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Only 10% of DoD Contractors Asked to Use RFID
Issue #111 | July 27, 2007 | by Steven Jessup
When you run the numbers, what the U.S. Department of Defense reports is happening with their RFID requirements does not add up.
By mid-2006, most goods purchased by the DoD were required to be shipped with passive Gen 2 RFID tags in place. In theory. Even if it was not spelled out in your contract, the RFID requirements were contained in the Master Solicitation Agreement, which is essentially "the fine print" that contracts must adhere to.
Got that? All goods shipping to the defense department must be tagged. So even if merely 90% need tags, how can it be possible that not even 25% of awarded contracts actually require RFID?!
Here are those numbers. During the first half of 2007 the DLA has been busy issuing contracts without RFID requirements. The following table shows the total number of awards each month, and the number of those awards that contained RFID requirements.
| 2007 | | Total | | RFID | | January | | 49,104 | | 10,425 | | February | | 61,733 | | 14,930 | | March | | 80,381 | | 21,619 | | April | | 100,878 | | 25,420 | | May | | 125,016 | | 25,043 | | June | | 123,025 | | 24,228 | | Totals | | 540,137 | | 121,665 |
Where are the vendors?
The scary part of this is the number of unique Cage Codes that have received these 121,665 RFID contracts. On the RFID circuit, Deputy Undersecretary of Defense Alan Estevez routinely says there are more than 50,000 vendors serving DoD. Press accounts typically report between 43,000 and 60,000 active defense suppliers.
In half a year, with more than half a million awards issued, it is reasonable to expect the number of suppliers required to use RFID would be at least 20,000.
The actual number is 4,120. Only about 10% of the DoD contracting community is being asked to use RFID tags! This is simple to track. Each supplier is represented in award reports by their individual Cage Codes – so just follow the codes each. (All information in the table above is from https://www.dibbs.bsm.dla.mil/ )
It gets more interesting if you analyze it. At the end of February that number stood at 3,457. This means only a little more than 700 new suppliers were issued RFID contracts in the last four months of the half. In fact, during the first two weeks of July no additional contractors were asked to do RFID tagging, even though more than 10,000 awards were issued in that same time period.
RFID providers left holding the bag
From the point of view of RFID equipment suppliers, these numbers are disastrous. It indicates a market potential only one tenth the anticipated size.
Starting in early 2004, the DoD began a concerted effort to promote RFID use. They sent high level representatives to speak at dozens of conferences; they produced their own conferences on the topic; and threw around the number of 50,000+ vendors at every opportunity. Why? To prepare the suppliers, surely; but they needed to inspire the IT industry to invent, design and manufacture the RFID tags and hardware necessary to execute this supply chain program. My company was not the only one making investments these past years to serve this market.
Further exacerbating the supplier’s woes is the Office of the Secretary of Defense’s acceptance of a Certificate of Conformance as proof of viability for pre-encoded tags. This policy actually makes it foolish for a supplier to create his own RFID tags in house since, by doing so, he is responsible for making sure that the tags are readable when placed on the containers for shipping. By purchasing pre-encoded tags with a COC he has no such requirement.
This policy was put in place, and is being currently defended, on the basis of reducing cost to the department. It is assumed the cost of creating and putting RFID tags on containers would be passed on to the DoD in the contracts, and the cost of equipment to provide this capability is high (even though some solutions I’m quite personally familiar with are available for less than $450.).
Where are all those tags from?
Okay, you ask, then why did "RFID Street" report recently that 100% of the goods going to Iraq and Afghanistan are tagged? Remember, much of that tagging is the active RFID used on the containers shipped overseas.
The rest? The DoD is tagging most goods themselves, rather than asking their vendors. Any doubt was put to rest when the DLA put out for bid, last month, a request for more than 3,000 additional RFID thermal printers to be used in their distribution centers to mark products.
If the suppliers are required to put RFID tags on their containers when shipping to these distribution centers, why does the DLA need more than 3,000 of their own printers? The millions of dollars they are spending on this effort certainly exceed what it would have cost to outfit the 4,000 plus suppliers who are currently shipping products with RFID tags. Simple implementation and enforcement of the rules would save not only the cost of this purchase, but the unending need for the DC’s to provide the labor and management necessary to do the actual tagging.
Steven Jessup, CEO of Ensyc Technologies has been a frequent editorial contributor to RFID Switchboard. Ensyc offers low cost solutions for the DoD market. http://www.rfidsb.com/userpage.php?do=main&userid=1924.
Last edited by AndyKowl : 07-29-2007 at 02:44 PM.
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