Time to jump on the tag wagon

LinkedIn +

Is 2009 going to be the year for RFID? LUCY TESSERAS talks to industry leaders about the current state of play

All within the RFID industry are waiting with bated breath as German retailer Metro Group, a pioneer of tagging in the grocery sector at case level, is about to publish its results.

The retailer has been at the forefront of the RFID revolution within the logistics field, and David Lyon, EPCglobal business manager at standards organisation GS1 UK, says a number of big grocery companies are now holding back to see how successful the technology has been for them before deploying it themselves. If it is helping them to return important sales and lower costs, he says shareholders of other companies are likely to start asking serious questions as to why their company is not yet using it. When this happens Lyon suggests we may well see a “huge swell” in the interest and adoption of RFID. “It’s a brave person,” he says, “that hears of somebody else’s success and doesn’t try to replicate what they have done within their own business. Costs have dropped significantly, performance has gone up and technological barriers have been removed. Companies will get left behind if they don’t start thinking about implementing RFID.”

Despite being an industry worth around £3 billion last year, the widespread adoption of Radio Frequency Identification, that many expected we would now be seeing, has not yet happened.

It’s an industry that dates back some 30 years, which people had extremely high hopes for when it first emerged, but Ronald Teijken of software provider Sterling Commerce, says: “It was slow to take off owing to limitations such as price, regulations and international standardisation.”

When the technology was first emerging companies made the mistake of jumping on the RFID bandwagon and thinking short-term rather than long-term and as a result, “many were disappointed with the lack of ROI as they couldn’t see the bigger picture”. However, in the last six months to a year, he says, its true potential has been revealed.

It is now picking up in just about every sector and, as such, the value of the industry has tripled in the past two years, and, according to RFID research and analysis specialist IDTechEx, it is set to quintuple over the next ten.

Jorma Lalla, chief executive of handheld terminal manufacturer Nordic ID, compares the current state of RFID to the mobile phone industry of 20 years ago. He says when mobiles were first introduced, and weighed more than five kilos, very few people believed they would ever be as compact or as widely used as they are today. He says it’s the same with RFID and that once all the teething problems have been ironed out it will be much more likely to take off. Improved visibility is one of the key advantages of RFID, something which has not gone unnoticed by manufacturers, many of which have now experienced it working with customers and are telling others to pilot it, in what Lyon calls a “network effect”.

To promote its growth, GS1 unveiled the first version of a European guide to help companies plan and prepare EPC/RFID deployments earlier this year. It has been developed in conjunction with retailers and consumer goods manufacturers across Europe, such as Metro, Nestlé, and Carrefour, and aims to keep management better informed of the key issues surrounding the technology.

The organisation says that although GS1 EPCglobal standards are currently in place, there is still the need for guidelines and references of good practices to help facilitate any future electronic product code (EPC) implementations in Europe. Retailers and suppliers are also encouraged to contribute to the guide to keep it up-to-date and improve its value over time.

If deployed correctly the advantages of RFID are potentially enormous, says Alex Mills, sales and marketing director at Chess Logistics Technology. “RFID offers significant benefits for information management, including increased accuracy, reduced human intervention and interaction, improved automation, integration with other applications and the ability to transport (and modify) information associated with the item as it passes through the supply chain.”

Ray Cronin of Intermec adds: “It seems safe to say manual processes are on the order of 90 to 95 per cent accurate in logistics operations and that it is likely the use of RFID and associated software and mobile wireless connectivity technology will get it to 99 per cent accuracy – an order of magnitude increase in accuracy. That translates into significant economic benefits for logistics operations and I believe this is the fundamental driver for the intense interest from many logistics operations.”

However, it’s not a case of one size fits all, says Clive Fearn of Zebra Technologies. “RFID is not a magic wand that you can wave to cure all supply chain ills. In order for any operation to run smoothly it needs to have good management and well trained people in place, alongside simple, effective processes, to get good results”

Companies shouldn’t be naïve in thinking that RFID is the best solution for them without properly researching the benefits it has to offer their specific operation and looking at all other possible avenues as in many cases it may not be the right route to take.


According to Cronin: “The return must be clear and have a high probability of accruing as planned. The key then is to apply the technology to processes that will deliver a clear, high probability return.” However, he adds: “I think it is also prudent to note that making the return clear and likely may often require process changes or even implementation in greenfield situations. Fundamentally, RFID is an enabler – not a solution in and of itself.”

Lyon says Tesco looked at implementing RFID within its grocery supply chain, but after doing in-depth research saw that its current supply chain was adequately efficient, so couldn’t see a real business case for it. However, he says the company has taken that learning and is now looking at applying it to apparel.

To help companies decipher whether RFID is the right choice for them GS1 UK set up the independently-run EPCglobal RFID Test Centre, to provide members with an honest, unbiased assessment of RFID EPCglobal standards and help companies understand how RFID could benefit their operation. The centre is hosted by Intellident and has been up and running in Winsford, Cheshire since November 2007. Since then 100 GS1 UK members have visited the centre and of those five have requested project services.

By simulating specific processes it is easier for companies to see exactly how moving to RFID could help them, says Lyon. “It’s low cost, low risk and you get It also eliminates the need for companies to set up their own trials, which can be costly, and ensures results are scientifically proven, letting the company focus on their business without having to worry about the technology.

Lyon adds: “I’ve not come across any company that is opposed to RFID, but whether there is a business case for it at some companies is another story. If it’s not cost justified it might not be the right course of action to take.”

Toshiba advises companies considering RFID to work within a clearly defined budget and without too much disruption to current business practices, adding that an RFID system returning 90 per cent accuracy might still be better than the system currently in place or the next best alternative.

While RFID might be the best solution operationally, if it is not cost effective it becomes a fairly pointless exercise and one that is potentially damaging to the business in the long run.

To address this issue a number of companies are developing ways to produce printed RFID labels, which significantly reduces the cost. At present a Gen 2 RFID tag costs in the region of four to eight pence, depending on volume and the application it is used for, but if the tag is printed this could be brought down to one pence.

The first to launch a printed RFID product could be Silicon Valley-based company Kovio, which hopes to start shipping at the end of this year. The company has developed a new category of semiconductor products using printed silicon electronics and thin film technology.

Instead of using conventional colour inks used to print magazines and books, Kovio uses silicon-based inks to print integrated circuits that can be used to make high frequency RFID tags.

The company says: “This new platform technology overcomes the inherent limitations of conventional silicon technology such as large capital expenditure, significant working capital and inventory, long and high-cost development and manufacturing lead times, and the need for large volumes. Additionally, the use of digital printing technology facilitates a high level of product customisation and rapid time to market.”

Kovio has said that it can achieve 80 per cent cost reduction of chips now and 90 per cent in two years.

Hot on its heels is German company PolyIC, a joint venture between Siemens and printing company Leonhard Kurz, which has developed the PolyID product line, consisting of roll-to-roll printed transponder chips based on polymer semiconductor polythiophene printed on flexible polyester film. The chips are mounted on a low-cost antenna and work at high frequency range.

It is hoped that through developments such as these that RFID will reach a broader variety of markets that were previously unreachable, such as low cost consumer goods, which would allow RFID to become a serious contender to the ten trillion barcodes printed each year. IDTechEx has predicted that if the cost of printed tags drops to around one pence that some 500 billion will be fitted to consumer goods in 2018.

However, Texas Instruments suggests that companies shouldn’t base their decisions purely on cost. It says that some companies have led businesses to believe that newer, less expensive systems are better, but the company says: “Unfortunately many uncovered after implementations that accurate reads and environment were more important in consideration of a successful business process using RFID than just the cost of a tag alone.”

Furthermore, even if the cost of RFID is reduced, most in the industry believe it is unlikely to ever overtake the use barcodes, particularly for lower cost items. Matt Heskey of Sybase says: “We see RFID as part of the overall system, not necessarily as a replacement for barcodes.”

Although we are still a long way off having an RFID tag attached to a can of soup, there is development being done to enable RFID to be used at store level for low cost items. Intellident is currently trialling a prototype called smartPOS, a cardboard shelf imbedded with an RFID tag which is attached to a supermarket shelf.

“When a product sells out the shelf pops up, activating a signal to alert the shop assistant that the product needs to be replenished, which the company says is a “simple, cost effective way of monitoring stock levels”.

Adrian Bastow, global field marketing director at Intermec Technologies, says in his paper The Future of the Humble Barcode: “RFID should not be viewed as a replacement for the barcode, rather the two are complementary data capture technologies that can work in tandem to produce desired results. Even when RFID is adopted on a large scale, it is likely that RFID and barcodes will coexist.”

Bastow adds: “RFID is superior to barcodes under certain circumstances, such as situations that involve simultaneous reading of multiple tags, those in which there is no line of sight between the reader and the tag, or those in which a label may need to be altered over time. One key benefit of RFID is speed – an RFID tag can be read and communicate data in milliseconds.”

Share this story: