from 2005 to 2006, and by 20% from 2006 to 2007. The shipment of RFID tag readers will reach 1.6 million hardware units by 2007[3].

Macro-trends

We now take a look at whether general market trends favour the adoption of RFID technology.

Socio-cultural trends

RFID technology leads to privacy and safety concerns, which may hinder its adoption[4]. After purchase, tag serial numbers can be read at a distance without the owner knowledge. As serial numbers uniquely identify items, tag (serial number) reading means item tracking. This leads to privacy concerns (e.g., when tracking personal items) and safety issues (e.g., when a malicious person scans shopping bags so to detect the presence of luxury items). These concerns may, in turn, hinder RFID customer adoption.