As Logistics Management's editors made the rounds during the spring conference season, they noticed that it was nearly impossible to find an empty seat in any educational session that had "RFID" in its title.

Pens flew across notebooks as supply chain and logistics professionals eagerly took down the details of RFID cost projections and implementation recommendations. Yet the overwhelming majority of questions asked at those sessions were aimed more at understanding the basics of RFID than at learning how to achieve a return on investment or how to integrate the technology into an existing WMS.

For all those conference attendees who were too shy to raise their hands, Logistics Management offers this RFID primer. Here you'll find the basics of what you need to know, along with words of wisdom from logistics managers, consultants, and technology providers.

RFID stands for Radio Frequency Identification. The technology has been around for more than 50 years and has been used for such applications as manufacturing controls, vehicle tracking, and theft prevention since the late 1980s and early 1990s. Current applications include automatic highway toll systems and those plastic buttons retail stores attach to expensive items to prevent theft.

There are two parts to an RFID system; the tag (either "active" or "passive"), which is attached to the object being tracked, and the reader that collects the data from the tag. At a minimum, each RFID tag comprises a small integrated circuit—a computer chip—that stores data, and a small copper coil that acts as an antenna for receiving and sending signals to and from the RFID reader.

Tags are typically encoded with Electronic Product Codes (EPC), unique identifiers assigned to companies and products by the standards group EPCglobal. (EPCglobal, by the way, has trademarked the term "Electronic Product Code.")

These codes include details about the product, its size, and case count along with other identifiers, such as point of origin, producing factory, and production batch information. When a tagged case or pallet passes a reader, it transmits the product data to that reader, which then downloads it to a host computer, where it can be merged into a company's inventory management database.

Two big advantages RFID holds over bar coding is that an RFID reader doesn't need a direct line of sight to collect data from the tag, and the data capture itself is automated, eliminating the need for manual scanning.

Passive tags use the signal from the reader to activate and communicate information, while active tags have an on-board battery that allows them to continuously emit more powerful signals. The major advantage of active tags is that they increase the readable range to more than 50 feet from the 6 to 10 feet that's typical for a passive tag.

Because active tags are more complex and carry their own power source, their price is measured in dollars, not cents. Passive tags are much cheaper—anywhere from 20 to 50 cents each. But that's still a far cry from the nickel per tag that would make tagging pallets and cases cost-effective. "For some companies that have higher-value items, it might make sense for them to adopt RFID more quickly because it makes sense to put a 25 cent tag on a $200 printer," says Jeannie Tharrington, spokesperson for Procter & Gamble (P&G). "But it doesn't make sense to put that tag on a tube of toothpaste."

RFID is not yet a 100-percent solution. That's because limited read ranges and interference with radio signals caused by metals and liquids have presented barriers to accurate reading of all tags.

Several initiatives to resolve those problems are now underway. P&G, for example, is one of seven companies involved in a pilot program with Wal-Mart at its Dallas distribution center. "We're trying a bunch of different tags from different vendors, working to find out the best placement of tags on cases and how to arrange the case on the pallets to increase our read accuracy," says Tharrington. P&G also is testing tags on shampoo bottles to improve readability of tags on liquids.

The U.S. Department of Defense (DoD) also is conducting readability tests that have yielded interesting results. "At one of our facilities, the guys found that a little weather stripping behind tags that were attached to metal drums solved the problem of metal interference," says Alan F. Estevez, undersecretary of defense for logistics management. The defense agency is sharing the results of those tests with its RFID tag vendors, and Esteves expects vendors will soon add some kind of backing to tags used in such applications.

Passive tags for a 12-case pallet with six items in each case can cost anywhere from $3.00 to more than $6.00, which is an added cost of 4 to 8 cents per item—and that's just for the tags.

"The costs can vary greatly," says John Sweitzer, director of industry marketing for RFID supplier Intermec Technologies. "If a company is wiring each dock door with a high-quality reader installation and running power for that reader, it could be as much as $10,000 a door. For less than half of that you can equip a forklift," he says. "We encourage people to consider hand-helds that only cost about $1,000 and are great for exception notification."

Mike Dominy, an enterprise management and supply chain technology specialist with the research firm Yankee Group, says many companies are doing the minimum needed to adopt RFID because their biggest customers are demanding it. Ultimately, he believes, costs for large consumer-goods companies are likely to run into seven figures. "The reality is that many companies will get up and running with RFID just to be in compliance with the deadlines that are out there right now," Dominy explains. "But larger companies probably should have budgeted several million dollars for equipment and ramping up their infrastructure."

There are also incalculable costs associated with preparing for the flood of additional information that will one day be available via RFID. "One of the biggest challenges, given the technology is working as intended, is the capture and transmission of what becomes a fire hose's worth of data in a timely manner, and what you do with that data once you have it," says John Hill, principal of supply chain consultants ESYNC.

Yes it will, but it probably won't have much impact right away. Despite the early deadlines for compliance from Wal-Mart, DoD, Target, and others, the first couple of years will be a learning process more than anything. Bar codes will still be the order of the day and will likely exist in parallel with RFID for the foreseeable future.

The long-term goal of RFID is to enable retailers and suppliers to share data that will give them real-time visibility of exactly where products are in the supply chain. "We think that instead of it being a supply chain where one links to the next, we want it to be more of a network where all of the players involved have the information simultaneously," says P&G's Tharrington. "So the retailer, the manufacturer, the supplier—everybody knows the same data at the same time."

But exactly how to make that happen is still being worked out between retailers, suppliers, and EPCglobal, which is developing worldwide standards and applications protocols.

What kind of benefits could I get from RFID right now?

Dominy suggests that companies that are implementing RFID in order to comply with a customer's mandate can immediately realize value by looking beyond "product in, product out" and examining how the technology could improve other operations. Applying active tags to tractors and trailers, for example, could make for more effective yard management. Drivers could quickly be assigned to loads that are ready to roll, or inbound loads could be scanned and assigned to a spot in the yard or an available dock door.

Hill notes that this technology could revolutionize the area of product recalls. Using RFID tag data, a shipper could tell the exact time and location suspect products were manufactured, and which tag I.D.s were assigned to them, he explains. "Companies will be able to reduce the scale of recalls by knowing exactly where the affected products were sent and where they are in the supply chain, and recall only those affected."

Will it really be worth all the cost and effort?

If your company's revenue depends very heavily on organizations that are requiring suppliers to use RFID, then the answer probably is yes. But to figure a return on your RFID investment, you'll need to take a longer-term view.

The first companies that effectively leverage RFID technology across the enterprise will have a big advantage working with customers like Estevez at DoD. "We know that when we are putting contracts out to bid, people are going to be including the costs of RFID right now," he says. "But those that figure out how to manage it effectively in all parts of their business are going to eventually be able to offer their goods at a better price, and that will offer them a great competitive advantage."