RFID mania has been a non-event for most food & beverage companies so far. For others, the hard work of implementing the technology and making it an investment rather than a cost is well underway.

The top of Wells Dairy's ice cream pails proved to be the most readable area for RFID tags. High water content in ice cream is a challenge. Source: Rockwell Automation.

Elders in the RFID temple stand ready to stone anyone who questions the potential of radio frequency identification to squeeze out costs and increase the operational efficiencies of retailers, wholesalers and manufacturers of food and beverage products.

To even suggest RFID is new ground for food manufacturers is to invite a sharp rebuke, though widespread deployment of standardized, one-time-use tags clearly is new ground. What is indisputable, however, is that RFID still is unrealized promise, and return on investment will remain theoretical in the short term.

Until Wal-Mart announced in 2003 that it would require its largest suppliers to tag cases and pallets with RFID tags, supply-chain applications of RFID were largely seminar fodder for academic eggheads and technology wonks. Sure, there were successful examples of closed-loop tracking systems in the automotive world, high-value asset protection and other applications. But universally readable RFID tags that could track goods through the supply chain was new ground, and the potential set off a vendor and consultant feeding frenzy not seen since the Y2K computer scare.

Instead, RFID entered 2006 with a sound closer to a whimper than a roar. Cognizant of the challenges its suppliers face, Wal-Mart scaled back 2005's compliance mandate to products bound for three distribution centers (DC) in Texas, with most manufacturers applying RFID to only a handful of SKUs. The Department of Defense made pallet and case tagging a requirement for all RFPs as of November, though the military isn't holding suppliers' feet to the fire for now. And Albertsons, which had ambitious plans two years ago, placed RFID development on hold when the supermarket operator went on the sales block recently.

In consultant-speak, RFID has entered "the trough of disillusionment," believes Don Flynn, vice president-business development for Hand Held Products Inc., a Skaneateles Falls, NY, maker of bar-code readers and an active participant in the RFID arena. "There is potential that RFID will slowly climb to widescale adoption, but the amount of hype is actually hindering development of the technology." In the unlikely event Wal-Mart was to pull the plug on its RFID program, Flynn suggests, "it will retard deployment for five years, despite RFID's value."

Locating specific cases in a large warehouse can be a labor-intensive nightmare with bar codes. RFID tags can automate the task. Source: Zebra Technologies Inc.

Business cases have been made for in-house RFID tracking systems, such as the sanitation and weight-verification read-write tags. Yet, Escort Memory Systems, a Scotts Valley, CA, RFID supplier, implemented one at Nestle's Franklin Park, IL, snack bar plant a few years ago. "If there's a demonstrated ROI, the kicking and screaming (over implementation cost) stops," adds Bradley Todd, marketing manager for Escort Memory Systems. When it comes to retailer-mandated shipping and receiving programs, however, good customer relations and other soft savings are the only payback at this point. For the most part, manufacturers are settling for slap-and-ship programs involving a handful of SKUs to meet retail mandates. "RFID is intriguing because it's a cost-effective way to meet the product-traceability mandate," Todd notes, though the technology is too costly and immature to deliver on that promise now.

One failure in 10,000 is threshold reliability for any automation system, Todd suggests, and the current state of RFID falls well short of that. Wal-Mart's expectation is that individually tagged cases of product will have a 100 percent read rate while traveling on a 600-ft./min. conveyor in the receiving area. Currently, the retailer is reading 95 percent of them, according to Ray Hagedorn, a Cincinnati area consultant and former CIO at Sara Lee's Hillshire Farms division. When pallets pass the receiving portal, two-thirds of the case tags can be read-up sharply from the one-in-four rate when Hagedorn left Hillshire 13 months ago, but light years from Six Sigma reliability. The term "trusted receipts" was coined to reconcile the cases shipped with what the retailer read, he says

While the retail giant expects to realize $8.3 billion in pre-tax savings if RFID is used for all goods entering its warehouses, it insists there is a pot of gold at the end of suppliers' rainbows, too. To bolster the claim, it commissioned a study at-where else?-the University of Arkansas's Sam M. Walton College of Business on RFID's ability to reduce out of stocks. The 29-week study concluded stock outs were slashed 16 percent and shelves were replenished three times faster at a dozen stores using RFID compared to 12 stores relying on bar codes. The implication is that full shelves mean more sales of a manufacturer's product.

The promise of real-time, or even near-time, sales data is tantalizing. However, much work will have to be done first, and the onus is on Wal-Mart to hold up that end of the deal. For now, data reliability is sketchy at best: early feedback has suggested highly perishable food products were on layaway, suppliers report.

Seafood cases bound for Wal-Mart are tagged and verified with RFID readers at Beaver Street Fisheries. Source: Zebra Technologies Inc.

A competitive edge

Despite the glitches, many food companies are proceeding with RFID implementations, convinced the technology will pay off long term. Today's investments could provide a competitive edge down the road; in the near term, RFID projects help foster an image as a progressive supplier. Food companies too small to be affected by the Wal-Mart mandate report their RFID profiles have caused retailers like Target and Publix Super Markets to solicit their participation in RFID pilots.

Retailers who never ordered from Beaver Street Fisheries have come knocking on the seafood processor's Jacksonville, FL, door since the company's voluntary participation in the Wal-Mart program became known, according to Howard Stockdale, the firm's CIO. "We want to be a leader," he says, and if leadership rekindles a supply relationship with the Department of Defense, so much the better.

Early adopters also help shape a technology's standards and procedures, a motivation for California's fruit and vegetable growers in forming an RFID Task Force two years ago. "As the operating parameters develop, we don't want produce to be forgotten," says Tom Casas, vice president of information technology at Salinas, CA-based Tanimura & Antle Inc. and chairman of the task force. "Ordering an apple is very different than ordering a roll of toilet paper," yet those distinctions were overlooked when industry created a framework for electronic data interchange (EDI) and other paperless transaction systems. "There isn't enough critical mass (in RFID tagging) to change our processes now," Casas allows, but his firm and other produce suppliers volunteered for the Wal-Mart program to ensure a seat at the table while procedures are being set.

Technology companies also are feeling their way through the RFID labyrinth. Partnerships with processors help them sharpen their RFID chops, and the collaborations can be enormously beneficial to a manufacturer. "Anybody can be a slap-and-ship supplier to Wal-Mart," scoffs Karl Paepke, vice president-operations at Link Snacks Inc., a Minong, WI, maker of beef jerky. "We needed to take this technology and drive internal benefits." That requires middleware to filter the hundreds of reads that can be made from a single tag and relay the data to the ERP business system. Integration costs make tag and reader capitalization look like chump change; Microsoft engineers did Link Snacks' system for a nominal fee. "They specifically wrote the middleware program for our operation," Paepke told attendees at last year's Food Engineering Food Automation & Manufacturing Conference.

Though it has been a supplier of closed-loop RFID systems for years, Rockwell Automation's first foray into a Wal-Mart style application was with Wells Dairy, the nation's largest private-label ice cream manufacturer. Rockwell's involvement rendered the middleware issue moot: the controls giant modified the programming of Wells' PLCs to perform the filtering function. "There is no standardization yet for data transfer between RFID readers and the PLC," points out Andreas Somogyi, Rockwell's global program manager-wireless. The work with Wells could short circuit costly integration for its other food industry clients.

Engineers at Wells Dairy are seeing soft paybacks from the RFID project begun in 2004 while they lay the groundwork for a more comprehensive program. Source: Rockwell Automation.

The Wells project was distinctive from another standpoint. Instead of relying on the IT department, management turned the project over to plant engineers. PLCs already were collecting bar-code data; adding RFID readers to them was a minor change. "There is some additional programming necessary," Somogyi allows, "but it's a small change. You don't need $50,000 worth of software and a PC."

Brad Galles, process controls manager at the LaMars, IA, facility, spearheads the project. He assembled a five-member team in May 2004 to begin evaluating different readers, tags and other system components. Since the initial line trials late that year, the team has outfitted 14 lines with RFID print-and-apply systems. Set-up time, including PLC reprogramming and mapping data to an Oracle database, is down to three days per line.

Ice cream contains matter in three phases: gas (half the mass is air), solids (10 percent milk solids) and liquids (the balance of the milk). Although the water is frozen, it still behaves like a liquid in terms of the ultra high frequency (UHF) radio signals by which data is transmitted. While closed- loop RFID systems use low and high frequency signals, supply-chain systems such as Wal-Mart's use UHF because signals can be detected by readers up to 15 feet away. The drawback is that UHF is subject to signal interference from liquids and metal. As Wells' experience demonstrates, product interference is an issue for more manufacturers than beverage companies and canners. By placing tags over an air gap in containers, Wells engineers were able to overcome the interference issue, Galles says. Finding an adhesive that could withstand the moisture and -40°F temperature in the hardening room was another challenge that had to be worked out. The experience convinced him that lab tests are useless: manufacturers need to implement RFID in their own plant environment. Read rates have steadily improved at Wells, from a 24 percent non-reads at the outset to less than 0.5 percent.

"We see a lot of upside to RFID," says Galles, though soft savings such as faster lift-truck routines and better shrink tracking characterize the benefits now. "Unfortunately, you need to do it everywhere to derive the full benefit," he says, and until Wells can justify tagging all its products, those benefits will be deferred. In the meantime, engineers continue to refine an infrastructure attuned to the production environment, increasing the likelihood of long-term paybacks.

Having learned to crawl, Beaver Street Fisheries is entering its RFID walking phase, deploying an in-line print-and-apply tag machine from Zebra Technologies to replace a more manual procedure. "Slap and ship was a first step," says Stockdale. "We were handling the product twice, which was inefficient, but it got the program started." It would be premature to reengineer processes around RFID-only three products representing fewer than 15,000 of the 275,000 cases shipped to Wal-Mart are being tagged at this point-but Stockdale rhapsodizes about the day when bills of laden and advance shipping notices will be generated automatically and physical inventories will be obsolete. "You'll push a button, and hundreds of thousands of cases will be inventoried," he says.

For now, management is content to learn the details of deployment, such as the need to leave air space between a metal forklift and a case tag to get a read when moving through an RFID portal. Many mysteries remain, such as why a box of snapper is easier to read than a box of grouper. "We still haven't figured that one out," says Stockdale.

An RFID tag is applied to a pallet of Wells Dairy ice cream bound for Wal-Mart. Tag read rates are up dramatically since the company began its program. Source: Rockwell Automation.

When in doubt, punt

Inter-company application of RFID is making impressive strides. "It's come through a lot faster than any other technology in our lifetime," suggests Shawn Hufendick, RFID application engineering manager at Cleveland's Kennedy Group. "In the past two years, it's progressed faster than computer technology." Last year's introduction of Gen 2 tags with up to 256 bits of memory almost tripled the amount of data that can be carried, raising the bar on functionality. With Texas Instruments and other technology heavyweights ready to jump into tag manufacturing, the downward spiral in prices should accelerate.

The absence of mass produced microchips for readers of those tags is a measure of the technology's immaturity. Philips and other semiconductor manufacturers are sitting on the sidelines until market volumes justify their participation, points out Encore's Todd. In the meantime, integrators will cobble together readers to work with Gen 2 tags, but whether or not those readers will quickly become obsolete is an open question. "Six months after we bought some readers last year, they were obsolete," notes Hufendick.

For manufacturers with diverse product lines and high levels of automation, the barriers to RFID implementation are great. As a result, the largest food and beverage firms are keeping their compliance programs as simple as possible for now. Some are turning the challenge over to third party logistics providers (3PL). Working with the Montreal-based integration firm Ship2Save, Atlas Cold Storage began a pilot slap-and-ship program at its Sikeston, MO, DC last fall. Its client, a major ice cream manufacturer, sends 50 pallets an hour over a connecting walkway to the Atlas facility. Although the firm produces more than 300 SKUs, only a handful of them are being tagged for now, and then only when headed out of the DC. "They could do the tagging at the production facility; we're just doing it as a service to our customer," says Darryl Peacock, Atlas' senior manager-IT. The stripped-down system won't be any help when Atlas has to pull pallets of recalled product; workers will have to search among hundreds of thousands of cases with bar-code readers to find those items. For now, both parties are learning to crawl. "The system can and will grow to a much more complex level," Peacock vows.

Outsourcing to a 3PL is a sensible option for Atlas' client, who has a mature bar-code system that delivers most of the functionality of RFID, except for the ability to collect data from objects outside the line of sight. "RFID isn't going to replace bar code where bar code works," notes Matt Ream, senior manager of RFID at Vernon Hills, IL-based Zebra Technologies. But at some point, the ice cream maker will have to apply the technology in house, and the further upstream it can push it, the more benefits the organization will gain.

At this stage of the game, companies with paper-based tracking systems enjoy an advantage, suggests Nick Infelise, RFID specialist at Omron Electronics LLC, Schaumburg, IL. "The low hanging fruit for a quick ROI is where codes are being re-keyed or where the wrong product is being shipped because codes are unreadable," he says. "That's where supply-chain losses start to build up." It's similar to the cell phone scenario: less advanced countries without land lines were able to leapfrog to superior technology that put them on equal footing with industrialized countries.

At a minimum, food and beverage manufacturers need to begin learning about the technology and how it can be incorporated into their operations. The Wal-Mart mandate affects a small fraction of the retailer's 18,000 suppliers. It also impacts only a small part of a manufacturer's operations and can't move any farther upstream than a finished-goods case packer. The tracking of work in process and the receiving of raw materials is where the greatest manufacturer ROI will come, and early adopters are beginning to explore those opportunities. Beaver Street sources seafood from 50 countries; lobster tails from the Bahamas soon will be tagged in a pilot program of supply-side RFID.

Building an infrastructure to support the technology from the farm to the fork will take years. Taking a big bite on the necessary investment would be disastrous at this point. On the other hand, manufacturers would do well to start nibbling.

For more information:
Bradley Todd, Escort Memory Systems, 831-438-7000, btodd@ems-rfid.com

Don Flynn, Hand Held Products Inc., 800-782-4263

Shawn Hufendick, The Kennedy Group, 440-951-7660

Mike Putnam, Markem Corp., 800-356-2375

Nick Infelise, Omron Electronics LLC, 847-843-7900

Ray Hagedorn, Premier Executive Consulting Group, 513-260-4036, ray.hagedorn@premierecg.com

Andreas Somogyi, Rockwell Automation, 440-646-3105

Philip Calderbank, Seeburger US, 770-604-3888, p.calderbank@seeburger.com

Konrad Konarski, Ship2Save, 866-222-0001, kkonarski@ship2save.com

Matt Ream, Zebra Technologies Inc., 847-634-6700, mream@zebra.com