Taking a Gamble on RFID
Approximately 3,300 attendees from around the world walked the exhibit hall during RFID Journal LIVE! 2008, held April 16-18 at the Venetian in Las Vegas, where more than 170 vendors showcased real-world applications for leveraging the benefits of radio frequency identification. One exhibitor was Tipp City, Ohio-based Repacorp, whose RFID solutions include both paper and synthetic labels and tags. Rochelle Heinl, manager, RFID business development, graciously found time between speaking with distributors and end-users crowding the booth to provide Print Professional with a status report.
“There’s been a tremendous amount of interest; most people are seriously shopping for solutions and plan to move forward with RFID implementation within the next year,” she observed. “The announcement of the Sam’s Club mandate has been quite the buzz—lots of people here are end-users looking to be supplied with [RFID technology necessary] to comply.”
ROI
On Jan. 31, Sam’s Club—owned and operated by Wal-Mart—began requiring all of its suppliers to apply EPC (Electronic Product Code) Gen 2 RFID tags to every full, single-item pallet of goods destined for its distribution center in DeSoto, Texas, or directly to one of its stores served by that distribution center. Any supplier failing to comply was charged a service fee of $2.00 per untagged pallet starting on Feb. 1, and the fee will gradually increase until it caps out at $3.00 per pallet on Jan. 1, 2009. The fee covers Sam’s Club’s costs in having to tag the pallets itself.
By Jan. 30, 2009, Sam’s Club intends to have suppliers tag full, single-item pallets destined for all 22 of its distribution centers. The suppliers must also tag at the item level all shipments to any of the 22 distribution centers by Oct. 31, 2010. As a warehouse retailer, Sam’s Club’s items are typically bulk goods packaged in large units. The company predicted tagging will lead to increased sales resulting from fewer out-of-stock items, better product placement, fewer out-of-date products, faster checkout and better-quality products, such as fresher produce.
“A lot of suppliers need to get on top of this, which, in turn, means distributors have to start figuring out how to bring [RFID solutions] to their customers, particularly [those supplying product] to Sam’s Club, Wal-Mart, Albertsons, Target or K-Mart,” continued Heinl. “The bigger companies are definitely looking at [the technology] and doing research to move forward with an RFID integration, as they [increasingly] realize the ROI they can gain by incorporating RFID into their systems.”
In particular, closed-looped systems that companies use internally for their own processes are in demand. Heinl offered the example of a uniform company receiving a shipment of merchandise that gets misshelved. “Then, when an end-user customer requests 25 blue T-shirts to be embroidered, the uniform company can’t find them in the warehouse, and winds up having to overnight new product in order to meet the ship date promised based on the assumption the items were in stock. The uniform company not only incurs overnight shipping and rush charges, but is delayed in working on other orders,” she noted. “When companies start analyzing processes and begin to see where they are losing money, what the weaknesses of the company are and what customers need, they will understand where RFID can benefit them.”
One RFID application Repacorp worked on enabled a plant nursery to tag trays of seedlings spread out over 700,000 square feet. With the seedlings planted in trays and not yet sprouted, the employees needed an efficient way to track and identify the trays when pulling orders. The company opted for an RFID-enabled wand system which, when passed over the trays, reads the labels on the seedlings to reveal batch number, seed lot and flower type. “Before, it could take hours and hours to walk around and locate a missing item, which meant other orders were not being filled and money was being lost,” observed Heinl. “Before the RFID project, the nursery spent [three or more] days picking orders and getting them to ship in their complete form. With the integration of RFID, [it] has been able to [pick and ship orders in] under one day, which in the nursery’s eyes is an improvement of 300 percent in gained efficiencies. Any type of gained efficiency will certainly be reflected [in] the bottom line, helping to show ... ROI. The positive about new implementations, such as [this], is [the] nursery will tell another nursery, and help create awareness and add more uses for RFID.”
During the show, Repacorp was approached by a distributor seeking a solution for a manufacturer of automotive hoses. “Having [RFID-enabled labels] will prevent the wrong items from being shipped to customers,” explained Heinl. “But, they need an RFID label that can be wrapped in some sort of protective material and subjected to 80 degrees Celsius during a curing process. The [integrated circuit] becomes brittle at that heat, so the challenge is to try to find a material to encompass the tag, allowing it to go through the process.”
Growing Pains
RFID has been on a slight incline over the last few years, but as Heinl pointed out, the flood on the marketplace that many in the industry predicted—with estimations of one billion or so tags by 2007—still seems to be a couple years away. “While RFID technology has substantial benefits over a standard barcode, it also has two significant obstacles to greater use: its cost in comparison to more traditional identification tags, and the difficulty with using the tags near or in combination with metal and liquids,” she continued. “These issues are constantly being addressed and new innovations are on the horizon.”
Compared to just a year ago, costs have come down and more quantity is showing up in the marketplace. However, demand certainly isn’t as high as the supply, and, for now, costs are holding steady. “But, if the mandates start to go up, and all of the close-looped systems that everyone is talking about come to be, companies will have to lower their prices,” shared Heinl.
Close-looped applications may start at just a few thousand pieces for testing and tweaking, then grow significantly. One test Repacorp provided involved 100 RFID-enabled tags; it’s on target to become a 20,000-piece order. “With some mandates, customers can use 10 million labels,” continued Heinl. “[A prospect] we met here at the show hopes to use a billion labels by the end of next year. The industry is definitely growing as customers are learning about the benefits—especially for inventory control purposes—and are figuring out ways to use it in their systems.”
Besides increasing volume, ongoing engineering revisions translate into cost savings. Just within the past few years, inlay suppliers have found more efficient ways to produce their products, and there are better integrated circuits, better antenna structures offering greater read ranges and more efficient ways to print on RFID tags and labels. “Still, metals and liquids do interfere to an extent with the RF technology,” added Heinl. “Even if someone was wearing a badge on [his or her] chest or if a finger was placed over a chip, the fluids contained in the human body can interfere with a reading.”
Furthermore, the integrated circuits are fairly delicate and can be easily damaged. “If it gets cracked, it breaks the connection to the antenna and you cannot read information. However, if an antenna is cut or bent, it will affect the read rate—maybe get less distance on the read—but won’t make it unusable in most cases,” explained Heinl.
Another factor preventing RFID from getting to market, observed Heinl, is that some people are frightened of the technology and fear they can be traced by it, or that having an RFID-tagged item in their home could allow others to invade their privacy. “They don’t understand there is only so much information that can be put on the tag and it relates to the product and buying preferences,” she commented.
Like most industry professionals, Heinl believes RFID will continue to be used in conjunction with bar-code technology for some time to come. “I don’t feel bar codes will ever go completely away,” she offered. “There are too many smaller companies for whom bar codes are more practical. If you look at using RFID on a single pack of gum, for instance, the item itself might sell for 50 cents, and it seems silly to use a 15 cent tag when a bar code will do.”
Done Deal
Despite some improvements, the costs of upgrading all of the labels, software, hardware and equipment to outfit a full RFID integration can add up, which is why Heinl suggested distributors help their customers analyze weak sales or profit loss area when considering the technology.
“If a company is able to put a dollar amount on how many items were misplaced in inventory last year, or how much product was shipped out on the incorrect purchase order, or the amount of hours that one employee could eliminate to locate merchandise needed to complete a shipment, you are on your way to helping your customer[s] estimate the return on their upcoming investment in RFID and creating a turnkey solution to their needs,” she stated. “After you have identified why the customer should be using RFID and what the customer’s RFID needs are, it makes sense to contract an integrator to work with you on the ‘how’.”
To begin the integration process, Heinl said Jeff Hudson, president of Brighton, Michigan based-Smart Label recommended a software engineer to perform an analysis of the current business process. Smart Label will focus on making the software fit the current business process so that too much change is not forced. Finalizing the entire integration is very wide open and the hardware needed will be determined by how the system is set up and who the customer is supplying tags to. If the customer is using the RFID integration as a closed loop-internal system, the hardware may differ from what is needed to meet the type of mandate required by the Department of Defense or even a retail client. There are many different aspects involved in setting up shop to use RFID technology, so the customer’s best bet to make sure installation is done correctly would be to contact someone who has experience in the field.
“When it comes to the tags, this is where a label converter like Repacorp will come into play,” continued Heinl. “Going after RFID tag business is similar to preparing a quote for standard labels, but with an extra step or two to account for the RFID technology.” She suggested starting with compiling the standard label basics, including finished width, length, face material, adhesive, printing, perforation, carrier and repeat. Then, dig into the specifics needed for RFID. “First, find out how the customer plans to encode information onto the chips. If the customer is using a printer, this will help determine the pitch, or repeat, and the placement of the inlay,” she said. “While this information is not necessary to quote the label, it is necessary to manufacture the label. Second, find out what material the tags are being applied to, such as corrugated, plastic or metal, and the contents of that item. Remember, metal, liquids and other materials can reflect, absorb or alter the RF signal, so it is important to be aware of these materials in the beginning.”
Depending on how the tags are being utilized, the customer will require an expected tag performance, which involves the amount of information the customer needs the chip to hold and the distance from the reader the tag will need to be read. This is only the beginning of the process, and customers should be prepared to have a few back-and-forth conversations in order to iron out the final specifications.
“Diving into an RFID application for the first time is overwhelming,” acknowledged Heinl. “However, if you wish to take on this exciting technology, working with an experienced RFID manufacturer as your partner will help you meet the customer’s needs for the final sale, and hopefully alleviate extra frustration on the salesperson’s end.”
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