New RFID Services Based On IBM's Own Tagging Projects - InformationWeek

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New RFID Services Based On IBM's Own Tagging Projects

RFID work done at an IBM chip factory becomes the basis for a new line of consulting services.

IBM is introducing a line of radio-frequency identification services for midmarket companies that are based on practices that have been honed by IBM itself at its facilities for more than a year.

The services include business-case development, technological proofs of concept, internal pilots, trading-partner pilots, and full-system rollouts. IBM is selling them to industries such as aerospace and defense, automotive, chemicals and petroleum, electronics, forest and paper, and manufacturing.

Eric Gabrielson, IBM's director of worldwide RFID products, says a weeklong workshop to determine where to apply RFID technology costs $20,000.

IBM consultants will assess a company's operating environment, testing parts and products for performance on site and at IBM RFID test centers in Yamato, Japan; LaGaude, France; or Gaithersburg, Md.

Globally, RFID integration, maintenance, support, and training will account for nearly $1.3 billion in sales by 2007, up from $363.8 million this year, predicts Venture Development Corp. The research firm forecasts RFID middleware application software sales will reach $587.8 million in 2007, up from $122.1 million in 2004. RFID middleware has been IBM's niche to date, and analysts say that dominance will spread into services as well.

During the next six months, as more midmarket companies begin RFID initiatives, RFID will likely become the biggest buzzword heard from the supply-chain divisions of Accenture, Capgemini, IBM, LogicaCMG, and SAP, according to Lehman Brothers, a global equity-research firm.

In a report released earlier this month, Lehman Brothers crowned IBM the global leader in RFID projects. The report states that 1,000 IBM employees are already involved, and the company has a European test-and-interoperability lab in Nice, France, for piloting and proving RFID technologies.

IBM says it has mapped a return on investment for companies based on business processes for the consumer packaged-goods and industrial sectors. "Most ROI is based on the business process," Gabrielson says. "Companies have found--regardless of the whether the RFID implementation is mandate driven--in some business processes, applying RFID will have a payback in less than 18 months."

He speaks from IBM's experience.

The company has been quietly mapping its own RFID strategy, running a full-scale supply-chain RFID-tracking program at its East Fishkill, N.Y., chip factory. For more than a year, the company has been using RFID to track thousands of chip orders through the manufacturing process.

The Fishkill factory is largely automated in no small measure by RFID. IBM has cut the number of people required to run the factory line to 70 and increased the yields. An average plant the size of Fishkill would require 120 to 150 people, according to IBM.

IBM plans to expand RFID's use in the Fishkill facility and others around the world, says Jesus Mantas, IBM's global wireless business-consulting-services leader. "Tracking containers and potentially [hazardous] materials and links with other OEMs," says Mantas, declining to elaborate on several pilots in planning stages or under way. "Our supply-chain group has a program to take our RFID projects and expand them across the supply chain."

During the last six months, IBM has been looking at other places to apply RFID technology within its own supply chain, such as asset tracking from backup and recovery for service tapes to shipping containers used to move computer servers between sites. The pilots under consideration aren't limited to the United States, Gabrielson says. "We are looking at pilots in Europe and Asia, too," he says. "They aren't all manufacturing sites similar to Fishkill."

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