Brave New RFID World
Only 3 percent of respondents to FE's annual packaging trends survey believed RFID would have a significant impact. In the next few months, the Department of Defense's Defense Logistics Agency (DLA) and Wal-Mart threw their weight behind RFID. Both have mandated that major suppliers begin using RFID tags on shipments to their distribution centers by January 2005. Almost overnight, RFID was transformed from a back-burner issue to the auto ID market's equivalent to Y2K.
RFID tags have been around for decades, and applications such as Exxon/Mobil's Speedpass and automatic toll collection systems have given them public visibility. Whether they are used to electronically pay a toll from a moving vehicle or to purchase a hamburger at McDonald's, the technology is the same: a transponder tag with a miniscule antenna is activated by a reader and relays a unique identification number via a predetermined radio frequency to initiate transaction authorization. Human intervention is eliminated; all aspects are automatic and, theoretically, foolproof.
Moving the technology into an industrial environment requires hardware that is at least as reliable and tags that are much more inexpensive. International Paper replaced bar codes with RFID tags in August at its Texarkana, Texas, warehouse to track rolls of paper as they move through distribution. But that is a closed system, and the business-to-business application being mandated by Wal-Mart and DLA is a considerably more complex Brave New World.
Instead of replacing bar codes and shipping numbers in the supply chain, RFID will coexist with them for the foreseeable future. Cases, pallets and, ultimately, individual items will have scannable, human readable and electronic codes. The immediate payoff is at customers' receiving docks. Rather than find and scan codes on individual cases, a process that averages 4 to 5 seconds, retailers will place those cases on a high-speed conveyor that will pass through a portal where the electronic code is read. The labor savings alone will amount to multi-million dollar cost reductions for major retailers.
About 30 food and beverage companies are among the 100 largest Wal-Mart suppliers who must begin affixing RFID tags to all pallets and cases bound for the merchandiser's pilot site, a Texas distribution center. If the company sticks to its project timeline, all suppliers will have to be RFID-compliant by 2006. A handful of food companies are expected to participate in a test with Wal-Mart as early as this spring.
The tags will broadcast 64 bytes of data at a frequency of 915 megaHertz (MH) on the UHF band. The Electronic Product Code (EPC) Council's Class 0, Class 1, version 1 and Class 1, version 2 protocols will be followed. Actual execution remains a murky area, however. Class 1, version 2 protocol supports 96-byte electronic numbers, and there is some question if readers will be able to handle all the protocols.
Tag placement, signal interference and other issues are among the unknowns that won't be resolved until orders begin arriving in Texas. Further complicating matters are the protocols, frequencies and standards that DLA will require. Though the smart money predicted the agency would adopt the EPC standard, the possibility that another protocol would be embraced underscores the difficulty of reaching a globally accepted open standard.
Before cases and pallets reach their customers, however, food and beverage engineers must ensure they can attach RFID tags at conveyor speeds that can exceed 1,400 feet per minute. According to ARC Advisory Group's John Blanchard, one major food company experienced a line efficiency drop to 91 percent from 97 percent during a dry run-a reduction that could spell serious problems when they go live.
Into the breachMajor beverage processors have been kicking the RFID tires for several years, and a handful are conducting tests. They are looking beyond the Wal-Mart mandate to determine how much and where they need to invest in order to get a payback. A somewhat larger group is tracking developments and waiting for the early-adopter dust to settle.
Another segment is suffering from deer-in-headlights syndrome. Stunned by the fast track that RFID has taken, they are ignoring the issue in hopes it goes away. That's an unlikely scenario, participants at Wal-Mart information meetings agree. RFID is building momentum, and costs will rise for late adopters, they predict.
A fundamental system must include a tag applicator, an interface with existing labeling systems, a verification point, readers at identification points and the tags themselves. For a distribution center, a $400,000 investment is likely, a study by AT Kearney concluded, and a manufacturer would face a similar cost-plus the cost of the tags. Assuming 50 million case shipments at 15 cents per tag, that would mean $7.5 million. Integrating the data with ERP and other reporting systems could add another $40 million, Kearney concluded.
AMR Research's forecast is even glummer. Barebones deployment to meet Wal-Mart's requirements will cost from $13 million to $23 million a year, assuming the same shipment level, AMR predicts.
Tag costs are a wild card in those estimates, points out Tom Coyle, vice president-supply chain solutions at Matrics Inc., a Columbia, Md., tag manufacturer and systems integrator. Volume dictates cost, and one billion passive tags would have to be ordered before Matrics could deliver a 15-cent tag. The biggest order the company has fielded to date is from McCarran International Airport in Las Vegas, which will buy 100 million tags over five years for baggage handling.
Given the velocity of change in RFID, pricing is apt to change dramatically as retailers and manufacturers ramp up. Matrics' new tag assembly system will alter the firm's pricing significantly. Called Parallel Integrated Chip Assembly (PICA), the process will be able to produce up to 12 million tags per hour, compared to the current standard of 8,000 per hour. "The assembly process is the expensive part of tag production, and that is what PICA attacks," says Coyle.
Printed electronic applications using conductive inks will add additional economies. Instead of stamping out a copper or aluminum antenna, ink with conductive silver or carbon can be used, with application at the same printer that is generating a bar code, claims Dan Lawrence, director of technology and commercialization at Precisia LLC, an Ann Arbor, Mich., start-up owned by Flint Ink. The read range of printed antenna doesn't quite match stamped antennae, but distances up to four meters have been achieved, "and that's a good starting point," says Lawrence. "We see savings of 20 to 50 percent with printed antennae." Precisia serves converters who produce RFID tags.
Printed RFID tags "are several years out, and developments over the next few years will tell us when or if that will ever happen," he adds. Whether printed tags could ever carry the 64 bytes of information remains to be seen. Silicon is the only existing technology that delivers the high-speed switching required, Lawrence points out.
Some of the tags, printers and readers being bundled for the market work great together but are incompatible with other suppliers' components. That could pose a problem for manufacturers who want flexibility as new solutions become available and additional customers make their tag standards known. "Some people are blindly focusing on EPC technology," says Jan Svoboda, product manager at printer manufacturer SATO America Inc. "EPC might become the prevailing technology, or it might not. It's not yet clear what standard manufacturers' customers will adopt." SATO is offering a "tag agnostics solution," a printer that reads and writes multiple types of tags.
Compatibility issues extend to readers. The auto ID community has coined the term "agile readers" to describe multi-protocol, multi-frequency readers that can cope with the variety of tags that are likely. Tag variability will affect food processors both in tracking pallets and cases and when shipments of raw materials from their suppliers start turning up at the receiving dock with RFID tags.
Tyco is one of a handful of agile reader suppliers. It licensed the technology from ThingMagic LLC, a design and engineering firm composed of MIT researchers who were involved in the Auto ID Center's standards-setting efforts (the center shifted those duties to the UCC Council's EPC Center in October). ThingMagic now is squeezing costs out of those readers and waiting for the market to dictate standard features, according to ThingMagic's Larry Moore.
For example, Wal-Mart has specified that readers have an Ethernet port and one antenna. Some manufacturers only provide a serial port, and some have multiple antennae. If Wal-Mart's requirements become de facto standards, all readers will be redesigned to reflect them. Similarly, some reader architecture incorporates a savant, a device that filters the repeated signals transmitted by the tag so that only one read is written to the database. That drives up reader cost but drives down system costs, explains Moore. If the market accepts that principle, savant-equipped readers will become the norm.
"Once the issue of feature-sets is resolved, pricing will follow a downward curve, as happened with wireless LAN," he predicts. It's the evolutionary path of all technology: standardization, feature-set selection, commoditization.
Plant-floor executionThe immediate concern for food and beverage processors is implementing a tagging system that works in an industrial environment at high speeds. Tag orientation and how it is attached to cases and pallets must be resolved, along with integration with material handling equipment and high-speed printers and coders.
"We're following the standards set by the Auto ID Center and focusing on our little corner of the woods," says David Benjamin, business development manager at Markem Corp. The Keene, N.H., coding equipment manufacturer has tested a system that blows a tag onto a passing carton at a manufacturing facility and is gearing up for "a real down and dirty trial," he says.
Blowing on a tag takes 0.3 seconds-fast enough for cases but much too slow for individual items like candy bars, where item coding is done at a clip of 900 units per minute. After it is affixed, the tag is coded and read, cuing a printer that applies matching readable or scannable data. The tag then is verified.
A serious limitation with low-cost passive tags is signal interference from liquids and metals. Reading tags on cases along the perimeter of a beverage pallet isn't a problem, but those in the interior might experience too much interference to respond to the reader. The same concern applies to food in metal cans or possibly even metalized film. "My concern would be yield: what's the reject rate going to be, and what are the unknowns of dealing with interference from metal and liquids?" Benjamin says.
"This isn't just about slapping a tag on the box," he adds. "This requires integration." Designing a software system that can retain tag data until it is relayed to the ERP or a middleware system has been part of Markem's focus. Integration with those systems is where costs begin to mount, but it is also where manufacturers begin to see a payback on their RFID investment with improved tracking and traceability.
RedPrairie, a major supplier of warehouse management systems for packaged goods companies, has developed RFID Accelerator, an interim solution to the integration challenge. This middleware package is a "bolt on solution" that will satisfy the Wal-Mart mandate and buy processors time to formulate a strategy while issues of standards and protocols are being resolved. "Standardization is moving quickly, but it has to move faster," insists RedPrairie's Mike Dempsey.
Universal standards and open architectures that are easily integrated are the packaging department's Promised Land. Reaching it won't be easy: European manufacturers such as Benetton already have adopted ISO standards for RFID. But the more compatibility that can be engineered into readers and tags now, the greater the long-term savings for users. It would also give processors a potent weapon for dealing with the traceability requirements in the Bioterrorism Act. As a carrot for cooperation, Wal-Mart is offering suppliers visibility to their inventory in stores and DCs.
If RFID lives up to its promise of automated product tracking, compulsory adoption of the technology might look like a blessing in disguise in a few years.
For more information:
David Benjamin, Markem, 603-357-4255,
Tom Coyle, Matrics Inc., 410-872-0300,
Bill Delmolino, NJM/CLI, 800-432-2990
Dan Lawrence, Precisia LLC, 734-205-6625
Mike Dempsey, RedPrairie Corp., 773-529-1936
Jan Svoboda, SATO America, 704-644-1650
Larry Moore, ThingMagic LLC, 617-758-4170,