D3.7 A Structured Collection on Information and Literature on Technological and Usability Aspects of Radio Frequency Identification (RFID)

Untitled HURDLES AND APPLICATION PROBLEMS

Hurdles and application problems

1. What are the biggest hurdles for an RFID investment?

In addition to the potentials of RFID technology, the problems that can arise with the introduction and use of the technology occupy a central position in the public discussion. Besides technical and financial problems, there is primarily the fear of consumers that the employment of RFID is linked with a restriction of their privacy. Within the scope of the study in hand, these problems were ascertained in the form of hurdles that have to be overcome when investing in RFID technology. A total of 14 hurdles could be evaluated according to their importance by the enterprises. Of particular interest is – besides the separate evaluation of individual hurdles – the analysis of the evaluations in relation to one another. This relative significance of the various obstacles is apparent in .

Figure : Hurdles regarding the investment in RFID technology (base 55-50)

Main hurdles 

Standardization issues and integration of RFID technology into existing process and IT architectures are primarily regarded as main hurdles. 70% of the respondents (basis 54) attach a (relatively) high degree of importance to the lack of an accepted standard for inter-enterprise use as investment hurdle. The same applies for the complex integration of the technology into inter-enterprise business processes and the existing IT infrastructure of the enterprises. Furthermore, an unfavourable cost-utility relationship of RFID technology – from both the point of view of the respondent enterprises as well as from the perspective of the suppliers and customers – and data protection concerns of the customers are rated as significant hurdles. These findings are largely consistent with current prognoses and practice reports. Above all, the problem of data protection and the danger that the costs of the technology could exceed the utility for individual actors (e.g. manufacturers of low-value consumer goods) are frequently quoted. Moreover, it can be assumed that the main hurdles so far – standardization issues and integration– will decrease in significance with the introduction of the EPCglobal Gen 2 standards.   

Further hurdles of relatively high significance 

The point that cooperation partners have not yet grappled with RFID technology can be placed midway on the priority list of investment hurdles, just as the complex integration of the technology into company-internal business processes. The same applies for open legal aspects that arise from the introduction of RFID technology. It should be noted, however, that a (relatively) high degree of importance is attached to all of the previously presented hurdles by more than half of the respondent enterprises. The fact that German enterprises are uninformed with regards to RFID technology is particularly highlighted in numerous studies. The study of the marketing research company “Lünendonk und Technoconsult” results that 800 out of 1000 German decision makers do not know the meaning of the term RFID (Quack 2005).

Trend towards relatively insignificant hurdles 

Hurdles that address the technical aspects of RFID systems are perceived to a comparatively low degree. Both the inadequate readout precision and the quality/functionality of the RFID systems and the drastic increase in the data volume to be handled for the readout of RFID transponders in real time are estimated to be a hurdle of (relatively) high significance by a minority of the enterprises questioned. This result gives rise to the conclusion that the technical problems with the introduction RFID systems, undoubtedly still existent (see section 3.4), are rated as “teething troubles”. Their cure is thus merely a question of time and, for this reason, is of secondary priority for the enterprises.

Strong resistance by suppliers and customers is decisive for enterprises, to a similarly low degree, when deciding about a potential investment in RFID technology. A possible explanatory approach for this is provided by the fact that RFID has so far mainly be used in enterprise-internal applications and therefore the majority of the enterprises have not yet been confronted with the problem of having to motivate cooperation partners to an adaptation of the technology. 

Finally, open security issues are attached a (relatively) high degree of importance by 44% of the respondents (basis 54). This hurdle therefore belongs to the last but two positions in relation to the other established hurdles in order of priority. In view of the mainly high degree of significance that is attached to this hurdle in surveys with regard to the operational Internet application, this positioning is surprising. For example, the respondents of the “ECE 2005” study, representative for Germany, rated open security issues for both the networking with other enterprises as well as external access by personnel to business information systems as the most significant hurdle. This hurdle also always occupies a position in the top half for the offer and supply of services via Internet (Sackmann, Strüker 2005). The possible explanatory approach that the slightly less degree of significance of open security issues in the RFID context is due to the present dominance of company-internal RFID applications, cannot be sustained for the present: Both the enterprises that use RFID solely for internal processes (basis 24) and the (still) outnumbered group of inter-enterprise users (basis 18) unanimously rate the significance of open security issues at exactly 50 percent as “(relatively) high”. There can therefore be no difference made between these two groups with regard to the significance of security issues. This result indicates that other explanations for the low evaluation of open security issues for the application of RFID technology must be found. 

1. 1. 1. Are the costs for RFID transponders too high?

One of the most important hurdles with regard to an RFID investment, whose significance is rated as “(relatively) high” by 64% of the respondents (basis 53), is the danger that the costs of an RFID application could exceed its utility. The analysis of the payment reserves of enterprises for active and passive transponders and the evaluation of the relative significance of individual items in the (planned or already realized) RFID investment volumes should therefore provide deeper insight with regard to the costs that are incurred for enterprises with the introduction of RFID technology. 

The market for active RFID transponders is characterized by a great diversity of models with different functionalities and correspondingly varying prices. In contrast to this, the payment reserves of the 37 respondent enterprises are relatively homogenously distributed. 15 enterprises (41%) are therefore prepared to pay a maximum of 1 € for active transponders. Added to this are a further 16 firms for the sum of up to maximum 5 €, so that with 84% the great majority of all the enterprises are not prepared to pay more than 5 € for active transponders. Only 6 enterprises (16%) estimate their payment reserves at between 5 and 50 €.

The price range for passive transponders is considerably more limited compared to this. With 17 out of 45 respondent enterprises (38%), the relative majority of the enterprises are only prepared to pay between 1 and 10 cents per chip. A further 16 enterprises account for the next highest category (11-20 cents), so that with 74% the majority of the respondents are not prepared to pay more than 20 cents for a passive transponder (see also 3). In view of this concentration of payment reserves, the price reductions of the large chip manufacturers constitute a first step towards a broader acceptance and application of the technology.

Table : Payment reserve for passive RFID transponder (basis 45)

To determine the relative significance of the transponder costs in proportion to other items of the entire RFID investment volume, a priority sequence of the proportions of the six most important elements was ascertained from the RFID budget. Besides the transponder costs, these elements comprise the acquisition costs for reader devices, other hardware (e.g. additional computers) and software as well as integration costs into existing information systems and conversion costs of previous company-internal and inter-company business processes. Due to the low case number of 17, the significance of the responses is, however, very limited.

1. 1. 1. Is there a threat of lacking customer acceptance?

Possible data protection concerns of customers with an increased use of RFID transponders at article-level continue to be rated in their significance as “(relatively) high” by the majority. This is due, amongst others, to the technically easy to perform option for enterprises, authorities and private persons, of collecting unauthorized personal data with a wide distribution of RFID transponders and to aggregate this in the form of profiles. The real or at least feared loss of privacy by the consumers resulting from this can have an affect on enterprises using RFID in the form of turnover losses owing to a boycott for example. 

According to the estimation of the enterprises questioned, data of a different quality and further data about business partners (e.g. for the improvement of the cooperation) is primarily stored (see Figure 4) with the use of RFID and the resultant modified data situation. These assertions apply for 72% (basis 47) and 69% (basis 48) of the respondents. Furthermore, with 59% the majority of the respondents (basis 49) are of the opinion that the use of RFID technology necessitates a tightening of data protection declarations. Further assertions felt by the majority as applicable imply an elaborate protection of personal data against loss, theft or misuse and an increasing amount of stored data about end customers. Conversely, a minority of the enterprises believe that with the use of RFID, data is stored longer than before (42% “(relatively) applies”; basis 48). Moreover, it is virtually ruled out (10% “(relatively) applies”; basis 48) that with RFID even a slackening of previous data protection declarations has become necessary.

Figure : Estimation of several statements regarding data protection: “By using RFID technology …” (basis 50-47)

This modified data situation can also generate a series of problems for enterprises, of which inadequate security has the highest significance (58% “(relatively) high significance”; basis 48) for the respondents after successful introduction of the technology. This result is particularly interesting in view of the low significance attached to open security issues as investment hurdles, therefore as problem before the introduction of the technology (see section 3.4). Further cooperation-related problems, e.g. information retention, information misuse and unobservability of misconduct of the transaction partner are rated as less serious by the majority. The same applies for the loss of control over personal data, which is felt to be a (relatively) significant problem by only 39% of the enterprises (basis 49).

1. 1. 1. Is the problem of inadequate readout precision overestimated?

Although the significance of hurdles concerning the functionality of RFID systems is to be regarded as relatively low, problems concerning the readout precision of RFID transponders are known from numerous practice reports. Owing to the multitude of environments in which wireless technology can be used and particularly for the use of passive transponders that do not have any power supply of their own for sending their information, variations with regard to the readout precision are virtually unavoidable.

The presence of liquids and metals which hinder wireless transmission presents by far the most significant problem with regard to readout precision for the respondent enterprises. 17 enterprises are or were confronted with this problem (basis 18), of which only 2 enterprises had solved the problem at the point in time of the survey. The high margin of error with the readout of moving transponders presents a problem for 11 out of 16 enterprises, which was solved in 4 cases. A too small a range of readability is criticized by 13 firms (basis 18), could however be remedied in 7 cases. Only a minority of the enterprises encounter further problems, such as the damage of transponders through dampness or temperature fluctuations. 

With regard to the required period for increasing the readout precision to an acceptable level, it is to be noted that no adjustment was necessary in only one out of 17 cases. Most of the enterprises still succeeded in solving their readout problems relatively quickly. 6 enterprises could increase the precision of their RFID systems within a month to an acceptable level, 6 others within the first six months of use or trial use. 3 firms required between 6 and 12 months, whereas only one enterprise did not solve the problems regarding readout precision even after a year. These figures substantiate the impression that technical problems when introducing RFID technology are of course virtually unavoidable, but can be relatively quickly solved by enterprises (teething troubles) and are therefore relatively lowly assessed in their relative significance compared with other hurdles.