Magazine article The CPA Journal

Radio Frequency Identification and How to Capitalize on It

Magazine article The CPA Journal

Radio Frequency Identification and How to Capitalize on It

Article excerpt

What CPAs Should Know About RFID Technology

Businesses must leverage information technology (IT) to improve their operations and create a competitive advantage. A dramatic shift toward mobility and real-time information is changing the way business data is collected. One IT tool that can meet the needs of both mobility and timeliness is radio frequency identification (RFID), a technology set to revolutionize business operations. RFID technology represents an efficient and versatile replacement for the barcode systems that have been a "best practice" for inventory and property identification.

Bar-code systems facilitate fast checkouts and effective inventory management, but the data processing is performed sequentially (one item at a time) and the device reading the bar code must be relatively close to the item (within sight of the tag). RFID, however, can concurrently identify up to 1,000 tagged items per second via wireless transmission. In the future, for example, the sale price of all the items in a shopper's cart will be instantly totaled upon approaching a retail checkout counter, where a credit card receipt will be ready for the customer's signature, the sale amount having already been charged to the RFID-enabled credit card in the customer's wallet.

In 2003. the U.S. Department of Defense required its suppliers to use RFID tags on shipments to the military by January 2005. Wal-Mart also required its top 100 suppliers to have products on pallets or in cases employing RFID tags by 2005. The company required its next largest 100 suppliers to adopt this technology in 2006. With RFID, Wal-Mart hopes to improve its alreadystreamlined inventory management and boost sales by ensuring that the right products will be in the right place at the right time. According to BusinessWeek's "Smart Web 50" report, Wal-Mart may generate pretax savings of as much as $8 billion by 2007. The RRD mandates required by the Defense Department, Wal-Mart, and other leading retailing firms have increased the demand of RFlD tags significantly. In January 2006, IDTechEx predicted sales of 1.3 billion RRD tags this year, compared to about 600 million in 2005. IDTechEx also expects that by 2016 the number of tags delivered will be more than 450 times the number delivered in 2006 ( Meanwhile, competition and economies of scale have already pushed down the price of RRD tags (in October 2005, SmartCode announced that its EPC Gen 2 inlays are priced at $0.075 apiece for quantities of 1 million, and $0.072 apiece for orders exceeding 10 million). The tag price is now low enough for some companies to apply RFID to item-level applications.

Although the application of RFID started as early as World War II, when the Allies used it to identify airplanes, the application of the technology by businesses is still in its infancy. Nonetheless, leveraging RFID for automatic identification and data capture (AIDC) can provide significant benefits, including enhanced operations, reduced labor costs, increased inventory accuracy, and improved customer service.

RFID Systems

A typical RFID system consists of several components, including tags, printer/encoders, tag readers, RFID middleware (facilitating data exchange between readers and business information systems), a host computer system, and application software (Exhibit 1). With an Internet connection, the information can be accessed by authorized users at any time and place. An RFID tag is small enough to be attached to or embedded into almost any product. RFID tags are equipped with antennas to enable them to receive and respond to radio signals from RFID readers. RFID tags can be active or passive. Passive tags require no internal power source and can be very small; active tags have their own power supply, may have longer transmission ranges, and carry more data than passive tags. With either type, many tags can be read simultaneously instead of the sequential processing in a bar-code system. …

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