RFID Applications: Determining the Total Cost of Ownership

By: Gary Randall

Determining the cost of deploying and maintaining a radio frequency identification (RFID) application is not a trivial matter, as the magnitude of your investment will depend on several factors that may or may not influence the cost of other components within the system.

The RFID application's "system" consists of both the RFID network itself (hardware, software, tags, etc.) and everything that needs to accommodate the RFID network: personnel, IT infrastructure, business processes, and the facilities in which the application will be installed.

Because there are so many system variables that in turn vary according to industry, it's difficult to provide a definitive cost breakdown for implementing an RFID solution. Therefore, the purpose of this article is to make you aware of the major variables that should be considered when assessing the total cost of ownership (TCO) of your RFID application:

RFID Hardware, Middleware, and Software

RFID hardware includes devices such as antennas, hand-held RFID readers, fixed RFID readers, mobile RFID readers, RFID portals, and RFID printers. RFID middleware facilitates the flow of data from where it is captured (the reader) to where it will be stored and analyzed (the database and related software). As you might infer from the assortment of readers alone, the type of hardware that you choose will depend not only on your budget, but also your business processes. Will you be placing large RFID portals at your dock doors, or would you prefer the mobility and flexibility offered by portable readers? You also need to consider the costs of the middleware and software that will communicate with the hardware. Rarely can the interface and software be used out-of-the-box; they will likely require customization to your particular application, and you may need to hire programmers to accomplish this if you lack in-house expertise.

A quick search online for RFID hardware components will prove that there's no shortage of vendors eager to sell you their RFID wares. Before you make a purchase, however, be sure that the hardware, software, and middleware are all compatible and that you have thoroughly investigated the impact that this new equipment will have on your existing IT infrastructure. In addition, choosing the appropriate hardware often depends on the physical environment where the RFID system will be installed. Therefore, your (or your consultant's) understanding of the physics behind RFID will be instrumental in properly deploying your RFID application.

In terms of cost, RFID equipment is usually a one-time investment. Recurring costs associated with the equipment may be incurred, though. These include licensing, upgrades, and maintenance costs.

RFID Tags

The cost of RFID tags varies greatly depending on the type of tag and the volume purchased. Passive RFID tags, which draw power from the reader in order to transmit data, are much less expensive than active RFID tags, which have an on-board power supply (e.g., a battery). As with most items that you may purchase in bulk, you can usually negotiate volume pricing for your RFID tags. To realize a cost of about five cents per tag, however, you may be required to purchase several million tags.

Another factor to consider when evaluating the cost of RFID tags, or chips, is whether or not you plan to recycle them, which in turn depends on the application. Some applications in the automotive industry, for example, do not warrant the recycling of tags because they contain critical information that must remain "attached" to the vehicles at all times (e.g., vehicle identification numbers, or VINs). On the surface, recycling RFID tags may appear to be a money-saving activity, but that is not always the case. Additional time, and thus personnel, may be required to process the tags, and the personnel will need to be trained in order to prevent damage to the tags from improper handling. Lastly, tag recycling is better suited to business operations that are housed in one facility, as opposed to those that span multiple geographic regions.

Business Processes

Inevitably, the implementation of an RFID system will have some impact on your business processes. While improving efficiency is a strong motivator for many companies to adopt this promising technology, it's important to note that RFID may be initially disruptive to business processes. It takes time to put the system into place, work out the bugs, and then adapt your existing business processes to accommodate the RFID application. For example, you may need to adjust the speed of a particular conveyor belt, or perhaps the rate at which your delivery trucks are loaded. Many procedures that you have previously optimized may need to be re-optimized once the RFID system is in place. Needless to say, this process may require an investment in time and/or additional personnel.

Services

By this point, you have probably realized that implementing an RFID solution is not a do-it-yourself project and that you may need to enlist the help of experienced professionals. RFID experts can make sure that your RFID readers, antennas, and controllers are connected and set up properly. This process may involve modifying your network architecture and/or building appropriate portals and structures to which the readers will be mounted. Once all of that is in place, the next step is to fine-tune the hardware setup to optimize its performance. Finally, thorough testing of this small-scale system should be done before the application is deployed on a production scale.

Training and Education

During your cost-benefit analysis, don't overlook the training/education variable. While RFID consultants can ensure that your application is properly constructed and deployed, it's a good idea to build a team of in-house experts who will have the responsibility of maintaining the system and training new and existing employees on how to use it. If and when you decide to use RFID in your business, you may want to pre-select a few such people, who can then participate in the installation and testing phases.

Maintenance

Maintaining an RFID application usually contributes the most to its total cost of ownership. This is largely due to the recurring overhead of RFID tags (even if they're recycled) and the need for spare readers, antennas, controllers, etc. to keep on hand in the event of a hardware failure. Additional expenses may include technical support from product vendors, bug fixing, and optimization of your IT infrastructure.

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