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RFID and Microsoft

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RFID: An Introduction

Simon Holloway
Microsoft EMEA Manufacturing Industry Solutions Architect

June 2006

Applies to:
Architecture Development

Summary: This white paper provides a general introduction to Radio Frequency Identification (RFID) technology, and discusses the benefits and challenges of this technology for organizations that are involved in the production, movement, or sale of retail goods. (30 printed pages)

Contents :

  1. Executive Summary
  2. The Origins of RFID
  3. What Is RFID Really?
  4. Market Overview
  5. Understanding the Challenges
  6. Data Privacy
  7. RFID in Practice
  8. RFID Business Benefits
  9. Applications for RFID
  10. How Does Microsoft RFID Architecture Address the Business Needs Conclusion.
  11. Appendix A - More Information About The Microsoft RFID Solution

Executive Summary :

Whatever you read about packaging, supply chains, or identification, you will come across an article or advertisement for Radio Frequency Identification (RFID). Why does it seem that this technology is being touted as the best thing since sliced bread? And is it just another piece of hype meant to confuse and make us invest money in another piece of technology?RFID is evolving as a major technology enabler for identifying and tracking goods and assets around the world. It can help hospitals locate expensive equipment more quickly to improve patient care, pharmaceutical companies to reduce counterfeiting, and logistics providers to improve the management of moveable assets. It also promises to enable new efficiencies in the supply chain by tracking goods from the point of manufacture through to the retail point of sale (POS).

As a result of the potential benefits of RFID:

  1. The automotive industry has been using closed-loop RFID systems to track and control major assemblies within a production plant for over 30 years.
  2. Many of the world's major retailers have mandated RFID tagging for pallets and cases shipped into their distribution centers to provide better visibility.
  3. There are moves in the defense and aerospace industry to mandate the use of RFID to improve supply chain visibility and ensure the authenticity of parts.
  4. Regulatory bodies in the United States are moving to the use of ePedigrees based on RFID to prevent the counterfeiting of prescription drugs.
  5. Hospitals are using RFID for patient identification and moveable asset tracking.
  6. RFID tags are being used to track the movement of farm animals to assist with tracking issues when major animal diseases strike.
  7. But while the technology has received more than its fair share of media coverage recently, many are still unfamiliar with RFID and the benefits it can offer. In the face of this need for clear, comprehensive information about RFID and its benefits, this paper defines the opportunities offered by the technology for all organizations involved in the production, movement, or sale of goods. It is equally relevant for organizations wishing to track or locate existing goods, assets, or equipment.

In addition, the paper seeks to outline the business and technical challenges to RFID deployment and demonstrates how these issues can be addressed with technology from Microsoft and its partners. Above all, it explains how Microsoft technology—which provides the software architecture underpinning the solution rather than the tags or readers—can support the deployment of RFID-based solutions.

The Origins of RFID :

The first disturbing fact is that RFID is not a new technology. It was first used over sixty years ago by Britain to identify aircraft in World War II and was part of the refinement of radar. It was during the 1960s that RFID was first considered as a solution for the commercial world. The first commercial applications involving RFID followed during the 70s and 80s. These commercial applications were concerned with identifying some asset inside a single location. They were based on proprietary infrastructures.The third era of RFID started in 1998, when researchers at the Massachusetts Institute of Technology (MIT) Auto-ID Center began to research new ways to track and identify objects as they moved between physical locations. This research, which has a global outlook, centered on radio frequency technology and how information that is held on tags can be effectively scanned and shared with business partners in near real time.

To do this we needed standards. The work of the Auto-ID Center focused on:

  1. Reducing the cost of manufacturing RFID tags. 
  2. Optimizing data networks for storing and delivering larger amounts of data. 
  3. Developing open standards.

It became apparent that the ideas being proposed, combined with other ongoing technological and standardization activities worldwide, would help to reduce the costs of RFID tagging. By 2003, the Center had over 100 sponsors from four continents. Its final task was to conduct a large field trial with 40 participating companies in 10 US cities. Today, the work of the Auto-ID Center has helped to make RFID economically viable for pallet and carton-level tagging. The technology is also becoming more affordable for high-value items. The Auto-ID Center officially closed on October 26, 2003, transferring all its technology to EPCglobal.EPCglobal is now leading the development of industry-driven standards for the Electronic Product Code (EPC) Network to support the use of Radio Frequency Identification (RFID) in today's fast-moving, information rich trading networks. EPCglobal is a member-driven organization composed of leading firms and industries that are focused on creating global standards for the EPCglobal Network. The EPCglobal Network is a set of technologies that enable immediate, automatic identification and sharing of information on items in the supply chain. In that way, the EPCglobal Network will make organizations more effective by enabling true visibility of information about items in the supply chain.
Figure 1. The (not so brief) History of RFID (Source: Deloitte Consulting: Lawrence Huntley, RFID - Why Now?, RFID Forum June 2004, Deloitte)

What Is RFID Really?

But what is RFID? RFID is the reading of physical tags on single products, cases, pallets, or re-usable containers that emit radio signals to be picked up by reader devices. These devices and software must be supported by a sophisticated software architecture that enables the collection and distribution of location-based information in near real time. The complete RFID picture combines the technology of the tags and readers with access to global standardized databases, ensuring real time access to up-to-date information about relevant products at any point in the supply chain. A key component to this RFID vision is the EPC Global Network.Tags contain a unique identification number called an Electronic Product Code (EPC), and potentially additional information of interest to manufacturers, healthcare organizations, military organizations, logistics providers, and retailers, or others that need to track the physical location of goods or equipment. All information stored on RFID tags accompanies items as they travel through a supply chain or other business process. All information on RFID tags, such as product attributes, physical dimensions, prices, or laundering requirements, can be scanned wirelessly by a reader at high speed and from a distance of several meters.

RFID Bill of Materials

So what is the bill of materials for RFID then? RFID Component parts are:
altTag or TransponderAn RFID tag is a tiny radio device that is also referred to as a transponder, smart tag, smart label, or radio barcode. The tag comprises a simple silicon microchip (typically less than half a millimeter in size) attached to a small flat aerial and mounted on a substrate. The whole device can then be encapsulated in different materials (such as plastic) dependent upon its intended usage. The finished tag can be attached to an object, typically an item, box, or pallet, and read remotely to ascertain its identity, position, or state. For an active tag there will also be a battery. 

Figure 2. A variety of RFID Tags

Reader or InterrogatorThe reader—sometimes called an interrogator or scanner—sends and receives RF data to and from the tag via antennas. A reader may have multiple antennas that are responsible for sending and receiving radio waves.



Figure 3. Examples of a Reader with Associated Electronics

Host Computer—The data acquired by the readers is then passed to a host computer, which may run specialist RFID software or middleware to filter the data and route it to the correct application, to be processed into useful information.

Host Computer,s

 Figure 4. Basic Operations of RFID (RFID Center: Dr Carol David Daniel, Introduction to RFID, RFID Forum December 2004, RFID Center)

Automatic Identification

RFID technologies are grouped under the more generic Automatic Identification (Auto-ID) technologies. Examples of other Auto-ID technologies include Smartcards and Barcodes. RFID is often positioned as next generation bar coding because of its obvious advantages over barcodes. However, in many environments it is likely to co-exist with the barcode for a long time. What advantages does RFID have over these other means of identifying a person, product, or asset? The real benefits of RFID can be summarized as follows:

  1. Line of sight not required
  2. Durability
  3. Range
  4. Data volume
  5. Multiple read–Speed
  6. Read/Write–Update

Rather than using light to collect or read a number from a bar code, radio waves are used to read a number from the RFID tag. RFID therefore does not need line-of-sight to operate. Using radio means that the tag no longer has to be visible on the object to which it is attached; the tag can be hidden inside the item or box that is to be identified and still be read. This minimizes or eliminates the need for a person to have to present the reader to the tag, as it can now be fixed to a wall, for example. As the item is passed by the reader it will be read automatically, thus giving a potentially large saving in labor costs or substantial increase in the throughput of scanned items.Another feature of RFID is the ability to read many tags at the same time. It is not necessary to present each tag to the reader separately (as is required for barcodes); instead, all tags within the range of the reader can be read almost simultaneously as they pass the reader. Again, there is a huge savings potential in not having to manually present the reader to each item to be identified.Furthermore, data can also be written to the tag, a feature that is not possible with barcodes. This feature has tremendous implications for IT systems and the potential benefits of RFID.

Figure 5. Comparison of RFID with Bar codes

Different Types of RFID

Another complication to the RFID question is that there are different sorts of tags available in the market. This typing of tags can be done in a number of different ways. The table in Figure 5 highlights these different typing approaches.

Table 1. RFID Tags Types

There are several versions of RFID that operate at different radio frequencies. The choice of frequency is dependent on the business requirements and read environment—it is not a technology in which 'one size fits all' applications.

Three primary frequency bands are being used for RFID:

  1. Low Frequency (125/134KHz)—Most commonly used for access control, animal tracking, and asset tracking.
  2. High-Frequency (13.56 MHz)—Used where medium data rate and read ranges up to about 1.5 meters are acceptable. This frequency also has the advantage of not being susceptible to interference from the presence of water or metals.
  3. Ultra High-Frequency (850 MHz to 950 MHz)—offer the longest read ranges of up to approximately 3 meters and high reading speeds.

    Figure 6 illustrates the different frequencies that are used for RFID Tags.

Figure 6. RFID Frequencies (RFID Center: Dr Carol David Daniel, Introduction to RFID, RFID Forum December 2004, RFID Center)

Applications for RFID within the supply chain can be found at multiple frequencies, and different RFID solutions may be required to meet the varying needs of the marketplace.Since UHF (Ultra High Frequency) has the range to cover portals and dock-doors, it is gaining industry support as the frequency of choice for inventory tracking applications, including pallets and cases.

RFID tags are further broken down into two categories:

Active RFID Tags are battery powered. They broadcast a signal to the reader and can transmit over the greatest distances (100+ meters). Typically they can cost £5–£20 or more and are used to track high value goods like vehicles and large containers of goods. Shipboard containers are a good example of an active RFID tag application.
Passive RFID Tags do not contain a battery. Instead, they draw their power from the radio wave transmitted by the reader. The reader transmits a low power radio signal through its antenna to the tag, which in turn receives it through its own antenna to power the integrated circuit (chip). The tag will briefly converse with the reader for verification and the exchange of data. As a result, passive tags can transmit information over shorter distances (typically 3 meters or less) than active tags. They have a smaller memory capacity and are considerably lower in cost (less than £1), making them ideal for tracking lower cost items.

There are two basic types of chips available on RFID tags: Read-Only and Read-Write:

Read-only chips are programmed with unique information stored on them during the manufacturing process—often referred to as a 'number plate' application. The information on read-only chips can not be changed.
With Read-Write chips, the user can add information to the tag or write over existing information when the tag is within range of the reader. Read-Write chips are more expensive that Read-only chips. Applications for these may include field service maintenance or 'item attendant data'—where a maintenance record associated with a mechanical component is stored and updated on a tag attached to the component. Another method used is something called a "WORM" chip (Write Once Read Many). It can be written once and then becomes Read-only afterwards.

So Why Now?

That's good, but why is everyone talking about RFID now? Well, after 15 years of testing, trials, and live specialized use, a number of converging factors have increased the attention and momentum behind RFID. Figure 7, from Deloitte Consulting, summarizes these factors best.

Figure 7. Why RFID Now? (Source: Deloitte Consulting: Lawrence Huntley, RFID – Why Now?, RFID Forum June 2004, Deloitte)

Market Overview

Wal-Mart has announced that its 100 top suppliers must tag their deliveries (at pallet level) by 2005. This mandate for a phased rollout, in tandem with large pilots at Target, Albertsons, and other organizations, including some US pharmaceutical companies, has raised expectations for future market size and growth. This uptake in the supply chain is mirrored by RFID deployments by the US military and by a range of other applications in agriculture, tourism, and asset management.As a result of global RFID pilots and phased deployments, projections for 2005 indicate that growth in the worldwide transponder (RFID tag) market will be £464m, equating to 24 percent (Venture Development Corporation, March 16 , 2004). At the same time, the value of the reader market globally will grow by 59 percent to £372m.In Europe, a host of organizations including Carrefour and METRO are already putting RFID solutions through preliminary trials. Manufacturers such as KiMS in Denmark are also piloting the technology. Research by RF & Microwave Industry News suggests that 41 percent of European retailers are planning RFID pilots for 2004 (RF & Microwave Industry News, February 5, 2004). According to estimates provided by leading pharmaceutical manufacturers, following their pilots it is estimated that RFID-based solutions could save the industry more than $8 billion by 2007/8.But what about small and medium businesses? Is RFID applicable to them? Nigel Montgomery of AMR Research states that "RFID is not just applicable to large household named companies, whilst it would seem so from the names of most early pioneers. Nor is it only viable at high volume. If anything, small-medium sized companies should be able to benefit faster than larger companies. But the potential return on investment (ROI) on an RFID-based project should not be about volume, it's more likely to be determined by pareto ranking, that is, 20 percent of the products represent 80 percent of the value of inventory." (RFID in Manufacturing, Nigel Montgomery, AMR Research, 2006)This global interest in RFID as a key enabler for the supply chain and for achieving greater traceability for goods and equipment is also stimulating the market for software that supports RFID. In 2005, this will increase by 40 percent to £323m (RF & Microwave Industry News, 5 February, 2004). ABI Research also highlights that RFID integration services will surpass RFID equipment revenues by 2007, reaching more than £0.82m by 2005 (ABI Research, 10 February, 2004).

Understanding the Challenges

Supply Chain Inefficiencies

Today, many supply chain inefficiencies originate from inaccurate data about where products are in the supply chain. Retailers may provide point of sale (POS) data to the manufacturer, but without the knowledge of existing inventory levels and stock in transit, these data points are not sufficient for accurate demand planning.While there is increasing pressure on manufacturers, distributors, and retailers to maximize efficiency, minimize cost, and provide the best value to the end customer, these companies face the following challenges:

  1. Buffer stocks, out-of-stocks, and late shipments impact on margins.
  2. Inaccurate data causes expensive manual interventions; 30 percent of supplier transactions contain errors (market estimates).
  3. £16.3m is lost per year due to supply chain inefficiencies (market estimates).
  4. Discontinuous data flow across the supply chain leads to redundant data entry/duplication of effort.
  5. Inability to trace products and ingredients to suppliers and customers makes information sharing and product recalls complex and expensive.
  6. New legislation to track products from source to origin, including European Union directive 2001/95/EC and the Transportation Recall Enhancement, Accountability, and Documentation (TREAD) Act.
  7. Leading Government agencies, OEMs, and retailers are mandating supply chain changes.

Technology Considerations

RFID presents a number of technology challenges. First, organizations must manage vast quantities of data that is generated by reading tags on individual pallets, cartons, or high-value items. In addition, they must implement a fully-integrated software architecture that enables this data to be analyzed and made available to internal and external systems in near real time.

Additional challenges include:

  1. Configuration and management of reader devices—Where organizations deploy a large number of readers, the process can be simplified with highly automated tools for set-up, configuration, and batch management.
  2. Tremendous data volumes—Each RFID tag is scanned several times per second and many facilities will be scanning hundreds of products simultaneously.
  3. Information maintenance and look-up—Each time a tag is scanned its key attributes must be looked up in a corresponding database in near real time.
  4. Ownership and partner data integration—In complex environments, such as the supply chain, supporting infrastructure must protect data that is owned by different business partners.
  5. Standards and architecture interoperability—Systems must be compliant with EPCglobal standards for defining product attributes and exchanging data.

Solving These Challenges

To overcome these technical challenges, organizations need to establish clear strategies for RFID deployment. They should also build their solutions on highly scalable systems that are built on open standards such as XML. In this way, they can rapidly create interfaces to enable real-time data exchange between internal and external systems.Typically, today's trials are based on specific areas of the supply chain where immediate returns on investment can be realized with minimum disruption to existing business processes or technology infrastructure.

Global Standards

With so much trade being conducted globally, standards and regulations are important to ensure safety and the interoperability of tags and readers across national boundaries and between trading partners. A common misunderstanding is that RFID is regulated by one trade body—it is in fact influenced by a number of official bodies for different aspects:

  1. Frequencies, power levels, and operating cycles are regulated in Europe by the European Telecommunications Standards Institute (ETSI).
  2. Protocols for communication between tags and readers are proposed by a number of bodies and equipment manufacturers. The two most prominent organizations for setting standards are the International Standards Organization (ISO) and EPCglobal.
  3. EPCglobal, a member-driven organization comprised of leading firms and industries focused on creating global standards, is developing a standards-based network to support RFID globally. This is to ensure that data created in one place can be read and interpreted anywhere in the global supply chain. EPC Global is part of GS1, which also manages the UCC-EAN system responsible for standardizing barcodes, so they are well placed to develop, manage, promote, and deploy the EPC standard.
  4. The Electronic Product Code (EPC) is a key element of this RFID network. It is held on RFID tags and identifies specific items as they travel between locations. By providing a standard way to attach information to products, EPC enables organizations to share information more effectively. It also increases the speed of supply chain operations because all items are recognized quickly and easily worldwide. Whereas barcodes refer to a category of product, EPC codes refer to specific events related to a product. EPCs are typically embedded in low cost, passive RFID tags. When a reader scans the tag, it transmits back the unique EPC code. This is done with little to no manual effort required, compared to the work needed to open boxes and scan barcodes. As a result, all supply chain partners achieve significant operational benefits.

Global Data Synchronization

In order to partake in RFID, organizations must be able to communicate their product data globally. This product data must be validated, up-to-date, and contain the information needed by any third party with whom they wish to trade or communicate. With millions of products being manufactured, distributed, and purchased across the globe on a daily basis, it is easy to understand that managing information about goods and services across the supply chain is a complex, time consuming, and expensive exercise. Furthermore, the widespread deployment of new ERP and MRP (or indeed new versions of) has exacerbated the issue by disseminating the components of the required product data across more, not less, proprietary systems. The inability to seamlessly communicate product information between trading partners has been a long-standing issue among manufacturers, distributors, and retailers alike.Global Data Synchronization (GDS) is a process designed to help keep all trading organizations in sync by ensuring that basic product data, such as the description and category stored by one company, matches the data stored by their trading partners. Organizations are asked to submit their product data in a specified format to data pools around the globe, which will then be validated against a global data registry; changes will be flagged immediately across the trading community. Capgemini forecasts that GDS can provide "Productivity improvements of 1–3 percent of supply chain costs, impacting the bottom line by 10–15 percent."All manufacturers and retailers who subscribe and embrace the GDS initiative and publish their product data to the data pools will also need to ensure that their internal product information is in the required standard and of the required quality to exchange with any third party and the EPCGlobal network.

Figure 8. Global Data Synchronization

GDS standards are being steered by a group of retailers and manufacturers known collectively as the Global Commerce Initiative (GCI), and are being developed by EAN International and The Uniform Code Council (EAN UCC). The standards assign key attributes to product data, enabling manufacturers, suppliers, retailers, and other supply chain players to share and understand product-related data worldwide.EAN UCC says: "Imagine, as a manufacturer, that your product catalogue is available worldwide in an efficient and easy-to-search way. Imagine, as a retailer, that you could search for any type of product and have access to what is available worldwide. Imagine now that when you start doing business with your trading partner, data will be exchanged in a seamless and streamlined way all along the supply chain, allowing for the right amount of goods to become available at the right place and at the right time."By cleaning and synchronizing data, organizations create a firm foundation for the deployment of RFID. However, additional standards are required to support widespread adoption of the technology. (For more details on Global Data Synchronization and Microsoft's support please refer to Microsoft Whitepaper–Global Data Synchronization).

Microsoft and RFID Standards

Microsoft is playing a key role in the development of RFID standards globally. It has been an active member of the EAN UCC working groups, collaborating with organizations such as GCI, CIES, UDEX, and others, to play a key role in defining standards for data synchronization.In April 2004 the company joined EPCglobal, supporting the organization's goal to make EPC the global standard for immediate, automatic, and accurate identification of any item anywhere in the world. In February 2005, the company joined the NFC standards group.As well as joining these standards bodies, Microsoft announced the formation of a new Microsoft RFID Council. The group will look at how industry can use RFID technology to identify objects of interest and then track them through a business process of interest.The Council highlights a growing ecosystem of partners that are building innovative RFID solutions on the Microsoft platform to enhance control of key business processes, improve inventory visibility, and provide better customer service for manufacturers, distributors, and retailers. The Council, which operates worldwide, aims to deliver RFID solutions that comply with global standards. They will also be low-cost, simple to deploy, and built on a robust, scalable technology infrastructure. Members of the Council already include major consulting firms, system integrators (SIs), independent software vendors (ISVs), and hardware manufacturers.In the UK, Microsoft has sponsored a Department of Trade and Industry imitative around RFID that has led to the setting up of the RFID Center in Bracknell (http://www.rfidCenter.com) to provide education on both business and technical issues. In France, Microsoft partners Manhattan Associates, Alien Technology, and Printronix have an RFID showcase at the world-renowned L'echangeur IT showroom in Paris.

Data Privacy

Key Issues for Consumers

The benefits offered by RFID provide a compelling case for deployment within the supply chain. However, organizations must be mindful of privacy issues surrounding the technology.Today, most RFID deployments are supply-chain applications such as tagging for shipping containers or pallets. These do not associate personally identifiable information (PII) with tag identification (EPC) numbers. But with 'item-level' tagging, unique identification numbers in EPCglobal tags might become associated with an individual at the POS when the tagged product, such as an item of clothing, is acquired.

The situation is of concern to privacy pressure groups because:

  1. RFID can be read through materials, items, or packaging, so consumers can never be sure when a tag is present or being scanned.
  2. RFID can be read at a small distance with no overt physical action required to scan the tag.
  3. Data collected from RFID tags can potentially be held by multiple parties, including Internet-accessible databases, causing security concerns.
  4. Tags can potentially remain active outside of the store environment.

To ensure that customers' concerns are addressed, retailers and other organizations must undertake initiatives to educate the public on the realities and myths of RFID. Increasingly, such initiatives will demonstrate that RFID is designed to track products and physical assets rather than people.The kind of passive tags that will be deployed for most retail applications, for example, are only readable from a few meters, ensuring that customers cannot be tracked once they exit the store.Tags can also be disabled as they leave the store, or placed inside labels that customers can remove from products once they have purchased them.In addition, it is imperative that all customer-facing RFID-enabled solutions are optional. That means customers must always give their permission before data about them is used.

Microsoft and Privacy

Microsoft has a single principle that guides its policies around consumer privacy and data protection: Microsoft customers will be empowered to control the collection, use, and distribution of their personal information.Microsoft's approach to putting consumers in control of their personal data is based on the widely-accepted concept of fair information practices, which form the basis of a number of privacy laws and industry guidelines. As such, Microsoft privacy policies provide a set of standards that apply to all PII, irrespective of the technology in use.

In brief, Microsoft follows the following policies relating to RFID:

  1. Conspicuous notification must be posted and the governing privacy statement must be available near readers and tags when RFID tags are in use.
  2. Items or packaging tagged using RFID tags must be labeled accordingly.
  3. Privacy statements must include information on the purposes for which tags and readers are being used.
  4. Consumers must be provided with the choice to remove or deactivate tags on purchased items.
  5. Consumers must be notified if personal data associated with RFID tags is being transferred to third parties, and they must provide explicit consent for any secondary use.
  6. Data transfers of personal data must include appropriate security measures.
  7. Reasonable access must be provided for customers to their personal data so they can correct or amend it.
  8. Appropriate security measures must be in place to protect personal information from unauthorized access, use, or disclosure.
  9. Reasonable steps must be taken to ensure personal data is relevant for its intended use.
  10. Consumers must have a mechanism for resolving disputes with the RFID data collector.
  11. There must also be an affordable, independent recourse mechanism when complaints or disputes cannot be resolved.

RFID in Practice

To fully understand the capabilities of RFID, it is helpful to consider how the technology can be beneficial in real business situations. The following examples illustrate how the technology can impact throughout the supply chain, delivering efficiencies for three types of organization: manufacturers, distributors, and retailers.The scenarios focus on a bicycle manufacturer that produces high-end bicycles for the global market. All parts are purchased from vendors, except for the frames, which are made in-house from raw steel pipe. The description shows the potential of RFID to deliver benefits at every stage of the supply chain as the bikes are assembled, distributed to retailers, and finally sold to customers.


The company and all of its suppliers use RFID to share location and other information about the various bicycle parts and sub-assemblies. This enables vendor managed inventory (VMI) for bicycle components.For example, a tire company supplies the bicycle manufacturer with an in-house stock of tires. Using VMI, this supplier takes responsibility for stock levels at the bicycle manufacturer, which never has to place an order. Each tire contains an RFID tag that holds product information such as the item and batch number, which enables automated ordering when stocks run low. Both companies always know how many tires are available in the warehouse and react to requirements in real-time.

Scheduling of Assembly Orders

Once the bicycle manufacturer has an order of frames ready, it ships them to a paint shop on RFID-tagged pallets that contain the production order number and destination. The paint shop is equipped with readers that register specific orders when they are delivered. These are then routed to the correct workstations, paint booths or powder coating facilities.When the frames have been painted, the system updates tags on the pallets with 'production order complete' status and they are then shipped back to the manufacturer. When the goods leave the paint shop, the manufacturer is informed when the goods will return. If there were any problems, this information is entered onto the tag, allowing the manufacturer to take appropriate actions.RFID readers at the manufacturer recognize the goods when they return from the paint shop. The system automatically notifies the final assembly facility and the order begins.Distribution A wholesaler manages the distribution of the manufacturer's bicycles to retailers of all sizes all over the world. This company works with a distributor to deliver a container of bicycles to a retailer. The deliver truck driver unloads the pallets of goods into the warehouse. As the pallets move from the truck into the warehouse, they pass an RFID reader. This reader picks up the information about the items received and displays them on a screen next to the doors so the driver can see what has been unloaded. Once all the goods are unloaded the trucker confirms that the order is correct and the retailer and distributor systems are updated in real time.


Picking at the warehouse is done on an order-by-order basis and the goods are shipped to stores on pallets. The pallets carry RFID tags that store the pick list for the order. Because the warehouse handles fulfillment of many sporting goods manufacturers to a number of outlets, the list may contain other items as well as the bicycles.As new orders are released in the warehouse they are written to the tag on an empty pallet. The next available forklift operator picks up the next empty pallet. The reader on the forklift reads the pick list from the tag on the pallet and displays it on the operator's screen.The operator drives to the first location to pick the required items. The system monitors the goods collected, verifies that they are correct, and deducts them from the pick list. If incorrect goods are collected a warning is triggered. Once the order is complete the operator brings the pallet to the packing area.If, for example, the tire manufacturer had a short run of bad tires, the bicycle manufacturer may need to recall them. In this case, the system would notify the operator when a bike is on the recall list. The operator then takes any recalls to a special section of the warehouse, where they are automatically removed from inventory and put on a pallet for return shipment.

Checking the Right Goods Are on the Right Truck

Each outbound door has an RFID reader that monitors all pallets that leave the warehouse. Once all the pallets that are being shipped have been loaded onto a truck, the operator can confirm that this has been done correctly on screen. A warning is triggered if there are any errors.

Figure 9. Extended Supply Chain Issues


Retailers track items using systems similar to those in the warehouse.

Store Level Inventory Control

One of the bicycle manufacturers' customers is an exclusive retailer in the United Kingdom. The retailer uses a perpetual SKU-level inventory scenario that tags and tracks items through the receiving process. In the future, it intends to extend this to tagging individual items and tracing them through to the POS.


As soon as an order is dispatched from the warehouse, the retailer receives information on when the goods will arrive. When the shipment is unloaded at the back of the store, data is collected from RFID tags attached to each pallet. This is accessed, summarized, and compared to the expected shipment.Any discrepancies are reported and considered as "shrinkage" until the discrepancy is resolved, because the store will be charged for items present in the shipment data.Receipts are logged into a store's perpetual inventory database. Items that have been recognized are entered into the store inventory records. As a result, systems are updated automatically in real time, increasing the efficiency of their operations and ensuring the accuracy of data by eliminating human error.

Shelf Stocking

As pallets of merchandise are received in the back room, the data is made available to a function for scheduling the stocking process. The application is 'aware' of current inventory levels in the store and will schedule stocking of merchandise that is either out-of-stock or at a low inventory level. Merchandise that is bulky or difficult to stock is scheduled for delivery when the store is closed or customer traffic is expected to be light. Merchandise is stocked in a sequence that spreads the available stocking labor throughout the store.Available store labor resources are taken into account when a shop stocking schedule is produced. The stocking application can present the shop assistant with a shelf stocking list either on a printer or wireless terminal. The shelf stocking work list indicates the location of the merchandise on the pallet, as well as indicating a shelf location for merchandise placement.When the store assistant indicates that the shelf or rack stocking is complete, an RFID shelf-checker application audits the restocking function and the store shelf inventory levels. Some stores have backroom or secondary stocking areas within a store. The stocking function not only puts away new merchandise, but it also moves merchandise from secondary locations to primary selling areas.

Store Replenishment and Ordering

In the future, each item of stock will have an RFID tag attached at the point of manufacture. These will enable the store to check its inventory levels quickly and effectively. The item-level tags will be able to see discrepancies between the items on the shelves and the store inventory. These could then be noted and reported.After checking inventory levels in store, the system will also generate an order and check it against the supply chain for any likely problems.

POS Checkout Process

Traditionally, all checkouts use barcode scanning. If a local cycling team buys new bikes, the shop assistant currently would scan the first item and then uses the quantity key to multiply that scan, instead of scanning each item individually. As a result, the retailer can't collect accurate pricing information or details such as the size and color of goods sold. To address these issues, the store plans to upgrade its checkout process to include RFID scanning of all products at the POS. This will enable the store to implement an end-to-end automated inventory process. The proposed system will independently recognize each product sold at the register using RFID for inventory and the barcode for sales.In addition, goods will be scanned at the POS with no human intervention as they pass within a certain distance of a reader. This makes the checkout process faster for the customer and more efficient for the retailer, who can deploy employees to other, more customer-facing activities.


The store is also planning a system to deactivate the tags as products leave the store. The devices that will disable tags can also potentially be used to determine whether items have been scanned at the POS before they leave the store. In doing so, these will help stores to detect shoplifters and reduce shrinkage accordingly.

Find Merchandise in the Store

The retailer could also use item-level tags to quickly locate items in the store, thereby increasing operational efficiency and service for the customer. Phone calls and wasted visits to the stock room will no longer be necessary.

Customer Loyalty

The retailer caters to an exclusive clientele of racers and aficionados. As an ultimate goal, it would like to give each customer a store card with an embedded RFID tag. Customers who agree to have such a card could be scanned as they enter the store. Those who prefer not to be identified would have a privacy flag next to their details on the database. In this case, nothing would disturb the customer while shopping.By tagging loyalty cards, the retailer could potentially harness information on customer shopping history to offer willing customers personalized offers in store. To enable this, a shop assistant would have to review customer data once they are identified by the system. The employee could then approach the customer and offer items that may be of interest. Eventually, this process could be fully automated, with offers and promotions made to customers' phones or PDAs, through mobile devices mounted on shopping carts or through kiosks.Item level tagging will mean that each bike that is sold will eventually have a tag containing the date of sale, service plan, and repair record. This would enable the retailer to effectively manage warrantee agreements and identification of bicycles in the event of theft.

RFID Business Benefits

Use of RFID technology can increase business productivity and reduce associated costs. To ensure that companies benefit from the advantages RFID provides it is important to understand how to adopt this technology. By analyzing current practices and procedures eight main areas of benefit can be identified. These are:

  1. Improved Productivity and Cost Avoidance.
  2. Decreased Cycle Time and Taking Costs Out.
  3. Reduced Rework.
  4. Reduced Business Risk & Control of Assets.
  5. Improved Security and Service.
  6. Improved Utilization of Resources.
  7. Increased Revenues.
  8. Exception Management.
  9. Improved Productivity and Cost Avoidance

Identifying items by RFID involves less work than using barcode scanning and other less automated ways. This leads to greater process effectiveness in many tasks such as receiving and putting away, picking and shipping goods when the time required and cost of identifying items by RFID is substantially less than other methods.

Decreased Cycle Time and Taking Costs Out

RFID scanning is not a serial process, like traditional Barcode scanning, so the business can perform identical tasks much more quickly. This means processes that move goods through a supply chain are more efficient, leading to a reduction in the need for larger inventories.

Reduced Rework

As RFID scanning has a greater first time pass accuracy, this reduces the number of errors that are generated, and the number of retries that are needed.

Reduced Business Risk and Control of Assets

RFID tagging enables better audit and asset control. The ability to better track and trace items means assets can be located more easily. The opportunity for enhanced data collection leads to increased accuracy of record keeping and improved asset maintenance. Regulatory compliance can be achieved more effectively.

Improved Security and Service

Being able to validate information relating to an item enables increased security. This individual identification contributes to more effective access control, reductions in shrinkage and other losses, and the ability to provide fast and efficient services at the point of need. Ability to authenticate information can prevent activities like counterfeiting and fraud.

Improved Utilization of Resources

Information obtained by RFID scanning can be used to improve planning. Processes can be improved, time can be saved, assets can be utilized better.

Increased Revenues

By eliminating uncertainty, companies will suffer less "out of stock" situations and obtain greater item availability. This will reduce lost sales and increase choice, leading to more sales.

Exception Management

RFID enables processes and procedures to be measured better. Until a process can be measured accurately, it often can't be improved. Decisions that are based on limited, inaccurate, out-of-date information are often poor decisions. The contribution information captured by RFID offers to IT applications will allow managers in companies to be alerted when compensatory business decisions need to be taken.

Applications for RFID

Applications fall into two principal categories: short range applications in which the reader and tag must be in close proximity (such as in access control), and medium to long applications in which the distance may be greater (such as reading across a distribution center dock door). A sample of applications is shown here:

Access control for people:

There are many areas in which RFID tags are carried by people to allow them to gain access to facilities or services:

Secure access to work place

Safety access to dangerous/secure equipment

Access to a computer or vehicle

Access to travel on trains/buses

Access to leisure facilities

Access control for vehicles:

Secure access on site

Road tolling

Instant payment for fuel

Manufacturing automation:

Control of flexible manufacturing processes by recognizing items being built on a production line (mass customization enabler)

Labeling key components for later recycling

Logistics and distribution:

Tracking parcels from shipment to end customer

Tracking goods from manufacture to retail


Supply chain management

Stock taking

Reducing loss through shrinkage

Reverse logistics

Product availability


Plant & Equipment

Fixed assets


Product security:

Tamper evidence

Product authentication


How Does Microsoft RFID Architecture Address the Business Needs

To encourage widespread adoption of RFID technology and address the customer pains of managing multiple devices, smoothing the data, translating data into meaningful events, and combating costly integrations, Microsoft is developing a layered RFID infrastructure that uses an open building block approach. It relies on the Microsoft Windows Server system, related Microsoft applications platform products, and a growing number of integrated partner solutions. This approach provides a wealth of solutions for any size organization or industry vertical, including manufacturing, pharmaceutical, or aerospace. Also, the combination of Microsoft's technology platform plus partner solutions offers a multiplicity of applications reflecting the broad potential of RFID.The Microsoft RFID infrastructure enables compliance, automation, and business process transformation while shielding users from changing standards/regulations. Toward this end the company is developing core infrastructure components to support RFID applications and solutions. It is also RFID-enabling select systems within its family of Microsoft Dynamics enterprise applications products. The infrastructure provides a base set of tools for device abstraction and management, event processing, and applications integration.Independent hardware, software, and systems integration partners play a key role in developing RFID applications based on the Microsoft .NET foundation technologies and Microsoft's applications platform products such as BizTalk Server, which provides data integration services for supply chain operations. Microsoft's RFID technology can be embedded within third-party applications, or used on its own to capture and interpret data from sensors and manage business events in an easy-to-deploy, user-friendly environment.

Microsoft's Layered Approach

The Microsoft RFID Infrastructure platform consists of layers (see Figure 10):

The architecture incorporates:

  1. Devices, such as readers and sensors.
  2. The Device Service Provider Interface.
  3. Event processing engine.
  4. RFID APIs.
  5. Tools and Adapters.

Figure 10. Microsoft's Real Time Enterprise Platform (Source: Microsoft Corp., 2006)

Because the layers are tightly integrated, applications and devices can seamlessly interconnect. Here's how the layers work together:

Devices Layer

The bottom Devices Layer consists of hardware such as RFID readers, printers, sensors, barcode scanners, 802.1X access points for wireless local area networks, handheld terminals, and Pocket PCs, which are provided by partners. Data transmissions from EPC readers and other devices from multiple vendors are processed via a Device Service Provider Interface included in the Microsoft RFID Infrastructure. It provides a platform for independent software vendors and system integrators to install hardware in a plug-and-play fashion, resulting in a complete and seamless RFID solution.

Data Collection and Management Layer

To accommodate the potentially large variety and number of devices that could be resident in an RFID implementation, a Device Service Provider Interface (DSPI) provides a consistent way for devices from multiple hardware vendors to expose their device services to the Microsoft platform. DSPI provides a scalable, extensible infrastructure that allows customers to read data through any standards-based or non-standards-based sensor regardless of format, thereby reducing dependency on a specific technology and protecting RFID investments long term.

Event Processing Engine

This layer includes event and workflow management, messaging, and a business rules engine. The Event engine enables context-based or rules-based processing of RFID data to provide information directly to line-of-business applications. Information also can be delivered to business processes that span applications via Web services integration and orchestration products such as BizTalk Server. This layer provides the structure for integration across multiple facilities and partners. It also includes device management, to convert data into business process relevant information.

Figure 11. The Event Processing Layer (Source: Microsoft Corp., 2006)

Services Layer

The Services Layer includes product information resolution lookup, business process management, analytics/reports/notifications, and enterprise content solutions. The Microsoft RFID infrastructure makes it easy for partners to embed functionality directly into their application or build applications on the infrastructure. Open application programming interfaces (APIs) and .NET-centric tools allow partners to quickly create specialized vertical solutions across a wide range of applications. The Services Layer also provides lookups to EPCIS servers in which data about a tagged object resides.

Application Solutions Layer

This uppermost layer relies on services, data, and tools from the lower layers to implement application solutions that drive business processes for the end user. Microsoft relies on its partners to build out many of the solutions, which are divided between two classes of applications: real-time enterprise/point apps and batch-oriented enterprise apps. In addition, the RFID infrastructure also supports the Microsoft Dynamics family of enterprise applications.

Business Benefits

The Microsoft RFID infrastructure offers many potential business and technology benefits to those considering RFID systems today. In all cases, careful attention has been placed on open standards and overcoming the shortcomings of today's custom systems. Thus, the Microsoft RFID Infrastructure is designed to lower total cost of ownership, simplify integration end-to-end from the device level to back-end applications, convert data into actionable information, and provide a platform on which Microsoft and its partners can build applications that take advantage of the volume and real-time nature of RFID data.

Lower total cost of ownership

One of the most significant potential benefits is helping clients leverage existing investments in Microsoft Windows Server 2003, SQL Server, and BizTalk Server, as well as popular ERP and CRM systems, including Microsoft's own ERP systems, Microsoft Dynamics. These familiar tools also shorten the learning curve and make the applications easier to use.

Simplified integration

The Microsoft RFID infrastructure allows for seamless integration of devices with provisions for discovery, configuration, communication, and management. Essentially, it provides ways to integrate data from disparate sources from the physical layer such as the shop floor, warehouse floor, and trading partners, and governs how information flows through the stack and ends up in business solutions that partners or Microsoft Dynamics provides.Because the DSPI basically makes hardware such as readers and printers plug and play, it helps system builders assemble the optimum solution and to focus on larger project issues without worrying if a driver exists. Meanwhile, organizations deploying RFID are better positioned to take advantage of the hardware innovation and falling prices that DSPI promotes.Firmware updates can be performed remotely across an enterprise to eliminate the need for physical intervention. Hardware health can also be monitored remotely. If a reader does not respond as expected, an administrator receives an alert so corrective action can be taken.

Converting data to actionable information

Above Microsoft's Devices Layer, an Event Processing Engine filters incoming noise while providing alerts and transformations. It reduces the data "noise" created by the volumes of redundant data it receives and converts it into actionable information. This functionality is enhanced by the use of English-like vocabularies for rule creation and a high degree of built-in configurability, making it easy for users to modify. Similarly, performance and scalability are built in so large volumes of irregular event streams can be handled and deployment can be distributed.Built-in edge processing includes a highly flexible and configurable rules engine that addresses potential business problems. For example, if a shipment of 24 cases is expected but only 20 tags are read when it arrives, the system can send an alert so the operator can check the pallet. The operator can then confirm the presence or absence of the four unread cases and transmit accurate receiving information to the enterprise application. Whether done at the edge or centrally, the processing of data is transparent to the user.Data management also requires context. Is the object arriving? Departing? This information can be provided by sensors on the device layer that show the direction of movement. Or it can be done by a combination of history and rules. For example, if the system has seen an object before, it would suggest it is departing rather than arriving. Adding the context of pending orders provides further confirmation of status.

Application platform

Open APIs and a rich Object Model make it easier for partners or users to build new RFID-enabled applications or integrate RFID data with back-end applications. Tools include a centralized dashboard for device monitoring and configuration, and a Tag Data Simulator that permits RFID events to be simulated without input from actual devices. Tight integration with BizTalk Server and existing enterprise software make it possible for partners and clients to convert RFID events to BizTalk Server messages and build closed loop "RFID aware"' business processes.Details of a sample of Microsoft's key partners who are developing RFID-based solutions can be found on www.microsoft.com/partners.


RFID offers new levels of visibility for companies that want to track physical items between locations. In the retail supply chain, goods tagged at the point of manufacture can now be traced from the factory to the shop floor, providing a real time view of inventory for all supply chain partners.Awareness of RFID technology and the benefits it delivers is increasing across the industry. By playing a key role in developing the infrastructure required for RFID, Microsoft is contributing to the momentum of mass deployment.The fully-integrated Microsoft architecture for RFID embraces a vision for increased operational efficiency and reduced costs. It enables the exchange of RFID-related data in near real time across disparate systems and corporate boundaries. It also supports standards for global data synchronization and interoperability with EPC, which is a prerequisite for global adoption of RFID.Microsoft is playing a leadership role in RFID, data alignment, and traceability through participation in a number of industry initiatives and involvement in the development of standards for RFID. Our RFID Council is also contributing to the development of the technology by helping organizations track items more effectively.Through a network of world-class partners, including ISVs, hardware vendors, and systems integrators, Microsoft is delivering RFID solutions that add value to businesses and enable fast returns on technology investments.

Research Firms and Microsoft Solution Partners Mentioned :


Deloitte Consulting

The RFID Center (UK)

AMR Research

ABI Research


Manhattan Associates

Alien Technology


About the author

Simon Holloway is Manufacturing Industry Architect at Microsoft EMEA. He is responsible for defining and developing solution-based architectures within the manufacturing sector. He is the EMEA Manufacturing lead on RFID and Shop Floor Security.His background spans some 20 years as an IT consultant specializing in IS/IT strategy planning, information management, corporate data and process modeling, business process reengineering, structured business analysis, software selection, and project management. He has worked in a wide variety of industry and service based companies. Simon is the author of 8 books on the subject of data management, development approaches, and open systems.



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