Manufacturers need to find value in RFID applications

Matthews Australasia Pty Ltd
By Rick Fox
Sunday, 11 January, 2004

RFID has major applications in supply-chain management, but those burdened with implementation costs don't receive much of the value. Manufacturers need to find ways to benefit from RFID technology other than forced compliance. Phil Biggs* spoke with US guru Rick Fox when he visited Auspack, about the situation in the US.

"Radio frequency identification, or RFID, shows great promise," says Rick Fox, who is president and CEO of FOX IV Technologies, Inc, based in Pennsylvania, USA. "But, "he continues, "so did barcodes."

Fox says the same benefits claimed for the supply chain by adopting RFID were attributed to barcodes more than 25 years ago - "just look through some old trade magazine articles".

"I estimate the adoption level of barcodes within the United States' warehouse/distribution segment of the supply chain at about 20%. This percentage applies to a combined grouping of those cartons that manufacturers and warehouses have properly marked, and distribution centres that are properly equipped to scan barcodes as they are received. I understand that owing to the high concentration of major retailers in Australia, your adoption rate has been much higher."

This dismal US performance is despite several factors: the existence of global barcode standards, the cost of printing a barcode being significantly less than an RFID tag, existence of industry-developed formats and stiff penalties for non-compliance.

"My question to our industry is: 'What are we going to do differently, or what do we think is going to happen, with respect to the implementation of RFID that didn't happen with barcodes?'"

The question is rhetorical.

"I'm not sure," says Fox. "As an auto-ID industry, we don't have a good understanding of why barcodes weren't adopted by the supply chain, as was promised 25 years ago. We need to take the time to understand what happened so as not to make the same mistakes. The cost to implement RFID technology is significantly higher than barcode technology."

Two areas Fox, who is on the Uniform Code Council Global Symbology Committee (UCC is part of EAN group), feels contributed to the slow adoption rate are a skewed cost-to-benefit distribution in the supply chain and the lack of software/hardware infrastructure.

"Barcodes are applied, at the carton level, just before transporting to a warehouse or distribution point. The manufacturer receives no benefit from the technology and yet they bear most of the implementation and ongoing application costs - and these are substantial. A real eye opener for manufacturers would be to do a survey of the number of their customers who are actually equipped with the hardware and software to read barcodes. For whatever reason, supply chain members have, for the most part, not been able to financially justify the software/hardware infrastructure.

"Considering the fact that RFID will face the same supply chain issues, why do we feel the adoption of RFID technology will be any different?"

Fox lists several issues he says the supply chain needs to address in implementing RFID. Many are the same issues faced with barcodes - it's just that the hardware and software solutions are different.

Tag verification and yields

"Our experience with labels with RFID tags implanted on the adhesive side of the label found about 5% of the tags dead on arrival. For whatever reason, the tags could not be read with the RFID reader. Tag verification must be done before label application. If found to be defective, the label must be discarded. It is costly to find you have an unreadable tag after it is applied to the carton. A 5% reject rate is an unacceptably high level. As well as slowing the entire tag-application process, the low yield increases the net cost per tag."

RFID tag placement

"Moisture, liquids and metals interfere with the RFID tag data transmission. Tag location on the carton, as well as the packaging configuration on the pallet, needs to be tested and optimised. It is not simply a case of applying the RFID tag to a carton, stacking the cartons on the pallet and then begin reading. Issues such as tag orientation, moisture in the wood pallet and products with metal components will impact the ability to read RFID tags."

Applying the tag

"How are you going to place the RFID tag on the carton or pallet? By hand or automatically? If by hand, what current work practices need to be changed? If automatically, how must the product be oriented and presented to the automatic application system?"

Confirmation of data in tag

"At some point before shipping, you should reconfirm the tag can be read and that the information on the tag matches the carton to which it is applied. The irony is that many companies will use a barcode for confirmation. This is to ensure nothing happened to damage the tag in the manufacturing and shipping processes."

No-read recovery

"You cannot assume tags will not suffer some level of mortality as they move through the supply chain. So, some thought needs to be given to a recovery procedure in the event of a 'no read'." How will the system handle a no read? How will it determine what information was encoded in the tag? What solution is going to be applied in the event of a no read - another RFID tag?

"RFID technology shows incredible promise to remove costs from the supply chain. However, the implementation hurdles are significant, and, unfortunately, those burdened with implementation costs will not receive much of the value. Manufacturers need to find ways to benefit from the RFID technology other than forced compliance. This is where the biggest obstacle to a successful adoption cycle lies. This is our biggest challenge as an auto-ID industry - and our biggest opportunity."

*Phil Biggs is national sales and marketing manager for Matthews Intelligent Identification, which is the Australian agent for FOX IV Technologies.

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