Elements of Cost

The cost of an RFID deployment can be broken down among three key areas: hardware, software, and services. Hardware costs include the cost of tags, readers, antennae, host computers, and network equipment (cables, routers, and so on). Software costs include the cost of creation or upgrade of middleware and other applications (for example, ERP and SCM). Service costs include the cost of installation, tuning, integration of various components, training, support and maintenance, and business process reengineering (workflow).

Tags

Tag costs are one of the key considerations in an RFID deployment. Tags come in various shapes and sizes based on applications. These factors affect tag pricing significantly. Other factors such as range, on-board memory, read/write capability, and active/passive configuration also impact the cost of tags. Generally, application requirement is the primary driver for the selection of a particular type of tag. Two types of costs are associated with tags: acquisition cost and preparation cost. Also note that some of these costs are recurring costs, so careful planning and negotiation can bring volume discounts, lowering the costs. Because tag prices are coming down over time, you should consider buying tags in phases for a large, multi-phase project to take advantage of lower spot prices in the future.

Acquisition Costs

The Electronic Product Code (EPC) passive UHF tags typically cost around 40 cents. Significant volumes in hundreds of millions, however, yield deep discounts on these prices. Based on projected tag volumes as well as projected improvements in processes used to make such tags, the price of such a passive UHF tag is expected to fall anywhere from 5 cents to 15 cents in the next several years. The tag price between 5 to 10 cents is likely to act as a catalyst for widespread adoption of RFID tags for itemlevel tagging in retail and supply chain areas.

Other non-EPC tags vary in prices. Passive tags used in the cattle industry cost around $2. Tags used in access control typically are quite small with very short range measured in inches. These tags cost in tens of cents (packaging, such as embedding the tag in a card the size of a credit card, is extra). Active tags, on the other hand, have long range and their own power supply. Such tags can cost up to $100 or more. Special purpose tags designed for a specific application can cost up to $100 or more. These tags typically exhibit special features (for example, the capability to withstand very high temperature, pressure, or concentration of corrosive materials) not available in mass volume tags. Semi-passive (or semi-active) tags can cost anywhere from a few dollars in small quantities to tens of cents in volume.

Preparation Costs

Tag acquisition costs are not the only costs driving the overall cost of a tag in a deployment. You must factor in related costs as well. For example, if a tag is printed on a label, the cost of the RFID label printer/encoder should be factored in. A 3PL logistics vendor or a large CPG (Consumer Packaged Goods) manufacturer would need manual labor or an applicator machine to apply tags to the boxes it ships. Mounting tags on a metal surface or a container filled with liquid may require special mounting accessories so the tag can be read properly by a reader. When in an industrial environment such as auto assembly, the tag may need to be packed in heat resistant packaging. Depending on your situation, some of these preparation costs should be factored into tag costs.

Readers

Reader range, multifrequency handling capability (agile readers), and antennae capability affect reader costs. A typical reader comes with a set of APIs (application programming interfaces) to communicate data with upstream processing elements such as a host computer running the middleware or other applications. Some manufacturers combine a host computer and readers in one package to create a reader appliance. The price varies from several hundred dollars to more than $5,000 for readers used in rugged industrial environments. Handheld readers typically combine the antenna and the reader in one package, costing more than $500 in volume. The cost of mounting readers and antennae (for example, to build a reader/antennae portal) should also be factored in cost-benefit calculations.

Antennae

There are two sets of antennae in an RFID deployment: one connected to the RFID chip and one connected to the reader. Some readers may have multiple antennae connected to them. The one connected to the chip is considered a part of the tag and is not addressed here.

Several types of antennae (connected to the reader) are available with different size, range, and directional output. Sometimes, aesthetic or functional considerations may require design of a special antenna. An EPC-compliant antenna costs up to $500. Price of a non-EPC antenna varies from tens of dollars to several hundred dollars, depending on the application.

Host Computer, Middleware, and Host Applications

The host computer typically runs the RFID middleware software, and in some cases, other applications such as inventory management and asset tracking. If it is just running the RFID middleware, it could be a small server costing $2000 or more. If it is a larger machine that is used to run other applications, it may cost tens of thousands of dollars. If your company already has such a setup, you don't necessarily need to incur this cost. Some vendors also package RFID middleware with a host computer, making it an RFID middleware appliance. Such appliances provide out-of-the-box functionality and manageability, making them ideal for facilities that don't have extensive resources to set up and manage a host computer system. Rugged versions of a host computer can cost anywhere from 20% to 100% more than the cost of a comparable base model.

The cost of RFID middleware could be anywhere from $25,000 to $100,000 and include a site license. The RFID middleware appliance could cost from $8,000 to $20,000 per device. The cost of application software depends on the application.

Installation

Installation of all these componentstags, readers, antennae, host computers, and related network infrastructure (for example, switches and cables)can be complicated. In a retail environment, some of the elements such as readers and antennae may need to be concealed or made less conspicuous for aesthetic reasons. In warehouses, new power connections and other network cabling might need to be provided to install readers, antennae, and host computers in various parts of the warehouse. Depending on the environment, additional gear may be required to set up a network, whether it is wired Ethernet or Wi-Fi (Wireless Fidelity). Depending on the size of the project, cabling costs (CAT5 or others) can also be substantial. In the cattle industry, readers installed in the slaughter facilities need to be protected so they aren't damaged by the cattle accidentally bumping into them. Each environment has its own unique set of challenges, along with some common ones. An experienced system integrator is essential here. Numerous service companies do this type of work. Some specialize specifically in RFID installations. More details can be found in Chapter 8, "Vendor Considerations and Landscape," and the book's companion Web site, www.rfidfieldguide.com.

Tuning

Tuning plays a critical role in successful implementation of an RFID application. It refers to activities such as tag/reader placement or shielding to get optimum performance. Because an RFID application is based on radio waves, disturbance (noise) from other devices that utilize radio waves can affect the network performance, that is, accurate read and write of tags. Many devices we use todayfor example, motors in a manufacturing plantor many elements we encounter widelyfor example, liquid and metalcan affect RF performance. An RF signal sent by a reader may not be equally powerful in all directions or may have certain "blind" spots where RF energy is quite low. Hence, the RFID system may need to be tuned by an experienced RF engineer. The engineer can tune reader and antennae for specific situations or use shielding to block RF noise emitting from other devices. Tuning requirements can vary by environment. In healthcare facilities, the disturbance comes not from motors but from patient monitoring devices. Only certain frequencies, typically in the HF (High Frequency) band can be used in this environment.

Integration and Business Process Reengineering

Full benefits of an RFID deployment can only be realized when the data collected from various tagged objects is used for better decision-making. This can lead to increased profit or operations that are more streamlined. Depending on the type of application an RFID system needs to interface with, the cost can vary significantly. It is usually easier to integrate with Web-based applications that run on standards-based middleware (for example, J2EE application server or Web server). On the other hand, legacy applications with proprietary interfaces may require more integration. In some cases, the integration project may require overall rearchitecting of the network as well as other business processes, going into the realm of business process reengineering. Initial design, programming, and integration costs such as those associated with encoding unique product IDs onto tags (serialization) as well as updating and verifying shared databases with tag data (synchronization) are part of the integration costs. Subsequently, these costs are also incurred for ongoing maintenance of the projects.

Support and Maintenance

The on-going support and maintenance of RFID applications and reevaluation of existing processes to maximize the usage of newly available data represent additional costs as well. For example, a software support and service agreement can annually cost up to 15% of software license cost. Physical equipment can depreciate or fail altogether and need replacement. Various existing processes may need to be re-engineered to take advantage of the real-time data collected by an RFID system. Different stakeholders may need to be trained on how to use these new processes. Such costs should be factored into the planning and cost-benefit analysis to create a comprehensive picture of the RFID deployment.