Spread of RFID in Defense slower than expected

The Defense Department's requirement that suppliers use radio frequency identification technology may be encountering resistance within the department, indicating that the effort may need time for the technology to mature.

Demand throughout Defense for RFID readers and tags from a contract known as Army Product Manager Joint-Automatic Identification Technology (PM J-AIT) has been so light that the Army does not plan to award new contracts until the first quarter of fiscal 2008, which starts in October, said Jo Manson, PM J-AIT spokeswoman.

The initial PMJ-AIT contract, awarded in September 2005, expired in June, and Manson said demand "was low due to delays in full-scale passive RFID implementation across DoD."

In passive RFID, electronic readers beam a signal to a tag attached to a case or pallet. The tag sends back information about the supplies contained in the cases or on the pallet.

In July 2004, Defense logistics officials required that passive RFID tags be placed on shipping and exterior containers, pallets and unit packs "when the appropriate contract clause is included," according to the United States Department of Defense Suppliers' Passive RFID Information Guide. Defense "has many contracts with its suppliers that are renewed and re-competed regularly," the guide states. "As these new contracts become effective, the requirement for RFID will be included, according to the supplier implementation plan."

But for RFID vendors in the PM J-AIT program, demand for readers and tags has been nearly nonexistent. Roger Perron, president of one such firm, SYS-TEC, said business had been "poorer than poor . . . . I've had three orders and sold 10 readers or less. RFID is not the next great thing."

Similarly, business for PM J-AIT contractor CDO Technologies has been slow, said a program manager at the company who declined to be identified. CDO has sold two readers and 500 tags since winning the contract in 2005, the manager said.

Larger companies such as Intermec Technologies, Alien Technologies and ADT Security Systems, which also held Defense RFID contracts, did not respond to queries concerning sales.

The U.S. Transportation Command, which acts as executive agent for automatic identification technology with Defense, did not respond to a query concerning the extent of RFID deployment. A spokeswoman for the Acquisition, Technology and Logistics office at the Pentagon also did not respond to questions about the RFID program.

By using RFID, the Army can quickly determine what supplies are on what pallets without the need to open every case and repackage the cases for shipment to appropriate destinations. But Perron said that Defense and commercial organizations such as Wal-Mart, which is using RFID to manage its supply chain, need to confront fundamental problems with the technology.

For example, the technology is supposed to make it easy to read tags on cases stacked in the middle of a pallet, but Perron said RFID users have found it difficult to penetrate to cases buried in the middle of a pallet. Liquids also pose a problem, Perron said, because cases or pallets containing them absorb energy from RFID readers, making it difficult to receive a reply.

Objects containing metals also present a problem, because metal reflects the signal from the RFID reader before it can read the tag, Perron said. SYS-TEC is working on a project with the Air Force to use RFID tags on computers for inventory control purposes, and the company had to add a shield to its tags to produce a good signal, Perron said.

Greg Buzek, president of IHL Consulting Group, said the promise of RFID "has been hyped beyond its practical uses right now" and that the problems reading tags attached to metal or liquid shipments illustrate the downside of the technology.

Craig Mathias, an analyst with the FarPoint Group, said passive RFID has its limitations in some cases and that some users such as Defense may have to use active tags (which are battery powered, have longer range and send signals out to a reader) to track some commodities. Still, Mathias wondered if the low sales experienced by SYS-TEC and CDO were an anomaly, as "hundreds of millions of tags are being sold by major vendors."

IDTechEx, a market research firm in Cambridge, England, forecast sales of 1.71 billion RFID tags this year across all sectors, from supply chain to retail to public transport to national ID cards. The firm pegged the total value of the RFID market at $5 billion in 2007. The company forecast it will approach $28 billion by 2017. Perron, despite his experience, is optimistic about RFID, saying Defense "might get off the dime in 2008."