Feature Article

Logistical Legerdemain

With RFID software developed by CapTech Ventures, Fortune 500 companies and the Defense Department soon will run their supply chains with unprecedented agility and efficiency.

by Peter Galuszka

The unassuming red brick row house on the edge of Richmond’s Fan District might seem an unlikely epicenter of a revolution sweeping the logistics sector. But the business found inside the homey office building, decorated with prints of such local landmarks as the Byrd Theater and the Third Street Diner, is establishing itself as a key player in the RFID (Radio Frequency Identification) phenomenon that is transforming supply chains across the globe.

CapTech Ventures, Inc., an eight-year-old information technology consulting firm, cut a deal last year with Richmond Cold Storage, a refrigerated warehousing company, which allows the field testing of its RFID systems under rugged conditions. The company went on to win Department of Defense approval for use of its TagsWare software platform in DoD's massive supply chain. Then, after lining up two major resellers for its software, CapTech inked its own agreement to outfit Owens & Minor, one of the largest medical supply distributors in the country. 

RFID is the hottest technology in the logistics industry today, and the field is getting crowded very quickly. CapTech, a firm with $14.5 million in revenues and 100 employees, is too small to be all things to all people. Instead, the company is focusing its efforts on the military supply chain and specialized distributors like those in the health care industry. Says CEO Sandy Williamson: “We’re exploiting unique, custom RFID opportunities that nobody else is chasing."

Basic RFID technology has been around since Navy scientists first used it before World War II. But the technology is accelerating today in a big way. Tiny radio transmitters are replacing the ubiquitous bar codes as the way to keep track of inventory movement. RFID technologies linked to space satellites are even tracking goods as they traverse oceans on container ships. The ability to gather immense amounts of data helps shippers plan with greater precision than in the past.

A package whizzes past an RFID sensor at

CapTech's test facility at Richmond Cold Storage.

RFID got a big boost in 2004 when mass retailer Wal-Mart and the U.S. Department of Defense both announced they were requiring their suppliers to start using RFID this year. Wal-Mart is the world’s largest retail chain, and the Defense Department uses more than 46,000 suppliers. In another boost for the technology, standards for RFID radio bandwidth spectrum were adopted in the U.S. and Europe, simplying RFID’s deployment and allowing a second generation of systems and hardware.

CapTech sensed the opportunity in RFID early on. The company had established itself in the Richmond marketplace as a leading local consulting firm that specialized in designing, building and managing information technology systems for blue chip clients. The firm has been growing at a rate of 20 percent to 25 percent per year.

The move into RFID represents a natural extension of CapTech's strengths in middleware application development, Williamson explains. "To execute and RFID project," he says, "companies will need a team strong in project management, workflow analysis, systems engineering, testing and risk management. Those are things that CapTech has always done."

CapTech’s core system, TagsWare, is an RFID software platform that allows information from RFID sensors placed on shipment packages to be collected, programmed and manipulated. A major challenge to the industry, says Williamson, has been setting up international standards acceptable on a global basis. Now that standards for such crucial factors as RFID radio bandwidth are established in both the U.S. and Europe, TagsWare enjoys an advantage because it is compatible with both.

RFID sensors come in two versions. Battery-powered active sensors, such as SmartTags on cars used at toll booths, can transmit data from greater distances than passive sensors, which work using radio wave energy picked up from reading devices. The Defense Department, which has been using RFID since 1995 to supply military actions like those in Iraq and Afghanistan, uses active sensors.

Consequently, CapTech, which wants DoD business, specializes in active sensors. “We’ve focused on software for active tags and DoD applications,” says Williamson. CapTech got a boost recently when the Defense Department awarded it a blanket purchase agreement, empowering any military agency to buy CapTech software.

By setting itself up on the military side of RFID, CapTech played to a home court advantage. The company’s headquarters, research labs and test facility are a two-hour, Interstate drive from the Pentagon, and even closer to dozens of military bases in Virginia, notes Gene Winter, senior vice president of the Greater Richmond Partnership, the Richmond region's economic development organization. The Commonwealth ranks No. 2 in the U.S., after California, in military expenditures, he adds.

The Richmond metro area stands at the intersection of three Interstate highways, making it a major East Coast entrepot and a logical location for warehousing and distribution centers. What makes the region really stand out, Winter says, is the combination of multinational corporations operating global supply chains, world-class distribution companies and entrepreneurial innovators like CapTech. 

Of special benefit to CapTech is its proximity to Ft. Lee in Petersburg, a major supply center for the Defense Logistics Agency, which oversees the military’s globe-spanning supply chain. Williamson and his team have made inroads with the U.S. Army Logistical Management College at Ft. Lee, which is the primary training facility for officers and enlisted personnel involved with supply for all of the armed services. Classes of up to 60 people, mostly officers, attend courses at the college that can last up to six months before they are sent on to active duty assignments.

Not only have CapTech executives lectured at the college, students at the Army logistical school have visited CapTech’s RFID testing facility that it runs in partnership with Richmond Cold Storage. “It’s a big plus because the students get to see RFID hands on,” says Thomas Reichart, a civilian instructor at the college. Getting working-level military personnel familiar with CapTech products and services could be a big advantage later on when the military makes purchasing decisions.

The joint venture with Richmond Cold Storage offers special conditions for testing RFID. The lab near the Richmond airport involves using passive RFID sensors in extremely cold environments -- typically about minus 10 degrees, according to Pat Hughes, director of operations for Richmond Cold Storage. “We use an assembly line to test the product in a real world, cold-storage environment.”

The test site, in operation for about a year now, is a major benefit for Richmond Cold Storage’s customers who need RFID to keep track of goods, such as food, pharma- ceuticals, tobacco and computer chips, kept in cold storage. Hughes says that Richmond Cold Storage and CapTech can experiment with which brand of RFID chip works best in different environments. They’ve picked up valuable lessons in where to place RFID tags when packing shipments. Hughes says that one discovery made at the lab was quite simple: Tags can be read best when placed in the corner of shipping boxes, where there's air underneath, rather than directly above a product with a solid mass, such as a frozen turkey.

Richmond Cold Storage, says Hughes, doesn’t get any direct financial income from the lab. But the knowledge gained from testing is invaluable. “All supply chain operators have a need to get smart on RFID,” he says. “We’re still in the learning curve, but we’re probably [farther along] the learning curve [than our competitors] in the United States.” 

CapTech faces another challenge with Owens & Minor, a Richmond-based supplier of medical equipment. CapTech is preparing the Fortune 500 company, which supplies medical equipment for the military’s hospitals and combat units, for Department of Defense compliance on RFID.

"We've been in discussions for two years with CapTech," says Pat Caine, director of information systems operations and security at Owens & Minor. "It started out as an information sharing relationship and they became a trusted partner. We signed another agreement a few weeks ago and we'll be finished with our project for RFID compliance by February."

Caine notes that the project is ambitious because Owens & Minor, which distributes from than $4 billion worth of medical and surgical supplies each year from its 44 distribution centers, carries so many product lines.

“Most firms only have from 70 to 100 products, notes Stephen Holdych, a CapTech principal. “But Owens & Minor has more than 120,000 products and it’s going to be an interesting challenge to tag all of them with RFID tags.”

Another home court advantage for CapTech is that RFID is playing a major role in the ongoing expansion of Virginia’s ports. Since the mid 1990s, scores of warehouse facilities have been erected in Virginia by mass retailers Target, Wal-Mart and QVC. Norfolk, Portsmouth and Newport News are strategically located in the Mid-Atlantic and can cover stores throughout the U.S. east of the Mississippi River.

Propelling the trade growth is China, which unleashed a flood of imports after winning tariff advantages when it entered the World Trade Organization in 2001. Trade from China and other Asian nations could represent a big boost for RFID and companies such as CapTech. Instead, it’s been a big headache. China has not said what radio bandwidth spectrum it will use when its workers attach RFID tags on cargos bound for export, says Holdych. Consequently, many pallets of cargo imported from China have to be broken apart at repacking centers in this country. There, RFID tags are slapped on the cargoes as they are repacked and sent on their way.

Since the potential growth of trade from China is so huge, playing a role in resolving the bandwidth conundrum could be a major coup. CapTech sees the possibilities and is trying to access the China market by working through Taiwan. It is using a marketing firm in Northern Virginia to make contacts and perhaps influence how RFID is developed.

As a small player, CapTech regularly partners with larger companies to extend its reach. A leading RFID firm, Peak Technologies of Columbia, Md., for instance has accepted CapTech’s software and is reselling it to their clients. “Their product is very robust and fits our strategy,” says Ken Franz, director of strategic alliances at Peak Technologies. Siemens Logistics and Assembly of Grand Rapids, Mich., part of the German technology giant, is likewise reselling CapTech’s products.

Meanwhile, CapTech is developing Virginia talent by hosting promising students as interns from Virginia Tech, James Madison University and VCU, only steps away from its Main Street office.

CapTech has come far since Williamson and Slaughter Fitz-Hugh, now the firm’s chief operating officer, founded the firm in Richmond 1997 after working together at Anderson Consulting in Washington. CapTech has racked up a number of honors, such as making the 40th spot on the Inc. 500 list of the nation’s fastest-growing private company in the nation. Local lauds include the 2001 Virginia Ernst & Young Entrepreneur of the Year.

For a small company that got its start with no venture capital funding whatsoever, CapTech certainly has reached far from its home in the brick row house.

October 20, 2005

CapTech CEO

 Sandy Williamson

For more information...

CapTech home page

News

CapTech Improves Fisher & Paykel Manufacturing Process Using TagsWare™ RFID Software
03.02.05

CapTech Delivers Updated TagsWare™ Version 1.2 RFID Software

09.29.04

CapTech Ventures and Comtrol create embedded RFID reader control device
09.28.04

CapTech Ventures and Richmond Cold Storage Create TagsWare™ Center

09.07.04

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