Amid tons of hype, radio frequency identification (RFID) technology has been heralded as a revolutionary technology that will change the supply chain forever. However, the lack of standards, the high cost of tags and readers, and the functionality of bar codes has stood in the way.
Although RFID has not revolutionized the world oftransport packaging yet, its impact may be felt soon as major companies perform pilot tests and attempt to validate the technology for tracking pallet load shipments. While some experts have looked way down the road and believe RF will be used to track individual packages, such as a box of cereal, the viability of the technology will likely be proven by tests on unit loads.
“Tracking unit loads within the supply chain is the greatest, immediate opportunity for radio frequency technology in distribution today,” said Dr. Robert Clarke, associate professor at the Michigan State University School of Packaging. The immediate application is for big companies, such as Proctor & Gamble or Wal-Mart, that either own or have control over their distribution systems. Plus, large companies have been the only ones willing to take the risk to bankroll RF pilot programs.
There is a lot of mistrust in the marketplace. Many companies do not believe what the manufacturers of RF technology are claiming, and they want validation according to Steve Halliday, vice president of technology for AIM. Halliday went on to say that despite some misconception, the economics exist right now for unit load tracking with RF. Halliday expects to see large pilots start before the end of the year.
Why RFID?
Barcodes possess several major advantages over RF including cost and infrastructure. Barcode tracking is a tried and true technology. But don't discount RFID's key advantage – it eases automation and eliminates the human element in the system. Barcodes require either hand scanning or line of sight to read a package as it moves by a reader. Packaging orientation or damaged barcodes can lead to problems with misreads. For individual package or unit load tracking to become feasible on the large scale, it must become an invisible part of the process.
Georgia Pacific (GP), a leading corrugated packaging provider and newcomer to the reusable plastic container market, has jumped on board the RF bandwagon. Jeff Hehir, director of operations for GP's supply chain solutions team, likes RF because it does not require a line of sight to read, can read multiple tags quickly and experiences less interference from the environment. Plus, RF makes it easier for GP to keep track of its plastic containers and to identify leak points in its distribution system.
Jim Evans of Intermec said that RF tags work well for reusable packaging because they are permanent. Barcodes don't stick real well on some plastic containers when exposed to harsh environments. Barcodes may come off when the container is washed whereas most RF tags are built right into the container or pallet.
Tom Coyle, vice president of supply chain solutions for Matrics, a cutting edge RF technology company, said that he does not believe RFID will replace barcodes but will supplement them. He identified several key advantages for RF including: improved automation, elimination of the human from the loop, and the ability to increase supply chain visibility.
Generally, RF can allow for faster processing because each item does not have to be scanned or need line of sight. RF technology allows users to store data and update it right on the tag. Enu Waktola, smart label marketing manager for Texas Instruments, said, “RFID benefits include reducing inventory carrying costs, savings in lifts and travels per box, and decreased potential for damaged goods and product obsolescence.” She further pointed out that RF can improve first pass accuracy particularly in harsh environments.
Pilots Will Either Validate or Doom the RF Concept
Three major players in the transport packaging market have either started or will soon conduct trials with RF. IFCO Systems, a leading provider of returnable plastic packaging to the global produce industry, will conduct a pilot using RF tags imbedded in its plastic crates. According to Stephan Muller of IFCO, it is evaluating tags from all major suppliers.
IFCO will use a combination of different readers depending on the requirement in the supply chain. At picking stations, handheld readers will be used due to the volume. Readers will be mounted near conveyors at the washing machines in IFCO's depots. At the retail level, readers will be fixed in the dock doors.
“IFCO is aggregating RPCs at depots and is tracking pallet load movements due to limitations in the read range (mainly in Europe) and for easier process handling,” said Muller. “The target is that we don't want to disturb the normal production/warehouse process with additional process steps, which will lead to higher process costs.” IFCO's pilot program will involve one major retailer and two growers in Europe. It will track containers in from retailers and out to growers as well as by status either washed or unwashed.
Beyond the basic location information, IFCO may track environmental data during transit including temperature and humidity. “The real challenge in RFID is to filter and use the right info,” said Wolfgang Orgeldinger, CIO of IFCO Systems. IFCO plans to use the information to issue warnings and alerts.
IFCO wants to create a flexible system that will work with the various infrastructures of different companies. IFCO is still evaluating who will pay for the infrastructure. It may offer tracking as a service to customers. Tests will start at the end of 2001 or the beginning of 2002.
CHEP, the largest pallet pooler in the world, has plans to incorporate RFID in its wood pallets. Tom Clinton, a vice president with CHEP International, said that CHEP will embed RF chips in plastic lead deck boards used on the ends of wood pallets. Tags will be put on the boards on both ends of the pallet. CHEP expects to roll out the new pallet design later this year. CHEP will use the G-TAG frequency and plans to use RF mainly to improve asset tracking.
GP uses Intermec's tag technology in tracking its plastic containers for the produce industry. GP associates tags together and creates a virtual pallet identification. Unit load tracking speeds up the processing time through the system because you don't have to read every tag to know what is on a load. GP uses read/write tags in conjunction with read/writers located on stretch wrap machines. According to Hehir, the next step for GP is to pilot with a partner in the supply chain. GP learned through its testing that tags must be put on both sides of the container to improve read accuracy.
It's the ROI Stupid!
Back in 1992, James Carville, a Democratic strategist, made the saying, “It's the Economy Stupid!” famous on the campaign trail. Today, companies looking at RF are focusing on the return on investment (ROI).
“Current technology, while very good, has missed on both price and performance to capture the mainstream applications in total supply chain visibility,” said Coyle. Tags are just too expensive; most with any functionality are well over $1 apiece.
The low cost range for tags is currently 30-40 cents apiece. RF chips alone cost 10-12 cents to make today. Unfortunately, the only time that silicon chips get cheaper is when the volume goes up. Halliday of AIM said that many people confuse the expense issue. The focus is ROI not the cost of the tag.
What should be the period for ROI? Well, it depends. Some estimates range from 8-9 months to 3-5 years depending on all the factors. Stephan Muller, vice president of business development and technology for IFCO Systems, said that the ROI phase should not extend beyond 3-5 years.
When it comes to ROI, the catch is no one will talk about the real numbers. Everybody is waiting for case studies to prove the concept. Most companies don't want to be the guinea pig. The first movers in testing or using RF are not revealing their secrets.
Clarke believes pallet load tracking is viable at 30-50 cents per tag, and he sees the cost of technology dropping in half every three years. For example, tags that cost $1 today may cost as little as 30 cents in 18 months.
Standards – Why Can't We All Just Get Along?
One of the greatest problems standing in the way of global adoption of RF for unit load tracking is the lack of a truly global standard. Frequencies work on one continent but not the next because different bandwidths are designated for different purposes by different governments.
The G-TAG™ is a joint initiative started by the EAN and the UCC, the two organizations responsible for the Universal Product Code. GTAG started in 2000 and has become one of the leading global RFID initiatives. It focuses on supply chain logistics identification and tracking. Unfortunately, GTAG's frequency is taken up by the analog cell phone industry in Europe. Thus compatibility has become difficult. The GTAG is based on the 915 Mhz frequency, which offers a fairly long read range suitable for dock door tracking. Europe uses a 13.56 Mhz for tracking reusable packaging. Its major drawback is a short read range, which eliminates the ability for dock door tracking. With 13.56 Mhz. readers must be placed on conveyors near the packages.
Besides GTAG, the International Standards Organization (ISO) is working on RF standards. Halliday of AIM, expects to see ISO standards developed by the end of 2002. The UCC/G- tag standard is proceeding on a much faster time frame.
Will the world ever reach a truly global standard with long read range? Orgeldinger of IFCO said, “We want a global solution, but realistically, it looks like there will be different frequencies used in Europe and the United States.” IFCO prefers the 13.56 Mhz frequency for Europe and the G- TAG/UHF frequency in North America.
Rules To Remember
Should tags be put on containers from the start or added later once a company knows exactly what it wants to use RF to accomplish? GP decided to put tracking capabilities on its container from the beginning rather than having to go back and retrofit them. For GP, this makes sense because it will likely end up using the technology at the very least to manage its pool.
But companies have to be sure that they will utilize the data. “Many modern warehouses still use paper systems even though they have barcodes systems,” said Dr. Clarke. Before spending the bucks, make sure the lower level managers will support the technology and make it work. Usually, RFID has to be implemented slowly in concert with the business re-engineering process. “You can't lay new technology over the same old process,” said Coyle.
