Electronic tags: contractors urged to comply with smart-tag policy.

Companies that supply military equipment to the Defense Department should begin voluntarily to put electronic tags on shipments, advised Alan Estevez, assistant deputy undersecretary of defense for supply-chain integration.

In January, contractors were supposed to begin applying the tags, which use a passive radio-frequency identification technology, but they have been slow to act, partly because many say they don't understand what they have to do. Also, the defense federal acquisition regulation, requiring application of the tags has been delayed perhaps until late spring. Nevertheless, Estevez told an industry summit, companies can begin using the tags voluntarily.

Two industry giants, General Electric and Lockheed Martin, already have begun compliance, noted Army Maj. Gen. Daniel G. Mongeon, director of operations for the Defense Logistics Agency. "We welcome additional volunteers," he said.

Defense officials want contractors to start placing the tags on all cases and pallets of military rations, clothing, individual equipment, tools and weapons parts being shipped to defense distribution depots in Susquehanna, Pa., and San Joaquin, Calif., for transportation to the Persian Gulf, Afghanistan and other overseas destinations.

For the most part, contractors are asked to place only passive RFID tags, not the more expensive active versions, on their shipments, explained Estevez's special assistant, Kathy Smith. "Suppliers are rarely obligated to apply active tags," she said.

RFID is an automatic identification technology that uses a device called a reader or "interrogator" to record data from a transponder embedded in a tag attached to a shipment. It is being used in the civilian world by such major retail chains as Wal-Mart, Target, Best Buy and Albertsons to ship goods to their stores.

Active RFID uses a battery, while passive RFID relies upon RF energy transferred from the reader to power the tag.

The proposed regulation is aimed only at those companies with new contracts taking effect in January or later, but eventually it is intended to cover everyone who ships defense-related materials, officials said. "It's going to be good for us, and it's going to be good for you," Estevez told industry representatives.

The pace will pick up in January 2006, when RFID tags will be required on all classes of shipping containers, palletized unit loads and exterior containers headed for DLA's key depots inside the continental United States, U.S. Transportation Command facilities and service maintenance locations, Smith said. In January 2007, she added, the tags will be mandated for commodities shipped to all Defense Department locations.

The Transportation Command, headquartered at Scott Air Force Base, Ill., is in charge of implementing the Defense Department's RFID policy. "Traditionally, TRANSCOM's responsibility was port-to-port, from some aerial port or seaport in the United States to some aerial port or seaport somewhere else in the world," said the command's chief, Air Force Gen. John W. Handy. "Now, our responsibility is from factory to foxhole ... We can't do that without information technology. We can't do it without RFID."

Shipments to Iraq and Afghanistan have been enormous, Handy said. They included 1.1 million tons of air cargo, 3.7 million tons of maritime cargo, 54 million barrels of fuel and 140 million meals.

To ensure that supplies are transported most efficiently, Handy said, "we need absolute knowledge about what's coming out of the factory and where and how it's going to be used."

That's where RFID comes in, Handy said. The technology already is proving its value in Iraq by helping track the movement of supplies all along the logistical pipeline, he said.

As an example, Handy cited a recent call to the U.S. Central Command's Deployment and Distribution Center, in Kuwait, from a U.S. Marine captain in Fallujah asking that Hellfire missiles that his command had ordered be sent as soon as possible.

"The captain had the RFID number of the order, and that enabled the DDOC to get the Marines the missiles they needed," Handy said.

The DDOC is a first-of-a-kind logistics-support cell made up of 63 representatives from TRANSCOM, DLA, the U.S. Joint Forces Command and all of the services' materiel commands. It deployed to Kuwait in January 2004 with authority, to synchronize, prioritize, coordinate and direct the flow of personnel and supplies into the theater.

Shipments are traceable 98 percent of the time while TRANSCOM has custody of them, Handy said, adding that it is when they arrive in theater that "you start to lose visibility."

Recipients need to learn more about RFID technology, Handy said. Some assume that the tags "are snooping devices," designed to spy on them, "and they beat the daylights out of them," Handy said. "Or they simply remove them, because they don't look like something that should be on a container."

DLA has installed RFID infrastructure at overseas depots in Gemersheim, German; Yokosuska, Japan; Pearl Harbor, Hawaii, and Sigonella, Italy. In 2004, facilities were added in Kuwait and Guam, In January, another one was stood up in South Korea, Mongeon said.

DLA uses the depots to pre-position wholesale stock, such as meals, battle-dress uniforms, construction material and spare parts, close to deployed troops around the world.

The RFID infrastructure to keep track of these items is "in place," Mongeon said. "We are absolutely committed to RFID technology."

Defense suppliers, especially small businesses, need a lot more information about the department's RFID policy, said Sherry Jenkins, a sales representative for the National Precision Bearing Division of Mechatronics Inc., of Preston, Wash.

"Everybody's really all over the place on RFID," she told the summit. "Some aren't sure if their products are mandated under the department's policy. Some just set the issue aside, hoping the policy will disappear." At her company, Jenkins said, "we often just shook our heads. After all, we sell bearings, not tags.

"We had to take a serious look at whether we wanted to continue to sell to the government," Jenkins said. "The profit margins are really small."

National Precision Bearing found that complying with the policy could be expensive. RFID consultants wanted an average of $2,500 plus expenses for their advice, and initial estimates for becoming RFID compliant ran between $30,000 and $50,000.

"Our internal [information technology] group whittled the cost down to about $13,000," Jenkins said. "But even $13,000 didn't make a lot of sense to us."

The company wanted to minimize upfront expenses, Jenkins said. "We don't want to be stuck with a dinosaur."

In the end, National Precision Bearing paid $3,500 for its RFID system, she said, "and we are prepared to be RFID compliant simply, affordably and with no pause in our shipping systems."

Jenkins' advice to other small businesses: "Don't let anybody talk you into something you don't need."

Defense officials concede that RFID technology still is evolving. In fact, the Defense Department has joined with Wal-Mart and other commercial RFID users to form a not-for-profit organization called EPCglobal Inc., which is dedicated developing a single, worldwide standard for electronic produce code technology.

"We don't want RFID to develop like cell phones, with different standards for all kinds of technologies--one or more standards for U.S. technologies and others for foreign technologies," said John Seaner, EPCglobal's senior director for industry development.

The key is controlling and guiding the convergence to one system, he said. "How do I manage the migration from bar codes to RFID? Which shipments are the most important?"

Concern also is growing about international implementation of RFID, Seaner said. "I'm continuously hearing questions about the role of China," he said. Seventy percent of our consumer goods are coming out of China. We anticipate China will be up and running by the end of the year."

RELATED ARTICLE: Federal RFID spending projected to grow 120 percent.

U.S. Government spending on radio frequency identification technology will increase by 120 percent over the next five years, according to a recent report by INPUT, a Reston, Va.-based firm that specializes in information-services analysis and consulting.

"To date, use of RFID in the public sector has been largely restricted to the Department of Defense, which is successfully using the technology to improve its supply-chain management process," said the report.

Beginning in 2007, however, RFID is expected to experience substantial growth in civilian agencies "as business cases emerge demonstrating similar cost benefits in areas outside of the supply-chain process," the study noted. For example, the Department of Homeland Security is adopting RFID in its Free and Secure Trade program, which seeks to speed up the movement of pre-approved, eligible goods across the U.S.-Canadian border.

Perhaps the biggest challenge facing agencies as they adopt RFID, the report said, is how to construct an architecture that can handle substantially increased amounts of data. One issue is how do you separate out the useful information. According to some estimates, the report said, 75 percent of all information collected by military RFID is useless.

In addition, systems architects will have to tie numerous logistics systems spread throughout the federal government, and figure out who will need access to the data, how to provide it in a condensed form and how to protect the information from spies and criminals.

--HAROLD KENNEDY