RFID technology is one type of automatic identification technology. Automatic identification technology is a suite of commercial technologies—including bar codes, smart cards, magnetic stripes, and radio frequency identification—that provides a range of capabilities that enable the automatic capture of source data and enhance the ability to identify, track, document, and control deploying and redeploying forces, equipment, personnel, and sustainment cargo. Anticipated potential benefits of RFID include providing (1) near real-time, in-transit visibility for all classes of supplies and materiel; (2) “in the box” content-level detail for all classes of supplies and materiel; (3) quality, nonintrusive (hands- off) identification and data collection that enables enhanced inventory management; and (4) better item-level visibility. RFID tagging of DOD materiel is applicable to all items except bulk commodities such as bulk liquids, sand, and gravel. At the most basic level, RFID is a data input system that consists of (1) a transponder, generally referred to as a tag; (2) a tag reader, also known as an interrogator, that reads the tag using a radio signal; (3) centralized data processing equipment; and (4) a method of communication between the reader and the computer. The reader sends a signal to the tag, which prompts the tag to respond with information about the container or item to which it is attached. The information is forwarded to central data processing equipment, which can then be used to get detailed information about the container or item, such as the shipping date or the date received. The information contained in the central data processing equipment can provide visibility over inventory items throughout the supply chain. DOD’s final RFID policy, issued on July 30, 2004, includes business rules for implementing two types of RFID tags—active and passive. Active RFID technology, which is more mature than passive technology, is used on containers or pieces of equipment for tracking shipments and their contents while in transit. Active RFID tags, which generally use a battery, have transmitters that transmit information when interrogated through radio signals that are read electronically. Active tags are more expensive than passive tags and are used for tracking major items and containers over long distances. Passive RFID is the newer technology and its use in DOD is evolving. Ultimately, this technology, which appears to be promising, will be used to enable better inventory management and accountability. Passive RFID tags are applied to cases, pallets, and item packaging. Passive tags do not have batteries and store only a limited amount of information. To be activated, these tags require strong radio frequency signals from reader devices to enable the tags to send back the information stored on them. Once the radio signal is received, a small amount of the reader’s signal power is temporarily stored and then used to generate the tag response. However, because of the tags’ limited energy, the radio frequency signal strength emitted by them is at a low level, thus limiting the distance— generally 3 to 10 feet—from which the tags can be read. We reported in our May 2005 report that, under perfect conditions, the tags can be read from a range up to about 20 feet. Passive tags are much lighter and less expensive than active tags, ranging from about $0.20 to several dollars each, in comparison with about $100 each for active tags. DOD is testing the passive technology through pilot projects and initial implementation to assess its application to existing business processes. DOD’s RFID policy, issued on July 30, 2004, requires (1) the department and its various military components to begin to implement passive RFID and immediately expand active RFID technology and capability within the DOD supply chain, and (2) suppliers to affix passive RFID tags on certain commodities for solicitations issued on or after October 1, 2004, for materiel delivered on or after January 1, 2005. Passive and active RFID tags physically differ from one another, as figure 1 shows. Even though passive and active RFID technologies require similar types of equipment and function in a similar manner, the equipment is not interchangeable between the two technologies because they serve different purposes and use different radio frequencies. For more detail about the equipment necessary for passive and active RFID technology, see appendix II. Although passive RFID is an emerging technology for both commercial and defense applications, DOD logistics leadership views it as a key factor in transforming DOD logistics. DOD envisions using passive RFID technology to facilitate accurate, hands-off data capture in support of its logistics business processes in an integrated DOD supply chain enterprise. DOD anticipates that the application of passive RFID technology will provide efficient and accurate item/content visibility for better inventory management. DOD’s goal for passive RFID is to provide nonintrusive identification of shipping contents to improve item-level visibility, and its goal for active RFID is to provide nearly real-time, in-transit visibility for most classes of supplies and materiel. Figure 2 depicts how DOD could use both passive and active RFID as items are physically moved from the manufacturers and suppliers to the warfighter. As the defense logistics executive responsible for RFID implementation, the Under Secretary of Defense (Acquisition, Technology, and Logistics) issued DOD’s final RFID policy on July 30, 2004. Certain other DOD military components also have specific responsibilities in the RFID implementation process. The DOD Logistics Automatic Identification Technology Office, for example, is the DOD focal point for coordinating overarching guidance for the use of automatic identification technology within the department. The Army Program Executive Office, Enterprise Information Systems, Product Manager Joint–Automatic Identification Technology Office is the DOD procurement activity for automatic identification technology equipment—including equipment and infrastructure—and it maintains a standing contract for equipment integration, installation, and maintenance. This office is also responsible for maintaining contracts for the purchase of passive RFID tags. DLA is the procurement activity and single manager for active RFID tags. Finally, the U.S. Transportation Command, as the distribution process owner, is responsible for directing and supervising execution of the strategic distribution system for moving and distributing supplies. DOD and its military components have developed RFID policy, and DOD has provided guidance to suppliers and military components for implementing passive RFID technology. DOD also is using pilot projects and has begun initial implementation at several receiving and conveyor locations to better understand this technology and test its application to their business processes. Although the military components have begun acquiring and funding the infrastructure needed for passive RFID implementation, existing infrastructure is minimal because implementation did not begin until January 1, 2005. Consequently, DOD is just beginning to purchase equipment for passive RFID technology implementation, and it projects a sharp increase in expenditures as full implementation proceeds. Since 2003, the Office of the Under Secretary of Defense (Acquisition, Technology, and Logistics) has developed policy and guidance to implement a potentially promising technology, known as passive RFID into their supply chain operations. The military services, DLA, and U.S. Transportation Command also have developed or are developing plans and guidance to support passive RFID implementation. DOD’s RFID policy and the military components’ implementation plans are evolving, and the department has taken several actions to provide additional guidance to suppliers and military components for implementing passive RFID. Figure 3 identifies the dates of several major policy and guidance actions that DOD has taken or plans to take to implement passive RFID into its supply chain processes. Although DOD plans to begin implementing the use of passive RFID to all classes of all commodities, excluding bulk commodities, shipped to all locations by January 1, 2007, it will be fiscal year 2016—and beyond for the Army—before passive RFID will be fully implemented into supply chain operations, according to Navy and Army funding projections. The initial RFID policy, issued by the Under Secretary of Defense (Acquisition, Technology, and Logistics), required suppliers to put passive RFID tags on pieces, parts, cases, or pallets by January 2005. A DOD news release officially announced the RFID policy in late October 2003. In early 2004, the initial RFID policy was updated. The updated policy provided an initial set of business rules for the implementation of passive RFID and laid out the requirement to plan for a January 1, 2005, implementation of the passive RFID business rules. In late July 2004, the Under Secretary issued the final RFID policy. This policy finalized the business rules for the implementation of passive RFID and prescribed the implementation approach for DOD suppliers and vendors to use to apply passive RFID tags. The final policy establishes a mandatory requirement on solicitations issued on or after October 1, 2004, for suppliers to use passive RFID tags for deliveries that take place on or after January 1, 2005. This requirement applies to shipments of materiel in four supply classes that are delivered to two of DOD’s distribution depots—San Joaquin, California, and Susquehanna, Pennsylvania—in accordance with the supplier implementation plan of the policy. In late August 2004, the Under Secretary of Defense (Acquisition, Technology, and Logistics) issued a Logistics Decision Memorandum approving initial implementation of passive RFID at strategic distribution depots, strategic aerial ports, and maintenance depots. Starting January 1, 2006, the final RFID policy expands the requirement for suppliers to tag six additional supply classes and 32 additional shipping locations. Commencing January 1, 2007, all classes of all commodities, excluding bulk commodities, shipped to all locations are to be affixed with passive RFID tags. According to the final policy, the Defense Logistics Board is to review the internal implementation plan, benefits, compliance requirements, and requisite budget requirements annually, based on an assessment of the implementation to date.