Subject: [NEXTEL-1] Defense Dept. orders its suppliers to use RFID tags by 2005

From: [email-masked]
Date: Fri, 10 Oct 2003 22:05:59 -0400

Defense Dept. orders its suppliers to use RFID tags by 2005
 
The new policy will cover practically
everything purchased by the U.S. military 

Story by Bob Brewin

OCTOBER 08, 2003

The U.S. Department of Defense will require all of its suppliers to use passive
radio frequency identification tags (RFID) on all cases and pallets by January
2005, a mandate whose impact will likely dwarf a similar policy that Wal-Mart
Stores Inc. imposed on its top 100 suppliers in June.
 
Analysts said the Defense Department and Wal-Mart projects would impose "massive"
infrastructure costs on supply chains over the next two years, with little return
for suppliers. 

The new policy will cover practically everything purchased by the U.S. military --
from beans to bullets and from toothpaste to tank parts -- or roughly 45 million
line items, according to Alan Estevez, assistant deputy undersecretary for supply
chain integration. 

Estevez couldn't estimate the number of suppliers affected by the policy document,
signed last week by Michael Wynne, the acting undersecretary of Defense for
logistics. But the Defense Logistics Agency -- which bought an estimated $24
billion worth of goods last year -- has 23,642 suppliers, according to DLA
spokeswoman Dawn Dearden. 

Estevez said he believes the Pentagon's policy mandate will help jump-start the
RFID industry, which had already gotten a boost from the Wal-Mart decision this
summer. He also said that while the 18-month timetable is ambitious, the
department believes it's doable. It plans to use the Electronic Product Code (EPC)
that Wal-Mart will deploy, Estevez said. 

EPC is under development by the Uniform Code Council (http://www.uc-council.org/),
a standards body, and EPCglobal,
(http://www.uc-council.org/epcglobal/) a new organization that the UCC will
formally launch in November. 

The department wants the "lowest possible price" for the tags its suppliers will
use, Estevez said. Wal-Mart has a goal of 5 cents per tag, and Enu Waktola, a
Texas Instruments Inc. marketing manager, said the economies of scale the Defense
Department brings to the RFID market will drive down prices. 

Besides requiring suppliers to use passive RFID tags on cases and pallets, the
department has also instituted a formal policy to use active RFID tags to track
all of the 20- and 40-foot shipping containers it uses, Estevez said. Savi
Technology Inc. is already supplying active RFID tags and container tracking
systems to the department under a series of contracts valued at $280 million. The
latest of the contracts was announced in February. 

Savi currently tracks 270,000 cargo containers transporting military supplies
through 400 locations in 40 countries. 

Passive RFID systems use low-powered radio transmitters to "read" information on a
data chip equipped with an embedded antenna within a range of 10 feet. Active tags
have built-in minitransmitters and can be read within a range of 300 to 400 feet.
The data tags in each system store much more information -- 128 bytes -- than bar
codes, which can store only 1.1 bytes. RFID systems can read cases stacked
underneath one another on a pallet, making it easier to conduct an inventory than
with a bar code system, which require scanners to be in the line of sight of the
bar code. 

Wynne, in his policy memo, said the Defense Department plans to use RFID tags to
"improve our business functions and facilitate all aspects of the DoD supply
chain." The agency also envisions using RFID tags "to improve data quality
management, asset visibility and maintenance of materiel," he said. 

Jim Cotterman, a logistics analyst at the Logistics Management Institute, a
nonprofit consulting organization in McLean, Va., that works closely with the
Defense Department, said portable RFID readers installed in a combat zone could
provide a commander with "much better visibility" into supplies stacked in a
forward depot. That would make it easier to locate a needed item quickly. 

Kara Romanow, an analyst at AMR Research Inc. in Boston, said the Defense
Department and Wal-Mart deadlines are highly impractical. RFID "is not going to
happen" by 2005, she said, citing impediments on both the hardware and software
sides. RFID chips today have a 20% failure rate and can't stand the kind of
environmental extremes the Defense Department faces. EPC is also still in its
early stages of development, Romanow said. 

Mike Liard, an analyst at Venture Development Corp. in Natick, Mass., said
suppliers will have to make massive investments in infrastructure to support the
coming mandates, with little return "aside from meeting the mandate." Hardware
costs for RFID readers and networks in just one warehouse could run as high as
$100,000, he said, adding that suppliers would also have to integrate RFID into
their existing information systems. He couldn't estimate how much that would cost. 

Vinnie Luciano, marketing vice president for mobile computing at Symbol
Technologies Inc. in Holtsville, N.Y., said the Defense Department would have to
invest "somewhere between tens of millions and hundreds of millions" in RFID
hardware and networks
to support the new policy. 

www.computerworld.com/mobiletopics/ mobile/story/0,10801,85869,00.html

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