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					WHITEPAPER

RFID Futures
in Western Europe

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White Paper – RFID Futures in Western Europe

RFID Futures in Western Europe
Introduction
This White Paper addresses RFID technology issues and markets in Western Europe. It discusses the European technology standards debate and the opportunities and challenges facing companies wishing to implement RFID initiatives within Europe. It also provides a forecast for European RFID initiatives to 2009. Radio Frequency Identification (RFID) is a technology that uses radio signals to communicate between a reading device and a small electronic transponder, commonly known as a tag. Communication takes place when the tag falls within the range of the signal emitted by the reader, which may be a fixed or portable device. The information transmitted by the tag enables it to be uniquely identified and, by inference, the item to which it is attached. It is not a new technology. It was first used during the 1940’s for use by the Allied forces to differentiate their own aircraft from that of the opposing forces. RFID is a component of the EPCglobal network, which has been described as the ‘Internet of things’, largely because there exists the possibility of tagging every item on earth which could then, in theory be tracked. It is this ‘track and trace’ application which both provides the major market opportunity and which has led consumer groups, to view the technology with suspicion and in many cases, hostility. In practice, although the technology is not new, the applications are very much at an exploratory stage. Interest exists across many sectors, and trials are underway across Europe. It is an enormous step to move from the present market to one where RFID is ubiquitous, but there are clear signs that the market is moving.

RFID Technology and Systems
RFID can be viewed as a competitor to the barcode, or a more advanced technology than the barcode. Today, in many cases the barcode remains the better solution, particularly in the short to medium term. However, RFID has many advantages; for example, the reader and tag do not

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have to be in direct line of sight, the tag can contain serial number information as well as product data and RFID tags can be made much more rugged and durable. The major downside at present is the price of individual RFID tags and the system set up costs.

The Components of an RFID System
An RFID tag comprises some electronic circuitry and an antenna; passive tags have no battery, while active tags have a built in battery. Tags are packaged in a number of ways, depending upon the intended application. Typically a low frequency (LF) tag, intended for implanting into an animal, takes the form of a narrow, glass encapsulated cylinder. High Frequency (HF) and LF tags may be enclosed in a small, hard plastic package such as a key fob, or in a flat credit card sized form. The antennas for HF and Ultra High Frequency (UHF) tags can be etched onto a flexible plastic base, for affixing as an adhesive label to a case or pallet. RFID tags can even be embedded into a product at the time of manufacture. An RFID reader contains a power supply and software to enable it to communicate both with RFID tags and with an upstream computer system. Hand held readers are similar in size to Personal Digital Assistants (PDAs), while others form part of a fixed installation. Middleware is needed to form an interface between the reader and enterprise software systems such as Warehouse Management Systems (WMS). RFID results in considerably increased volumes of data within the enterprise; the increase comes about through the addition of serial number information to each individual record, and a greatly increased number of data records. A simplified view of an RFID system is shown below. Figure 1: Simplified Schematic Diagram of an RFID System

Database

Reports

IT Centre Distribution Centre
Communications Link Enterprise Software M1 Tagged Item Reader Middleware M2 Middleware

Source: Juniper Research

Notes:

•

M1 represents middleware installed locally to the reader(s) to filter the data passed upstream.

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•

M2 represents middleware installed at the IT centre to provide an interface to existing and new enterprise software systems

Characteristics of RFID Tags
Tags come in a variety of sizes and packages and can cost from tens of cents to tens of dollars. The range of communication can be as low as a few millimetres and as high as several hundred metres. The longest range can be achieved by active tags, whose built in batteries provide power to the on board electronics. This enables an active tag to detect a much weaker radio signal than a passive tag, because the latter has no battery and uses energy drawn from the received radio signal to provide power for its electronic circuitry. Having a very short range is not necessarily a disadvantage. If the application allows the accurate placement of the tag and reader in relation to one another, the short range can improve security, by making it more difficult for an outsider to ‘snoop’ on the communications. The most commonly used radio frequencies for RFID systems are shown in the following table. Table 1: Frequencies and Characteristics of RFID Systems Characteristic Typical Range Applications 135kHz <0.5m access control, animal tracking, vehicle immobilisers Less absorption in liquids 13.56MHz <1.0m item level tracking, library books, electronic ticketing 868MHz (Europe) <3.0m supply chain item and case level tracking 2.45GHz See Note 1 electronic road toll collection

Effect of Liquids

More absorption in liquids

Source: Juniper Research

•

Note 1: The range of a passive 2.45GHz tag is in the order of one metre. Active tags used in road toll applications have a range in the order of ten metres.

The data capacity of a tag can range from tens of bits to tens of kilobytes. Tags may be Read Only (RO) or Read/Write (R/W), the latter tending to have the larger data capacity. Passive RO tags will take the lion’s share of the market; the applications will generally require that the contents such as an Electronic Product Code (EPC) are used as a lookup reference to a remote database system. Read/Write tags with a large data capacity will be useful in applications where the information must be updated and available in real time, such as when the reader is not in direct connection with remote systems, or when the tag is attached to a reusable container whose contents vary on each shipment.

The RFID Standards Debate
The standards for RFID are being developed by a number of organisations:

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•

International Organisation for Standardisation (ISO) in collaboration with the International Electrotechnical Committee (IEC) has produced a set of standards for the interface between reader and tag, operating at various radio frequencies. These standards are numbered in the series ISO/IEC 18000-n. International Electrotechnical Council (IEC) European Telecommunications Standards Institute (ETSI) EPCglobal

• • •

In addition to the global and regional standards, a system design for Europe will need to meet certain requirements defined by national standards organisations.

International Standards for RFID
There is strong interest currently in the UHF frequency band between 860MHz and 960MHz. The ISO standard, now in publication, is ISO/IEC 18000-6, with options for two differing communications protocols, type A and type B. It is likely that the recently agreed EPCglobal Generation 2 standard will be incorporated into ISO 18000-6 as type C.

European Standards Issues
Previously, only a relatively small amount of bandwidth at restrictively low power was available in Europe in the newly exploited band around 900MHz. This is because the frequency range between 902MHz and 928MHz as used in North America is assigned to Global System for Mobile (GSM) services in Europe. The situation has improved immensely following the recent approval by European standards bodies of the use of ten channels at 2 Watts Effective Radiated Power (ERP) in the band from 865.6MHz to 867.6MHz, together with five additional lower powered channels. The European Telecommunications Standards Institute (ETSI) has recently produced and approved technical standards to meet these parameters. While the available bandwidth may prove to be a restriction in the long term, the increase of radio frequency (RF) power to 80% of that allowed in North America means that the performance in terms of range will be quite similar in both regions.

EPCglobal
The purpose of EPCglobal is to provide the technology to increase efficiency and reduce errors in the supply chain, achieved by the use of low cost RFID tags and a framework for global information exchange. EPCglobal is a joint venture of EAN International and the Uniform Code Council (UCC). EAN International has announced that it will be renamed to GS1. The organisation has set itself tough targets in developing standards and interfaces for most of the elements of an RFID system, as follows:

• • • •

The Electronic Product Code (EPC) The standards for the ID System describing the functions, interfaces and communications protocols for the reader and tag. EPC Middleware that will sit between RFID readers and enterprise applications, ensuring that erroneous, duplicated and redundant information is filtered out. The Object Name Service (ONS) that will be operated by Verisign under contract to EPCglobal.

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• •

The EPC Information Service (EPC-IS) that will store, host and provide access to serial number specific information about products as they pass along a supply chain. The EPC Discovery Service providing subscribers to EPCglobal and EPC-IS with additional information about individual items for tracking and tracing purposes.

RFID Industry Participants
Key RFID Suppliers
As RFID is a relatively new industry, the participants are still evolving. However, irrespective of who the participants are, the roles which need to be fulfilled are clear. Different types of organisation are involved in the process from raw material to implemented RFID solution. The figure below represents the landscape of the RFID market from manufacturers of chips and tags, through to the providers of applications and systems integrators. Many companies will operate in more than one part of the chain. In this model, the most powerful players lie at the customer end – largely retailers and other customer organisations that have considerable supply chain power by way of their ability to order large quantities of tags. At the other end are semi conductor and chip manufacturers. Over time one would expect to see chip manufacturers extend into taking a major position as tag manufacturers and packagers. Figure 2: Industry Participants
Chip Manufacturer Tag Manufacturer Label converting & printing RFID Middleware

Reseller

Systems Integrator

Retailer

Hardware (Readers etc.)

Source: Juniper Research

There are a number of new companies which have been created to address the RFID opportunity specifically, and some have already been extremely successful and have high expectations of further success, notably Alien Technology and UPM Rafsec in (passive) tag production. Chip manufacturers who are taking significant orders include EM Microelectronic and Philips Semiconductors in Europe, and Texas Instruments in the US. A significant, but in many ways overlooked aspect is in the production of smart labels or tags, and companies such as Avery Dennison, Zebra, KSW Microtec and Printronix have been most active in this area, producing software development kits and pre-certified EPC tags to aid companies in starting on the RFID journey. In the longer term one would expect some of the larger systems integration (SI) companies, such as IBM, to take a more significant role. Most of the applications and implementations to date have been within a ‘closed’ system such as a single company or between a single distribution centre and a retail outlet which have limited SI requirements. As RFID rolls out there will be and increased

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requirement for more SI expertise, although this is likely to be a year or two away given the embryonic, trial nature of most implementations.

The Opportunities for RFID in Europe
Unlike many technology markets, RFID has been driven by the end user – in the United States (US) by Wal-Mart and the Department of Defense – rather than by technology suppliers. In Europe retailers have been to the fore with Carrefour, METRO, Marks & Spencer and others running trials largely directed at driving efficiencies in the supply chain. In the UK the government ran its “Chipping of Goods” initiative which used RFID as the technology to reduce theft in the retail sector.

Market Applications
The core market for RFID is in tag & trace, whether this is of baggage in the airline industry, people and animals or containers and transportation. It is also well established in the area of automatic road toll collection and building security. It is expected, however, that the retail sector will experience the most explosive growth, initially in the supply chain between the producer and the retail store. Later one can see applications in the development of improved processes for product recall or environmental disposal of products and warranty services. In the short term, the major opportunity lies with the tagging of containers such as pallets, cases and trays, together with more valuable individual items. Other sectors where there is the potential for high tag volumes include ticketless travel in public transport, and in smart cards, as the smart card market moves from ‘contact’ to ‘contactless’ cards, which use similar radio technology to RFID. Another market set to grow rapidly is the tagging of pharmaceutical products as a weapon against counterfeiting. Although counterfeiting is not seen as a major problem within the United States or Western Europe, trials with RFID tagged drug packaging have taken place. There is an opportunity for RFID to streamline the product withdrawal process.

Initiatives by Country
In terms of RFID applications the United Kingdom (UK) and Germany lead the way. Germany has the extremely high profile METRO Group initiative which has already started rolling out RFID within its supplier base. Tesco in the UK has also announced a roll out plan with its suppliers, and Marks & Spencer has conducted trials both at pallet and item level within a number of stores. Also in the UK, the Home Office, which looks after internal affairs, conducted a series of experiments utilising RFID as part of its Chipping of Goods initiative aimed at reducing shrinkage in the supply chain. An RFID centre is to be launched within the UK sponsored by the Government along with Microsoft and Intel where RFID can be tested and evaluated. In France the Smart Tracing consortium was set up to demonstrate and promote RFID, and in Paris l’Echangeur, a centre for retail technology, includes a number of RFID demonstrator companies. Carrefour, the leading retail group, has implemented projects, and other initiatives include La Poste, the postal service and DHLFashion which act as a hub between clothing suppliers and retail outlets. The Netherlands has a significant project to implement a full contactless system across its entire public transport network in the country.

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Spanish implementations include the Spanish cattle farmers association (FEVEX) which has developed an RFID solution to track cattle, the Baja Beach Club with its worrisome RFID implants for use as a credit device to avoid queuing for drinks in nightclubs and Proctor & Gamble with a more mainstream supply chain application. Active tags have been used to track children in Legoland, a theme park in Denmark and for numerous industrial applications including streamlining the disposal of waste in Austria.

European Wide Initiatives
The major source of pan-European co-operation is the European Union (EU). It runs panEuropean research and development programmes as a series of Framework Programmes, the current one running up to 2006. Within these Programmes, nine are RFID related projects ranging from design of a passive RFID programme for the paper industry to design of an infrastructure for supermarkets to allow home replenishment. Framework Programme Seven which runs from 2007-2010 is currently being outlined.

Challenges of Implementing RFID
One message has been repeated in the interviews which have taken place with market practitioners, and that is that the implementation of the technology itself has not been a difficult exercise. However, to gain the full benefits of implementing RFID within an enterprise a more holistic view needs to be taken. A large volume of data is created by implementing RFID which has to be turned into information and intelligence. At the present time enterprise resource planning (ERP) technology suppliers are developing extensions to their products to work with RFID systems. Experience of system design and integration of RFID into the business is a skill set which is very rare, and some of the major Systems Integrators such as Accenture, Logica CMG, and specialist logistics integrators such as Microlise have seen increased demand for their services. Table 2: Business and Technology Challenges of Implementing RFID Business Issues No proven return on investment Cost of initial implementation Data sharing between supply chain partners Intellectual property issues Environmental (disposal) issues Consumer privacy objections Lack of organisational experience Technology Issues Technology standards and interoperability Reliability & maturity of technology Accuracy of tag reading Security of data on tags and readers Spectrum congestion & frequency availability Environmental issues (Heat, moisture) Data integration Volume of data produced
Source: Juniper Research

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White Paper – RFID Futures in Western Europe

RFID Revenue Opportunities
Forecasting RFID market revenues is a difficult undertaking largely because of the limited history and the limited availability of industry statistics. Juniper Research has researched the likely trends on tag prices, readers, software and services to derive the forecast model. The retail sector is driving the uptake of RFID in the supply chain, which is likely to be the largest sector given Europe’s fragmented markets. There has been limited in store retail sector activity, but that is expected to grow over time. Other key markets are that of public (or mass) transportation and pharmaceuticals. Uptake in the pharmaceutical industry is likely to lag that of supply chain, public transport, and even retail, but will grow toward the end of the decade largely driven by US initiatives and requirements. Growth in Europe in the short term is driven by an increase in the numbers of trials in different countries and sectors, with acceleration of the market occurring once today’s trials have been completed and business cases built. Table 3: Total Western Europe RFID Revenue by Sector Forecast 2004-2009 2004 Retail Pharmaceutical Mass Transportation Supply Chain Others Total $92.9 $32.5 $83.6 $185.8 $69.7 $464.4 2005 $125.4 $62.7 $112.9 $250.8 $75.2 $626.9 2006 $169.3 $127.0 $169.3 $296.2 $84.6 $846.4 2007 $217.1 $194.2 $228.5 $388.5 $114.3 $1,142.6 2008 $267.4 $282.2 $297.1 $490.2 $148.5 $1,485.4 2009 $315.6 $408.5 $371.3 $575.6 $185.7 $1,856.7

Source: Juniper Research

The market is most likely to accelerate in the 2006/2007 time period when technical issues will have been resolved and when many of today’s proof of concept trials have been completed and business cases built. The market for RFID is one of when rather than if, but at least in Europe, full scale roll out will be a couple of years from now.

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White Paper – RFID Futures in Western Europe

Juniper Research Limited
Juniper Research specialise in providing high quality analytical research reports and consultancy services to the telecoms industry. We have particular expertise in the mobile, wireless, broadband and IP-convergence, sectors. Juniper is independent, unbiased and able to provide reliable assessments of markets, technologies and industry players. Our team is drawn from experienced senior managers with proven track records.

About the Authors
Susan Griffin is a Consultant with Juniper Research and a Director of Southwestern Consulting Services. She spent over 15 years in a variety of marketing and managerial roles working in the telecommunications and e-business sectors, most recently as Vice President with Charles Schwab Europe. Susan has an MSc in Information Science and MBA from Cranfield School of Management. She is a Member of the Chartered Institute of Marketing. Colin Williams is a Consultant with Juniper Research and a Director of Southwestern Consulting Services. He spent over 30 years working for Cable & Wireless in a variety of technical and managerial roles around the world and qualified as a Radio Engineer. Colin has a First Class honours degree in Electrical and Electronic Engineering and is a Fellow of the Institute of Electrical Engineers. Published: January 2005 For more information, please contact: Michele Ince, Marketing Manager Email: micheleince@juniperresearch.com Website: www.juniperresearch.com

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