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Issue of March 2004 

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Business Technology

Tag it with RFID

A look at RFID technology, the potential applications and its growing adoption in various industries. by Puneet Gupta

Businesses have been employing various technologies for increasing efficiencies and reducing costs. The intense competitive landscape that most businesses find themselves in means businesses continuously need to evolve towards a "sense and respond" model, where all value chains are optimized, and real-time response to changes in business conditions is the order. To sense and respond, requires every vital part of the enterprise to be integrated with the IT infrastructure, and this has to include the physical assets (inventory, equipment, infrastructure etc.) as well. This calls for the ability to give electronic identities to passive objects, and thus be able to bring them on-line (so to say).

Radio Frequency Identification or RFID as it is commonly known, is a technology that can enable this. The basic technology has been around for several years and it is only recently that—driven by the standardization activities and other industry initiatives—RFID has started to gain visibility.

RFID can be broadly categorized as an 'e-tagging' technology. At the fundamental level, RFID can be seen as an evolution from barcodes—now ubiquitous in retail outlets, and on all the consumer items that we buy. Barcodes are the simplest forms of tagging. Using barcodes, information about an item can be captured using optical barcode scanners. RFID enables passive object tagging using RF (Radio Frequency) sensing as opposed to optical sensing used in the case of barcodes.


Because radio waves are used to sense the tag, RFID has the advantage that no line-of-sight alignment is required between the RFID tag and the reader. What this means is that the RFID reader can read multiple tags simultaneously and instantly. The tags may be embedded inside an object such as a container or in a garment. Furthermore, RFID tags can store a lot more information than bar codes. Imagine a big carton with hundreds of boxes of shirts of different sizes and colors, each tagged with an RFID. The moment the carton reaches the warehouse or the store, the RFID reader immediately identifies all the RFID tags and information about the inventory such as the number of shirts, types, sizes, colors etc, is instantly available on a PC terminal, without even having to open the carton!

As mentioned before, RFID is a smart sensing technology, which is based on the use of RF signals for sensing. Essentially the technology consists of two components. The first is the RFID tag that has a chip that holds stored digital information, An antenna that communicates with the receiver, the packaging that ensures the combination of chip and antenna is rugged—and in a package that enables easy attachment of the tag to different kinds of objects.

The second part is the RFID reader that is a comparatively larger device that communicates with RFID tags to check the stored data. When the RFID reader excites the tag using radio waves, the tags respond by transmitting the code that is stored inside the tag. These RFID tags can either be passive (cheap and work without any battery) or active (relatively costly, have an embedded power source). Further the electronic identification stored in a tag can either be fixed or can be dynamically updated.

The range of sensing RFID tags from a RFID reader can vary from a few centimeters to a few meters, depending on the frequency of operation and the type of tags (active or passive). The amount of data that can be stored inside an RFID tag can range from few bits (typically 32-256 bits for passive tags, and 1 MB for active tags). It should be noted that RFID tags are very rugged and come in several form factors. The versatility of RFIDs can be gauged from the fact that RFIDs can even be fabricated to be embedded in a piece of paper, or in a form that can be permanently tagged to a shirt. When considering volumes, RFID tags can be very cheap. In fact by 2005, the cost of passive RFID tags is expected to fall to, or below the five cents level.


There are several application areas where RFID is becoming popular. Some of the application areas where RFID pilots, or limited rollouts have been initiated, include areas such as fleet management, inventory & asset management, warehouse automation, asset tracking, quality control (tracking and counting articles using RFID), packaging, security & access control, hazardous material management, advertising and promotion, delivery & smart card based payment systems.

This is just an indicative list to highlight the versatility of the technology. While most of the media coverage on RFID is related to application of technology in retail and typical supply chain scenarios, the technology is making significant inroads in different industry segments in new and innovative application areas such as location identification, keyless vehicle operations, spare part management, preventive maintenance (RFIDs with integrated temperature/pressure/ humidity sensors), telemetry etc.

Though the technology in itself may be sufficiently matured today, there are several other factors (such as cost, standardization, scale etc) that are driving different levels of adoption of the technology in different business segments. The most significant factor, however, is the cost of the RFID tags and readers. Most of the applications listed above require RFID tag costs to be very low, as the typical quantities of tags required in such applications can be very high. It should be understood, however, that there are several specialized application areas like railcar tracking, quality control and automation in aerospace or defense industries (typically addressed by active RFID tags) where the cost of the tags may not be such an important consideration.

At SETLabs, the Software Engineering and Technology Labs of Infosys Technology, we believe that the Consumer Packaged Goods (CPG) segment will be largest adopter of RFID technology during the early phases of RFID adoption, with primary focus on supply chain execution, inventory management (inventory counting, avoiding stock-outs), controlling theft and other losses and damages and generating a real-time view on demand. A Forrester research puts the number of RFID tagged objects in CPG segment at over five billion by 2005, up from just around one million today.


Larger adoption of RFID by different industry segments is expected to lead to falling prices of RFID tags as a result of economies of scale. Averaged between $1 and $2 right now, RFIDs are available from around 28 cents (passive) to over $20 for rugged, active and high performance tags (Gartner research).

At Infosys we see RFID technology adoption in two stages. In the short to medium term, RFID tag costs will have dropped enough to apply the technology for item level tagging. At this level, RFID would find its way into supply chain applications involving container level tagging, warehouse automation etc. As the price points begin to dip down to a few cent levels, new market opportunities will open up, especially in sectors such as apparel, manufacturing, delivery and pharmaceuticals. The market for RFID solutions could explode once the RFID costs have fallen to sub-cent levels and new technologies drive RFID sizes smaller, making them appropriate for item-level tagging. Forrester research predicts that by 2007-2008, adoption of very cheap RFID tags (sub $0.01 level) could explode to over 20 to 40 billion RFID tags.

The writer is with the pervasive computing research initiative of SETLabs, Infosys Technologies. He can be reached at

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