Education & Workforce Development and Technology

IU embraces RFID education: Radio frequency identification an essential part of supply management studies

June 13, 2005

Trucks and trains have been absent from the curriculums of most kindergarten classes for years. But at Indiana University in Bloomington, the toys are proving to be a valuable teaching tool.

The Supply Chain Management Academy at IU's Kelley School of Business employs the playthings to show students how radio frequency identification works.

Known as RFID, the technology is expected to replace the familiar bar code. It consists of a tag imbedded with silicon chips that carry up to 96 bits of data-allowing for better tracking of goods during shipment. Wal-Mart Stores Inc. and the Department of Defense are early adopters of the technology.

The students' use of a miniature truck and train system to experiment with RFID applications is hardly child's play. Kelley, which became the nation's first business school last year to build a working model of an RFID system, received a $150,000 grant in April from the Procter & Gamble Fund to develop RFID studies.

"We are able to simulate what happens when an item goes from a manufacturer to a warehouse to a retailer," said M.A. Venkataramanan, a professor within the Operations and Decisions Technologies Department. "We thought, 'Wow, it would be a fun exercise for students to see the simulation rather than just the animation on a computer.'"

The pieces of the mobile laboratory span an area of about 15 feet by 20 feet, Venkataramanan said, and can be taken from classroom to classroom. Venkataramanan; Ashok Soni, chairman of the academy; and Vincent Mabert, professor of operations and decisions technologies, purchased the equipment and built the simulator. Venkataramanan estimated the cost at $15,000.

The trio bought a train set and a radiocontrolled truck at a hobby store and modified the truck to make it resemble a semitrailer. More expensive items included antennae and what are known as "readers," which send out waves to locate the tags.

Index cards are labeled to symbolize different products, and a tag is attached to the card. The tags and the accompanying cards-that might be labeled "six pack of Coca-Cola"-are placed on the semitrailer or train. The antennae, placed on camera tripods, read the tags, simulating how companies track cargo using the RFID system.

"Active" tags can broadcast their data using their own battery power and can be read from 100 feet or more. "Passive" tags have no battery and broadcast their data only when engaged by a reader, usually within 15 feet. IU currently uses the "passive" tags.

Need for RFID knowledge

IU is among a growing number of universities engaging students in RFID. That bodes well for companies looking for workers knowledgeable about the technology, according to a recent study conducted by the Computing Technology Industry Association in suburban Chicago. The survey revealed that 80 percent of 51 member respondents think training and educating their employees about the technology is one of the biggest challenges they face in competing in the RFID market.

CompTIA, a global information technology trade association boasting 20,000 members, is developing a standard certification process for the industry that should be ready by early next year.

"Most of the universities are just beginning to gear up to offer courses and seminars on RFID technology, said David Sommer, vice president for electronic commerce at CompTIA. "There's a real need for them to offer more."

Elaine Cooney, professor of electrical and computer engineering technology at the Purdue School of Engineering at IUPUI, serves on the CompTIA committee formulating the certification exam. She said the need for RFID technicians will explode, once the technology is fully integrated into the supply chain.

"If you're going to be needing this in every Wal-Mart and every Target, and all the suppliers, there is going to be millions of installations out there," Cooney said. The engineering school is beginning to introduce RFID into some of its courses, she said.

Both Wal-Mart and the Department of Defense expect all suppliers to outfit pallets, crates and boxes with RFID tags by the end of the year.

"Wal-Mart was the big push," said Davison Schopmeyer, an IU graduate and senior director at the Carmel office of Manhattan Associates Inc. "You really began to see people move it from trials ... to more of a broader base."

The Atlanta-based Manhattan Associates develops supply chain software, in which RFID is a large component, Schopmeyer said. He has been involved in the installation of the technology for 40 clients and is pleased to see IU embrace RFID. Schopmeyer graduated in 1991, long before the RFID acronym became part of the retailing vocabulary.

"One of the biggest concerns people have is the shortage of people who have knowledge about RFID," Schopmeyer said. "It's nice to see Indiana is staying at the forefront of the technology."

Savings outweigh costs

While RFID systems have been used to track large shipments on boats and trains for years, the technology may benefit the retail sector most. Companies could save billions annually.

Tracking items remotely enables retailers to better manage inventory, as well as the entire supply- and demand-side operations. RFID should help stores improve revenue, too.

According to a report from CIES: The Food Business Forum, a Paris-based food business network with members in 150 countries, an average of 7.9 percent of all products in a store are out of stock.

Among the retailers surveyed, 25 percent indicated that oftentimes the products are in the stores but not on the shelves. Using RFID, retailers can locate the items easier and likely shave off at least a percentage point from the out-of-stock average, allowing them to capture more revenue, Schopmeyer said.

The integration of the tags is beginning at the pallet level and eventually will include individual items. The advance in technology is costly, however.

Users can expect to pay about 20 cents each for tags and about $1,000 each for readers. Some experts predict the price of the tags will decline to as low as 5 cents by next year, according to a report by High-Jump Software, a provider of supply-chain software based in Eden Prairie, Minn.

A manufacturer with $2 billion in annual sales might use 88 million RFID tags yearly, at a cost of roughly $18 million. Outfitting warehouses and retail outlets with the infrastructure would cost hundreds of thousands of dollars more.

But for many companies, the benefits outweigh the price. Cincinnati-based Procter & Gamble, which awarded Kelley the $150,000 grant, was a founding member of the former Auto-ID Center at the Massachusetts Institute of Technology. The center developed the electronic product code that is read by radio-frequency scanners.

IU was one of three universities this year to receive funds from the P&G Fund's Curriculum Development Grant Program, said Robert Pike, the fund's director of college relations. IU's "proposal was one of the most relevant and innovative we received," he said.
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