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RFID, ready or not

RFID, ready or not

Aussie CIO Con Colovos is a man with a burning mission. He is preparing his company, Moraitis, to be ready for RFID tags as soon as the call comes. It could be sooner than you think…

Renaissance man? Con Colovos almost baulks at the suggestion. Nah, he is a true blue Aussie. But, heck, when he talks about himself he comes across as a sort of wunderkind of technology and business. Well, let’s be fair: there is nothing wrong with having colossal confidence in yourself as long as you show you are deemed worthy of the title by your comrades in business. The thing about Colovos is that he comes across as being very worthy indeed. Colovos’s mission, at least for the past four years, has been to bring Australian fresh produce giant Moraitis out of the stone age and into the future of produce distribution. Now, after establishing a new ERP system, he is embarking where probably no other vegetable distribution business has gone before: into RFID, or radio frequency ID tags.

Can you hear the howls of protest? No, many of you will say: the world is not ready for RFID. Nah, says Colovos in his true-blue Aussie accent. The world has just never bothered to figure it all out properly.

Let’s get rid of this ego thing first. “There are CIOs out there who are unbelievably brilliant when it comes to management. But you will find they often have too much dependency on the people below them, their subordinates, to provide them with the information they need. There aren’t many CIOs who can understand the business, be able to communicate and have enough knowledge to build a desktop or a server, look at a router and tell you it is not working properly because there is a bottleneck in this area…”

Colovos has a point. He has proven he has a vast technical knowledge and, perhaps most important of all, he comes across as a model communicator – clear, precise, logical. That is probably the reason for his success, we suspect.

When it comes to RFID, Colovos defies the critics. “I don’t think it is a technology that’s not quite ready,” he says. “I just don’t think people really know how to embrace RFID and implement it properly. The critics are grappling with things they don’t understand.”

Colovos started looking into RFID in late 2003. His speciality is IT infrastructure, although over time that interest has evolved into applications, systems development and wherever his requirements have led him. It was while Colovos was investigating various infrastructure applications – middleware, data warehousing – that he began to investigate the idea of RFID tags. He wanted to understand the technology and its benefits. He also needed to find out where it was heading and whether it would suit his business. His conclusion: “As part of the implementation of an ERP system (Navision) we should be looking at implementing RFID.”

Moraitis is a produce company. “Everything we do is based on grading, quality and speed to market – from the warehouse to the supermarket floor. Timing is critical, and what we needed was better accountability, better information from the time we pick, pack and ship.”

Yes, but couldn’t barcoding do the job just as well? No, says Colovos. In principle RFID and barcoding can achieve the same things. The difference is that RFID goes a little further and can include information for your general ledger and your ERP system. Add to that its usefulness in tracking and tracing and stock inventory and you have a better range of readings than barcodes could ever achieve.

“Instead of having barcoding, which was purely serving the supermarkets’ identification requirements, I wanted to be able to break things down further. I had a new glasshouse on the way and it was going to be pushing through 18 million tomatoes – 600,000 trays – a year. This was the best place to test the RFID technology, I felt. So we did the business case, aligned that with our business and IT strategies.”

When the time came to study RFID technologies, Colovos covered the spectrum. It didn’t take him long – no more than a week – to decide that panel readers were unacceptable. They confirmed all the things the critics had been focusing on – less than 100% accuracy, “holes” in the readings. Forget the panels.

Eventually, Colovos found the thing he had been looking for – a tunnel reader. He wanted something with a 100% read and write capability – every time it was used. As it happened, the tunnel was made by an Australian manufacturer from German technology. Essentially, it consists of a conveyor belt that carries the boxes of fruit through a Magellan RFID tunnel that encompasses a pure magnetic field. Its manufacturer, eager to demonstrate its 100% accuracy, grabbed 200 tags, put them in a box and put them through the tunnel at walking speed. The computer system recorded 200 tags with a 100% read. Says Colovos: “I am as happy as Larry.”

The message here from Colovos’s RFID partner at IBM, Will Duckworth, is that a lot of people have misunderstood tag technology, believing that it is not yet ready for business. It is no silver bullet, he says. “A lot of people have just picked upon a vendor and tried a particular technology. They might not have looked at business process change. They might not have looked at environmental change. They need to ask, ‘How does this environment work for RFID? Should we reorganise our conveyor belts?’ Quite often they think of RFID as a silver bullet. They get a tag and whack it on a product. It doesn’t work that way, so they just move on to something different. Basically, you have to make an investment to determine what process, what physical environment, is best suited to RFID. There’s a range of options but there’s no silver bullet.”

Colovos is using read-write static tags for a trial involving a tomato supplier in Tatura, Victoria Another part of the trial is taking place at Moraitis’s tomato grading and packing operations at Homebush Bay, New South Wales.. Each tag is the size of a business card and costs 50c. That might sound like a lot but remember that these tags are reusable. When they reach their destination they are collected and sent back to where the cycle starts once again. That cuts the price of a tag to half a cent for each cycle. Each tag will feature its pallet’s shipping container code and up to 32KB of other information.

The RFID system provides data on origin, packing date, type, quality and size of the four tonnes of tomatoes leaving Moraitis every day. The tags also enable the company to monitor key metrics such as waste per batch and the exact number of trays received from each grower.

Once full integration into Moraitis’s business operations is achieved, the wholesaler expects to gain competitive advantage through the improved distribution system and enhanced information sharing with supply chain partners, including growers and supermarket retailers. Colovos says the changes and improvements will achieve operational savings through reduced wastage and lower inventory and handling costs. From a quality perspective it will further enhance the traceability of the produce, he says.

“I spent a year of my own time – not the business’s time – investigating the what, where and how of tag usage,” says Colovos. “I am one of those geeks who gets off on technology. For me it was just, well, I want to be challenged. Here is RFID. Wal-Mart has mandated its use. Moraitis is a large produce company dealing with companies such as Woolworths, Coles Myer and Safeway. Someone is going to ask about tags in one or two years.”

Colovos’s personal philosophy is always to be ahead of the market. “I don’t want someone to ask me about something and then have panic stations in the IT department because we don’t have a strategy for it. I’m the type who says everything has to be built around flexibility and where we can build on it. Where I started with the company, where we are today and where the company is heading is controlled not just from the business side: the business has to align its strategy with IT.”

Hold it right there, we say. Isn’t this the opposite of what most CIOs are saying? Most attempt to align IT with the business strategy. That’s right, Colovos says. “When the business wants to buy something they ask me for my thoughts as well. They want to know how their strategy fits in with IT.”

At this point Duckworth intervenes. “If you buy something and you can’t support it, you need to know.”

Insofar as the company’s WAN is concerned, Colovos feels pretty secure -- as long as he can get fibre to the premises. One of his achievements at the company has been to install point-to-point 2Mbit/s switched fibre. “In other words,” he says, “we’ve got bandwidth to burn. We do what we want whenever we want but, if a site doesn’t have that infrastructure, suddenly we are in trouble…”

For a man with such strong views, Colovos appears to get on amazingly well with his fellow executives at Moraitis. In fact, maintaining a good relationship is part of his strategy, something he has focused on in every project he has become involved in. “If I don’t have a good relationship they don’t trust me,” he says. “If things aren’t going well the project will fail. If you want me to be part of the process, great. If you don’t, I will be on my way. With any project, the first thing I say is that I need autonomy. I need to be able to report to the person at the top without any middle management intervening in any way. It works.”

When it came to Moraitis’s earlier IT structure, everybody knew they were in trouble. But, says Colovos, they didn’t know how much trouble they were in. Two years earlier, the company had implemented a new ERP system, TIMS from Geac. “If you are a manufacturer, and you implement it fully, it’s fantastic,” he says. In the case of Moraitis, though, the company had basically spent its money implementing an accounting system. Training had not been done well, with one division doing things one way while other divisions did things their way. Moraitis’s board simply couldn’t get the information it wanted. Not only that, the company was still using OzEmail dialup for email. All email had to be sent to the general manager’s personal assistant for typing.

Worse still, the Brisbane and Melbourne offices had no WAN connection. If something was not urgent it would be stored on a floppy disk and sent out in the overnight mail. Urgent mail would be printed out and faxed. Between Melbourne and Sydney there was a WAN, operating at 32Kbit/s and used only for TIMS. And for that privilege – ISDN to the markets and 32Kbit/s to Brisbane and Melbourne, the company was paying A$90,000 a year. Compare that to today’s 2Mbit/s links between each operational centre, including data centre management, firewalling and virus protection.

Colovos appears to have gone into every facet of the operation. He knows how the warehouses are managed, right down to the way things are done in the sheds, and so far he has delivered on his promises. “In the beginning they were very concerned about parting with their money,” says. “They wanted to see something for it. It took me six to nine months before I could get enough grunt to the board to be able to say it will cost you this much and this is what you are going to get.”

Putting in a new, reliable WAN and various LANs helped too. So did a new videoconferencing solution to replace the A$9 a minute Telstra connection Moraitis had been using previously. Seeing how much this had cost and how little it could be used because of the cost, Colovos approached his boss with a suggestion. “How would you guys like it if you could get videoconferencing free for the whole company in one hit, for as long as you want it, free of charge? ‘How much will it cost?’ A$70,000, then it’s yours forever. ‘Done.’ And they are videoconferencing every day. The benefit of that: we can see the produce, we can get the farmers, companies that buy off us and send them to the boardrooms in various locations. And we can say, ‘Okay, what are the issues you guys want to talk about?’ Face to face. We can put up spreadsheets and Powerpoint presentations. We are in total communication all the time and are regarded as being technologically one of the best companies in Australia. As far as produce goes, there is daylight between us and our nearest competitor, technology-wise.”

The prime business justification for RFID usage was based on traceability and cost reduction. Colovos says he can now say which tomato was picked from a particular row, and in which glasshouse. He can also say which day it was picked and who picked it. “You might not want to know that now, but I can tell you that our prime retailers will want to know. And I can tell you that RFID means you won’t have to hide those extra six people you originally put down in your budget for the glasshouse. Why? You no longer need those resources because the RFID chips, the conveyor belt, the whole process we are devising, means those six people are no longer needed.”

So how much are these savings on staff going to cost? “About A$150,000.” How much is the RFID project going to cost? “Minimum A$50,000, maximum A$100,000.” So it was done. Now Colovos knows he is ready to act as soon as any retailer comes forward with a need that will involve RFID. No other supplier is in that position. It all adds up to a strong competitive advantage.

Right now, with the Navision ERP system going in, Colovos has too much on his plate to bother with the next big steps his RFID planning will involve. Colovos hopes a middleware solution will become available to allow tag data to be fed into the system. What he wants to do next is have active tags on pallets and gate readers in the warehouses. “At the moment the grading line is set up from grade 30 down to 18 or 16. The women who pick up the tomatoes and put them into trays have a magtech writer sitting on the production. Different grades of tomatoes are packed into orange and red boxes. The women will pick up a tag and swipe it with the magtech writer for a particular grade and then the chip will go into a box. They lift the box and put it onto a conveyor belt, where it – and all the others that have just been packed – goes through the tunnel where it is read. The boys at the other end pick up the boxes and stack them accordingly to the RFID instructions. When they reach their destination they have to be read again, but it doesn’t make sense logistically to unpack the pallets. We need to access the allocation of lot numbers and traceability, plus stock numbers and inventory control… So we just go with handheld readers. You can read the tags straight away and update information as well. It’s 100% read and write every time.”

Now Colovos wants RFID technology to be used from the distribution centre to the retail outlets – the end of the supply chain. So how do retailers feel about that? Well, they already have a lot on their plate because they are going from direct store deliveries to consolidated distribution centres. But IBM’s Duckworth has found a lot of interest in RFID use not only from Australian retailers but worldwide. Colovos’s initiatives are the first of their kind.

“It’s a major shift,” says Colovos. “My job is to make sure the business is ready from a technical perspective, whatever they demand of me. The company is ready for what I want. All I am doing is delaying it to make sure I have got every ‘t’ crossed and every ‘i’ dotted. No one is out of the loop in this business. I have made sure every individual in the Moraitis crew across the country knows what they are about to be hit with.”

Will RFID change the business much? “Enormously. There will be staff efficiencies. Where we have people at the moment doing clerical processing, they will become more focused on managing and controlling stock and inventory. On the factory floor we won’t need as many casuals. Permanent employees will be reviewed and redeployed to facilitate better management of our stock and inventory and how we manage the business. We won’t need as many casuals because we can manage what is coming in more efficiently. We have grown 25% since I started four years ago. Yet we have not put on one new resource.”

Well, what can you say about a CIO such as this? If he can live up to his confidence and promises, every company should have one.

Sidebar:

What is RFID?

By Diann Daniel

Radio frequency identification, or RFID, is a wireless system that employs small tracking tags to store, send and receive data through weak radio signals. The technology has been used for years to identify and track shipping containers. With retailing behemoths such as Wal-Mart Stores and Target in the US mandating that their largest suppliers put RFID tags on pallets and cases, 2005 looks like a watershed year for deployment of the technology.

How does RFID work?

An RFID tag is composed of a tiny silicon microchip, which is attached to an antenna and packaged in a substrate. Tags can be placed on a variety of objects but not on very small, metal or liquid items. The microchip has a unique serial number to identify the object and may also contain other related information. A reader is used to send and receive data from the tag.

Why is there buzz about it now?

In a word: Wal-Mart. It wasn't until the early 1980s that bar codes came into general use, largely spurred by Wal-Mart's demand that its major suppliers use them. As with bar codes, RFID tags are a way to manage inventory. A reader can be stationed at a loading dock door or between the back room and the selling floor to track what goes in and out. Once read, inventory can be closely monitored so that shelves are restocked as needed. Fill rates for companies such as Wal-Mart are currently at about 90%, according to Bob Goodman, RFID specialist with The Yankee Group. RFID tags will help bump that number closer to 99%.

What's the marketing hook?

RFID will revolutionise marketing, according to Mark Roberti, founder and editor of RFID Journal. For example, a CD retailer could use the technology to show shoppers who have just plucked a recording from the shelf a music video by the very same artist on a nearby screen. If that's not Orwellian enough, consider a future where all plastic shopping carts are equipped with RFID readers that scan each tagged item deposited in them. The cart would have a video screen that shows a purchase tally and ads based on what passes the reader, giving marketers an unprecedented ability to target customers at the point of decision.

But RFID can also be used to build trust, since supply chain management is one of its main advantages. Products can be verified as they move from point A to point B. A consumer can trust that a tagged medication is authentic. Trust in authenticity is of paramount importance for a pharmaceutical company and RFID tagging is a way to build that.

What about consumer privacy issues?

Some specialists, such as Goodman and Roberti, say that privacy concerns about companies or the government using the technology to track individuals and their habits are largely unfounded at this time. For one thing, most readers must be within inches to a few feet of a tag to work. But other experts have a different take. "Marketers should tread cautiously in this territory," says Katherine Albrecht, director of Caspian (consumers against supermarket privacy invasion and numbering). RFID tagging of warehouse crates and pallets for the purpose of supply chain management is okay, she says. But Albrecht draws the line at placing a tag within an item of clothing or consumer product such as a razor. Albrecht says the danger in such tagging lies in its hidden quality: something could be tagged, and you wouldn't know it. The potential misuse of this information by governments, businesses and criminals is enormous, she says.

How concerned with RFID should your company be?

Goodman says most companies can take a wait-and-see approach. Cost, he says, is one issue; tags are priced around US30c-40c apiece but may go lower in the future. "Watch the trends in your industry," he says. "Watch for an opportunity to enhance positioning to customers, but balance it with the financial question: Is there a business case to do this? Currently, those situations are limited."

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