RFID: Worthy of Another Look

Evidence of Maturation Last week, Business Wire carried a story that announced the intention of RFID technology vendors (tag manufacturers, reader manufacturers, ink and industrial printer manufacturers, security and fire protections systems suppliers) to form a RFID industry consortium to manage the licensing of essential RFID-related Internet provider for participating companies. The announcement stated the purpose of the alliance was simply to facilitate the rapid advancement of RFID use.

In a similar article, RFID Update (Aug. 10), an online newsletter, stated, "Nearly 20 companies, including some of the biggest names in RFID hardware, have decided to follow an IP licensing model that has enjoyed great success in the DVD and MPEG-2 arenas. Each participating company will confer to a third party administrator – the consortium – the management of its IP licensing, thereby saving the considerable time and resources the company would otherwise have had to invest developing licensing agreements with individual licensees." This offers efficient patent management (which has consumed resources and time) and greases the skids for commerce.

The consortium was on record as being committed to EPCglobal and ISO specification, two standards-setting bodies, which would facilitate adoption, serve to support interoperability, and, therefore, scalability.

What does this mean for the foodservice distributor community and, of course, any entity that wishes to employ RFID technology? Potential adopters have a serious commitment from a sizable slice of those who manufacture RFID chips, tags, labels and readers to work together creating a viable commercial environment with prices reflecting the cost savings secured by this communal arrangement.

Cost Considerations According to several sources that we contacted, the cost of RFID tags as predicted is becoming more accessible. Not yet a nickel a tag, but prices are far lower than they were just a year ago.

In a feature story that ran July of this year, Dann Anthony Maurano of inboundlogistics.com stated the true costs of RFID implementation were not as high as touted by the naysayers in the media.

Maurano's data came from a panel of RFID implementers who, combined, have conducted more than 100 implementations, 40 of which were executed to address Wal-Mart's mandate.

The total cost of implementation, as presented by Maurano, came from:

  • Hardware (tags, readers and transponders) 44%

  • Integration 22%

  • Changes to existing supply chain applications 22%

  • Storage and analytics of large volumes of data 13%

    The most basic RFID tag, (a passive tag), which can be applied to a case or a pallet, costs 20-30 cents per tag. Active tags run more about $5-25 per tag. Antennas were priced at about $500 apiece. High-end readers were noted to be roughly $1,000 and were reported to be expected to drop in price to about $300 during the next two years. Tag printers were noted to be several-thousand dollars.

    Maurano reported – the size of the price depends on the level of implementation. Companies that were interested in adopting RFID were encouraged to start simply, limiting the amount of data captured to address a specific business event or question.

    Echoing this thought, in an interview with Duncan McCollum of Computer Sciences Corp., CSC, conducted by ID Access, McCollum stated companies that were getting the ROI were doing so because they had taken a very pragmatic, focused business approach to implementation. McCollum, having served as the lead consultant for a number of RFID implementations, emphasized the importance of selecting an initial pilot whose scope had the potential to significantly benefit the company, like keeping perishables fresh.

    RFID Pilots and in Use In an article by Jonathan Collins that appeared in the June 13 edition of RFID Journal, Sysco was featured as doing just that.

    Collins reported that Sysco believed RFID tags could provide a better way to document the condition of the food as it moved through the supply chain ensuring freshness and pinpointing, if necessary, when and why a product or products were spoiled. RFID was believed to assist in identifying which member of the supply chain was culpable if spoilage occurred, thus attributing cost to the responsible party. Further, RFID was being assessed as a means of ensuring product security.

    Two pilots were conducted through a third party logistics (3PL) provider, one that focused on frozen product and the other on fresh produce. The article reported that the trials focused on ensuring that the quality of food was being maintained as it was transported, helping track if and when theft occurred by recording when the doors of its trucks were being opened and to test the technology's use in product documentation.

    Collins noted RFID tags were attached to the wall of each trailer, one at the forward end and the other halfway along the trailer's length and another mounted inside close to the trailers doors. Two of the tags monitored ambient temperatures within a shipment and one monitored temperature variation and recorded only changes when they occurred. The trials proved successful: thermal data was captured and delivered along with other items on the manifest. Driver's behavior positively reflected their knowledge that load temperatures were being tracked.

    The Wall Street Journal printed, on July 7, an article by Gabriel Kahn highlighting the use of RFID technology in Mantua, Italy, to identify the attributes of Parmesan cheese with an eye to blocking wheels of counterfeit Parmigiano Reggiano from Eastern Europe. The cheese makers wanted to be able to track each wheel in all stages of the supply chain. Data required included capturing where the cheese was made, on what day, and what the milk-producing cows had been eating to ensure that high-quality wheels were not accidentally be mixed up with lesser quality product.

    With an initial investment of $179,000, plus the cost of each chip, the cheese makers launched a yearlong pilot that proved to be very successful. RFID guaranteed the buyer was getting the real deal and reduced many manual warehouse-related processes performed by the cheese makers. The article noted that it is anticipated that RFID will eventually reduce the cheese makers' consortium operating costs by up to 50% and their intent to extend the pilot to full scale.

    RFID Journal, on Aug. 3, spoke to a research project that was being conducted in the Netherlands. Basically, the objective of this pilot was to use RFID technology to improve the supply chain for perishables. Objectives of the trial included reducing cost by reducing spoilage, improved food safety because fewer products would go bad, better customer service due to better product management and higher product quality.

    In this trial, an RFID tag would be attached to crates and distributed from the food processors facilities in order to track the length of time fresh vegetables took to move from one point to another.

    The writer noted that RFID, potentially lower in manual tasks and notably high in data capture and communication, had the promise to assist in balancing the safety stock, out-of-stock and spoilage equation. The article said the concept of "first in, first out" (FIFO) would be replaced by "first near expiration, first out" (FEFO).

    Another RFID Implementation of Note An article published by Business Wire on Oct. 14, 2004, highlighted the formation of a research and development consortium of 3PL operators and RFID technology vendors to focus on RFID solutions for temperature controlled warehouse environments. The consortium's Phase I goal was to be in full compliance with the Wal-Mart initiative by the end of this summer.

    Further, an industry source noted that there was a business opportunity for 3PL providers to help manufacturers comply with RFID mandates by providing a new service, RFID case/pallet compliance.

    RFID…Should you take another look? Given the number of articles recently published, the above just provides a peek of RFID activity and its potential. Reducing theft, knowing when temperature mishandling has occurred and by whom, controlling spoilage, delivering quality product, being able to recall specific tainted product if the crisis should occur are all driving variables in building a business case for RFID implementation for the foodservice supply chain.

    With the cost of RFID implementation becoming more accessible, perhaps RFID technology is worth some thought especially for tagging high-end, perishable items. It's a thought.


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