Warehousing experts and supply-chain gurus have a difficult time curbing their enthusiasm for Radio-Frequency Identification (RFID) tags. Although the small tags represent powerful product-tracking potential — last month, The Denver Post called them “an emerging technology that could eventually save manufacturers, distributors and retailers billions of dollars” — most distributors are waiting for the associated cost to come down.

Each RFID tag is composed of a tiny antenna and silicon chip that work together to send a unique location signal. The location signal allows warehouse and shipping managers to track the location of every tag.

Although RFID tags may eventually enable shipping managers to track products after they leave a warehouse, right now they only allow for tracking within the warehouse. Nevertheless, RFID tags represent significant advantages over barcodes, says Sandra Hughes, global privacy executive for Proctor and Gamble.

“Bar codes require a line of sight, so somebody with a bar code reader has to get right up on the bar code and scan it,” Hughes recently told Technology Review magazine. “When you’re thinking about the supply chain, somebody in the warehouse is having to look at every single case. With RFID, a reader should be able to pick up just by one swipe of all the cases on the pallet, even the ones stacked in the middle that can’t be seen.”

Eventually, RFID tags could save jan/san distributors enormous amounts of time in their warehouse operations, but there are currently a number of impediments.

First, the initial investment for purchasing RFID printing and tracking equipment can be thousands of dollars, although that cost has shown signs of plummeting in recent months. In addition to the initial expenditure for the equipment, there is a cost for each RFID tag, which can be as much as 30 cents. That figure must decrease in order for jan/san distributors to consider implementing the technology.

“We haven’t even started planning for RFID implementation, and we’re one of the largest distributors in the United States,” says David Simmons, director of information technology for JanPak, Davidson, N.C. “There’s a lot of talk about the efficiencies that RFID tags could bring to companies like us, but I think the cost will come down just like it did for barcoding.”

Too Soon for Efficiency?
Despite the cost, warehouse managers are anxious to use the technology, because it will allow warehousing employees to be more than just full-time scanners. “That’s one of the great advantages to RFID tags: They free up warehousing employees to do less menial tasks,” says Simmons. “You’re able to streamline your warehousing operations and have fewer people sitting around scanning boxes.”

With RFID tags, warehouse managers can hire fewer employees because the tags essentially scan themselves. Any RFID tag has the capability of sending out a unique location signal that stays with the product from the moment it leaves the manufacturer.

And RFID tags aren’t just beneficial for manufacturers; they also help customers know exactly where their products are and when they will arrive. It’s not surprising, then, that mega retailers like Wal-Mart and Target are requiring their suppliers to start using RFID tags.

It also isn’t surprising that technology analysts and consultants are promoting RFID efficiencies for those companies that comprise jan/san supply chains. Senior analysts for Pembroke Consulting, Philadelphia, who recently authored Facing the Forces of Change, a well-worn handbook for many jan/san distributors, have been some of the biggest proponents of RFID.

This year’s edition of Facing the Forces of Change touts RFID as “the next major breakthrough in inventory management, with revenues for RFID applications forecast to exceed $7 billion within the coming four years.” However, that endorsement hedges a bit in the next sentence: “Despite these rosy projections, there is substantial uncertainty about [RFID’s] costs and the benefits to wholesaler-distributors for embracing this technology.”

According to the Massachusetts Institute of Technology’s (MIT) Auto-ID Center, a leading research center devoted to monitoring RFID technology and its acceptance, U.S. volumes [of purchased RFID tags] will need to reach 30 billion tags per year in order for prices to fall to 5 cents for a basic tag. “As a frame of reference, Wal-Mart’s suppliers are expected to require 8 billion tags annually by 2006,” says the Pembroke report.

A Whole Different Animal
“With the volume that Wal-Mart does, [investing in RFID technology] makes a lot of sense, but even they are starting slow,” says Timmy King, technology director for Pro-Link, a Canton, Mass.-based alliance of jan/san distributors. “Wal-Mart is just beginning to require that its suppliers have RFID tags on every pallet. That means they could have just one tag for 200 cases of liners, within which their might be 20 boxes of liners per case. So, even Wal-Mart isn’t really close to putting RFID tags on individual products.”

In addition, Wal-Mart’s incomparable size (there are 1,292 stores in nine countries) has created immense organizational pressure. In order to keep track of what products are going to which store, Wal-Mart requires the kind of efficiencies that RFID tags provide — efficiencies that are still a luxury for most jan/san distributors.

“Unfortunately, a lot of industrial distributors are not even using barcodes to track their product inventory,” says Simmons. Our company investigates warehousing technology because we have to, but a lot of distributors don’t think it’s an issue. At JanPak, we have several warehouses, but most distributors have only one or two.”

“It’s a technology that’s been around for about 40 years, but in terms of an actual functioning solution, it’s still many years away,” says King. “Usually, this kind of technology will be embraced by other distribution chains — the electronics industry, for example — before it’s embraced by the sanitary supply industry. Right now, Wal-Mart and Target are really the only companies that are fully employing RFID technology.”

“I think we’re still six years away from really seeing RFID tags being embraced in our industry,” says Simmons.

In Need of Tweaking
In addition to the reservations that distributors have about RFID technology regarding cost, there’s also the issue of reliability. RFID tags still aren’t where they need to be from a design standpoint in order to deliver the efficiencies they promise, says King.

“The single biggest problem with RFID is that it has limited distance,” he says. “[RFID signals] can’t go through metal and can’t go through liquids. The technology is fast approaching long-range tracking, but it isn’t there yet.”

Wal-Mart reports that the RFID tags its stores are investing in can transmit signals through metal, but there is no denying that the accuracy of the tags hasn’t yet faced a major challenge under actual business conditions.

“Performing in tests and labs is a lot different than really monitoring the traffic of products in real time,” adds King.

A Tag Can Say A Thousand Words
Privacy is also a concern for some distributors who are beginning to consider using RFID tags, according to Pembroke’s Facing the Forces of Change: “Privacy advocates oppose the introduction of item-level tags because the technology could allow individual buyers to be tracked after purchase. Industry response has been mixed, suggesting much more controversy is still to come.”

Although sanitary supply distributors are still a few years away from RFID acceptance, the privacy debate is central to the technology’s success. “Right now, of course, RFID is not a threat to distributors’ security, but there are things about RFID that could scare business owners,” says King.

Nevertheless, as logistics innovators strive to create greater efficiencies for distributors and wholesalers, wider access to a company’s inventory data is a concern.

“Along with the security factor and the cost factor, there are still other issues that we have to wait to test in the field, because the technology just too new,” says Simmons.

ON SITE

Learn Radio-Frequency Terminology at RFIDa.com
Not sure about how Radio-Frequency Identification (RFID) could eliminate inefficiencies in your company’s warehousing and delivery operations? Have no fear, RFIDa.com goes through plenty of information and terminology (explained in layman’s terms).

Under “About Us,” there’s a mission statement that explains why the site exists: “RFIDa.com is dedicated to educating the business world about the application of radio-frequency identification to achieve breakthrough performance and transform the extended enterprise. We believe that RFID is an important technology and is ready for wide adoption.”

Resources include reports on “RFID at Wal-Mart,” information about the “RFID Antenna,” access to “RFID Jobs,” and even an “RFID Blog.”

Pew Study: Acceptance of E-Government Growing
The Pew Internet & American Life Project has released new research showing that 97 million adult Americans, or 77 percent of Internet users, took advantage of “e-gov” resources in 2003. According to Pew, e-gov is defined as anything from visiting government websites to e-mailing government officials.

The Pew report is called “How Americans Get in Touch With Government.”

CLEANLINK® Calendar
Peruse our comprehensive “Calendar of Events,” located under “Industry Resources.” You’ll find a lengthy listing of upcoming industry events, along with their dates, times and sponsoring organizations.




POSTED ON: 7/1/2004