When radio frequency identification (RFID) first surfaced four years ago as the next big thing in supply chain automation, technologists hailed it as the answer to every logistics manager’s dream. RFID would make it easy to track goods in transit, provide more accurate information about them and take care of routine administration.
The idea of bouncing radio waves off a transponder that could identify itself dates back to the Battle of Britain when planes were equipped with the technology to sort friend from foe. But only with the arrival of cheap electronics operating at UHF wavelengths over a distance of 20 feet or so was it possible to consider mass applications of the technology.
Some of the biggest hitters in business backed the idea. Retailers such as Wal-Mart in the US and Metro in Germany drew up timetables for suppliers to incorporate the 10p tags in product packaging. Manufacturers including Unilever and Gillette followed suit.
Companies in sectors as diverse as agriculture, logistics, automotive, pharmaceuticals, and retailing embarked on a series of trials with the aim of proving the technology and working out the best way to apply it. Although the cost of tags and associated readers remained a stumbling block, proponents were confident that volume production would bring prices down.
So after four years of technology development, trials and industry initiatives where do we stand now? In many ways the adoption of RFID has been like the proverbial snail’s progress up the wall: one step back for every two steps forward.
One the positive side there have been major investments in the technology leading to real economic benefits. Only in December last year a survey by the University of Texas estimated that US industry has already saved $40bn by adopting RFID. This despite the fact that most applications involved applying tags to cases, crates and other containers. Only two per cent of goods in the US are individually tagged, while nine per cent of containers have tags applied to them.
The savings could grow, to $68.55 billion within five years, according to the Texas researchers, if, as predicted, adoption rates of RFID reach 45 per cent of sales at the container level and 20 per cent of sales at the item level. The financial benefits will accrue from reducing labour costs, cutting back on shrinkage due to thefts or lost goods, as well as cutting the level of inventory and inventory write-offs, the study claims. Increased product availability and time-to-market will also add to the bonanza.
For providers of health-care and pharmaceutical products, the researchers expect the benefits to come from reducing drug counterfeiting and theft, reducing time-to-market, and improving the product recall and sample-management processes. Hospitals, the study predicts, will gain value from RFID by improving equipment tracking and the use of assets, increasing access to health care and providing better patient safety and care.
Standards such as the Gen2 format for UHF applications devised by EPCGlobal, the body that overseas the development of RFID, are vital in bringing down prices and enabling tags and readers from different manufacturers to be used together.
Tags can be active, which means they require their own power source, or they can be passive with no need for power to work. The majority of tags in the supply chain are of the cheaper, passive variety. Makers of passive tags have opted for one of three different frequency bands – low frequency, high frequency and ultra high frequency (UHF).
Most companies want to use UHF because it offers a longer read range—up to 20 feet under good conditions. However, UHF technology is relatively new, and standards were only established recently. Because existing RFID systems tend to use proprietary technology, investments are usually made in closed-loop systems—in which a company tracks goods that remain under its control. This means that if company A puts an RFID tag on a product, it can’t be read by Company B. Closed loop systems are usually cheaper because if a company tracks assets within its own four walls, it can re-use the tags over and over again.
The standards body EPCGlobal wants to break out of that straight-jacket. The organisation is responsible for developing the international network needed to exchange data gathered from tags. The EPCglobal Network is critical to making RFID work. When an EPC number is read from a tag it is passed by the reader to a computer or local application system via middleware.
These systems match the EPC number to information about the associated item via the Object Name Service (ONS) which points computers to sites on the World Wide Web where the information is held. Data generated by middleware is used by a second system, EPC Information Services, to exchange data with trading partners.
EPCGlobal also defines the software and interface standards for the EPCglobal Network and how these elements interact with enterprise systems. Data management is essential if companies are to gain any value from their investment in RFID. RFID tags, scanned every time they pass a reader, generate enormous amounts of data that needs to be managed.
If that wasn’t enough, logistics managers also have to contend with environmental factors that create reliability problems for wireless communications. Moisture in the atmosphere can absorb radio waves, metal can reflect and interfere with radio waves and electrical interference from other appliances or florescent lights can disrupt connections. Those applying RFID have also had to contend with interference problems between tags.
Spreading the word about RFID and its capabilities has been a vital task, and one that has not been easy. A survey of supply chain managers by tech company Intermec revealed that although some 85 per cent of them in the distribution and logistics sector believed that improved customer service would be the most important justification for investment in RFID technology for their company, two thirds of companies in the sector said they had no plans to conduct a trial of the technology, generally regarded as a necessary first step towards using RFID in anger.
For all the difficulties and lack of rapid progress, companies have been steadily rolling out RFID applications. At Yorkshire-based Northern Foods, the company is taking an incremental approach to applying tags to its trays of pork pies and pizzas. “We’ve had our RFID project for a couple of years, but we’re looking for benefits that enable you to integrate real-time data from manufacturing systems into your enterprise-wide applications,” says Alan Bowling, IS director for business solutions at the company. “It’s about the ability to have a clear view of events in your supply chain, especially in your own plants.”
Passive high-frequency RFID tags on product trays will transmit data to integrators deployed on the manufacturing plant’s dock doors. IBM’s WebSphere middleware software will filter the RFID data and store it on an IBM server. That data will be linked with product details stored in Northern Foods’ mySAP supply-chain management platform. But challenges still exist. Many of Northern Foods’ products, such as biscuits, are packed in metal tins. Some metallic materials are reflective, interfering with the data signal. In addition, the speed that data reads and writes to tags remains slow, a problem not quite solved yet, Bowling says.
“You can read 40 tags on a pallet at one time, but it could take a minute or two to read, write and then read again to verify the information,” he explains. “All that takes time. If you’re reading batches of tags passing through, that time can be too long for a fast-moving volume business.”
Some more recent RFID applications go beyond merely tracking shipments. DHL and IBM, for example, have developed a tag with a sensor that monitors the temperature of pharmaceutical products in transit. Extremes of temperature can reduce the life time and potency of some medicines.
DHL’s tags continuously record temperatures, providing an immediate read out of the data without having to open up the shipment. Their sensors have been designed so that they can be attached close to the product, not just on the inside of the packaging as before, giving more accurate readings. The devices can also calculate the lifespan of a product and provide a read out at any time.
There are hopes that RFID can also help reduce the quantity of counterfeit drugs that enter the pharmaceutical supply chain. By tagging drugs and recording information about where they were made and their movements in the supply chain, authorities hope to make it much more difficult for counterfeit products to enter the legitimate market for pharmaceuticals. Legislation requiring pharmaceutical companies to keep information on the pedigree of their drugs either in electronic or paper form is on its way in the US. The Prescription Drugs Marketing Act is expected to give a big boost to the use of RFID in the industry.
The food industry is also keen on using RFID to track products so that their provenance can be verified and the authorities can head off health scares such as the one involving the Sudan 1 colouring agent that was illegally added to curry powder last year. The European Union, for instance, has carried out tests on RFID sensors that can keep tabs on animals wherever they are and is considering making them compulsory by the end of 2007.
The EU completed trials three years ago involving 900,000 animals that had RFID devices attached to their ears, injected under their skin or fed to them in a bolus that remains in their stomachs. The tags are intended to control disease and cut out fraud in the support schemes for agriculture. The tags give inspectors quicker access to records, while farmers can count their entire flocks in a few seconds, pinpoint the location of each animal and gain access to documentation about it via the internet.
Although the technology passed the trial, its introduction has been delayed. One stumbling block for the scheme is the question of who will foot the bill for the network of readers that will be required on farms, on trucks and in abattoirs.
Not all applications are as politically high profile as keeping tabs on drugs or farm animals. Tracking containers in the supply chain has also proved an effective application for RFID. Ensuring that often expensive containers are returned to their owners can be a time consuming and complicated exercise. In the brewing industry handling beer kegs is often outsourced.
One company called TrenStar turned to RFID tags as part of a service which involved the firm pooling millions of kegs among a group of brewers including Courage, Carlsberg and Coors. The company was able to optimise the use of kegs resulting in a 75 per cent reduction in spoilage and waste and a reduction in keg inventory of up to 25 per cent. Overall brewers can expect to benefit from cost reductions in operational staff, handling labour charges, third part logistics charges, charges for keg purchasing, maintenance, and storage, says TrenStar.
When the idea of RFID was first mooted some of its wilder eyed backers talked about an internet of things in which every man made item could be assigned its own unique identifying number. That may be a long way off, but companies are reaping reasonable benefits from the more transparent supply chain that RFID makes possible.