Behind the scenes, RFID and interacting technologies are revolutionising business efficiency throughout the supply chain. Frontrunners have shown that the introduction of radio tags may dramatically cut the costs of logistics and enhance chain transparency, while at the same time adding value for the consumer.
Elsevier Food International, Vol. 11, Number 2, May 2008, May 2008
Vincent Hentzepeter

Radio frequency identification is all over our society but mostly invisible for the average consumer. Nobody knows when the technology will enter the shopping arena but behind the scenes a lot of progress is being made. The technology is currently applied to warehousing processes all over the globe and increasingly embedded in logistic systems, primarily at pallet level. RFID applications are expanding at a fast rate. Many pilots are running or are ready for implementation after a positive test. At the same time, existing systems are further rolled out. In the long run, retailers may – thanks to RFID and related technologies – reshape logistics to near perfection. For the customer this means better product availability, more food safety, a better response to their wishes, while getting better informed about their purchases. Other possible benefits are a higher service level and lower prices. And once RFID is introduced at shelf level and all groceries carry RFID-tags, a full trolley can be scanned in seconds at the checkout. 

A typical RFID tag consists of an integrated circuit (IC), antenna (the coil) for communicating the data through radio waves and the connection between them. Notice the chip (dark rectangle) in the middle of the tag for holding the data. Tags may be active (send a signal, also called read/write tags) or passive (respond to a signal). Active tags have a built-in power cell (picture on the right) and have a higher communication range. Passive (picture on the left) ones carry no on-board power and can be placed on daily consumer products.

Unique identification
RFID is nothing really new. The first applications date from decades ago. In fact it is quite a simple technology and one with more potential than the barcode that transformed retail shopping 20 years ago. RFID identifies objects using radio waves that can be at different frequencies. Just an RFID tag with a tiny computer chip, a reader and a computer system are needed for the electronic product code (EPC). This EPC enables the unique identification of items and was developed by the Auto-ID centre. The 96-bit EPC-code is made of a header and three sets of data: the EPC manager, object class and serial number. Unlike barcodes, no line of sight is required for RFID to read the chip. Therefore the identification process is faster and more efficient. Many objects can be read at once and each individual item can be identified. Theoretically speaking a specific can of soup or a single box of sugar can be identified by its unique ID-number, paving the road to single item tracking & tracing. The fact that this promising technology is gaining ground relatively slowly, can be attributed to some technological hurdles that have to be taken and cost aspects.

DVDs with radio bars
Until now the technology has particularly taken off in warehousing and logistics. The electronic tags used are costly (over US$10) but improved operations guarantee fast returns on investments. It is therefore here that massive growth of RFID-tag use and related technology by a factor five is forecast for the next ten years. Not in retail stores, where the situation is somewhat different. Radio bars are, apart from luxury products, still too expensive for supermarket environments. Besides, reading accuracy and speed may be troublesome. Especially scanning a large amount of items at the same time poses problems. Nevertheless, RFID solution providers are convinced that all of these problems will be solved in the end. However, nobody knows when. So for the time being, tagging single daily purchases like a carton of milk with RFID-labels is still a thing of the future. In other retail areas, RFID tags are to be introduced sooner, for example, in stores for media and entertainment products. The first DVDs with radio bars have already been sold in pilot tests, including at Wal-Mart stores, that started last September in the US. The goal is to identify how technology based on EPCglobal standards can best be put in place and to illustrate benefits to the consumers such as improved availability and better quality assurance. 

Global standards
RFID is currently experiencing a heightened level of attention and momentum, says Mieloo & Alexander, a business integrator. Factors driving the adoption are cost reductions, industry pressure and demands by regulatory bodies. Costs are reduced by cheaper RFID tags and readers, standardisation and better interoperability. Since giant retailers like Wall-Mart, Metro, Tesco and Carrefour and manufacturers of consumer packaged goods (CPG) are achieving tangible benefits with the technology, increased pressure is put on the market to follow their example. At the same time, government organisations like food safety bodies in the US and Europe demand players in the supply chain to adopt RFID in their logistics. A major step forward was the initiative of companies from the Fortune 100 to set standards for EPC. Interoperability is crucial in the field of RFID. This enables enterprises to catalyse co-operation and avoid duplication of developments. It also puts a halt to unnecessary business expenses caused by the development of incompatible localised standards. Last February GS1, ETSI and CEN, three major standards organisations, announced the launch of the Global RFID Interoperability Forum for Standards (GRIFS). The aim is to improve collaboration by maximising the global interoperability of RFID standards.

The Internet of things The global electronic product code (EPC) network will enable near-perfect supply chain visibility. Starting at the manufacturer this will in the future automate the supply chain to shelf level in seven steps. 1. When leaving the factory, each item contains a tiny microchip with a radio bar for unique identification. 2. The item can now be automatically and cost-effectively identified, counted and traced. The same is true for RFID-tagged pallets. 3. As pallets leave the manufacturer an RFID reader above the loading dock beams a radio wave that wakes up the tags 4. EPCs broadcast by the tags are sent to a computer running specific software. Data are sent over the Internet to a server with a database which produces an address. Again the EPC is readdressed to another server which has comprehensive information about the product. 5. When unloading the pallet at a warehouse its contents are read by a RFID reader. A cargo list is provided and the goods are routed to the right truck. 6. As soon as the shipment arrives at the supermarket the pallet is tracked. Retail systems are updated to include every item. Store inventory is automated. 7. Reader-enabled smart shelves can automatically order more products form the back room or the manufacturer. In this way, keeping safety volumes in remote warehouses is a thing of the past. RFID reading devices at the exit can also automate checkout procedures.    Source: Mieloo & Alexander

Tag use in retail

German Chancellor Dr Angela Merkel with the Smart Trolley.

In a new report, IDTechEx estimates that retail will this year spend US$86.5 million on RFID tags, mainly for pallets, cases, apparel and CPG. However, this is nothing compared to users in the financial, security and safety sector where US$1126 million is spent! At the moment, demand for the tagging of pallets and cases comes mostly from retailers in the US. They will take the lion’s share of the 355 million RFID labels that retail will use in 2008. But other countries are catching up. British retailer Marks & Spencer, for instance, has used well over 100 million chips to date. A sharp increase of tag use is foreseen for the primary sector in the next ten years. Tagging of animals, such as goats and sheep, together with food and farming products is a major growth area because of legal requirements. In a report about RFID for these three areas IDTechEx says that this will become the largest RFID market by 2017. It is expected that the food supply chain will in a huge number of ways benefit from the tracking & tracing opportunities that RFID systems and tags offer. Rapid paybacks are expected from improved traceability, condition monitoring, crime reduction and error prevention. The investments may also help prevent health threatening diseases like chicken flu to reach pandemic proportions.
Traceability will be powered by innovations such as cost reduced RFID tags without a silicon chip and real time locating systems (RTLS) - a form of active RFID that is increasingly affordable for asset control. This means increased added value to the consumer, because (fresh) produce and meat is easier to trace back to its origin. On a smaller scale this is already taking place. Retailers’ initiatives range from error prevention in logistics of pistachio nuts in California to the tagging of ham at retailers in Spain and the tracing of food in China.

RFID rollout
One of the early adaptors of RFID in European retailing is Metro Group. At the Metro Cash & Carry stores in Germany about 40 per cent of all merchandise sold is now supplied on pallets tagged with RFID. A rollout is now prepared for store locations in France. Other sales brands are to follow in their footsteps. In March, plans were unveiled to extend the use of the identification technology to another 200 German and French locations of the Real hypermarkets. This in fact is a next phase rollout after a successful start in a group of stores in October 2007. At locations operated by Real, loading doors will be equipped with RFID readers for incoming goods. At the CeBIT Auto ID/RFID Forum two months ago Dr Gerd Wolfram, managing director of MGFI Metro Group Information Technology, summarised the benefits of RFID for the Group’s logistics: “RFID appreciably accelerates the handling of incoming goods, thus reducing truck idle times and contributing to a further optimisation of the transport routes. Thanks to the RFID labels, each pallet can be registered automatically and deliveries can be checked for completeness within seconds, thereby decisively improving the accuracy of inventory management.” Suppliers benefit as well. Data exchange with the vendor is facilitated as well as goods issuing control. This way, producers can better align their (batch) processes with consumer demand.

Smart dressing

Dressing area with smart RFID-technology at Galleria Kaufhof.

Achieving logistic excellence is the primary target of Metro Group when applying RFID-technology but the consumer is also benefiting. Since the opening of the Future Store the retailer is increasingly focusing on bringing added value to the customers using smart technology that interacts with RFID. The Galeria Kaufhof department store in Essen, for instance, is testing RFID-supported applications that help customers when shopping for clothing. ‘Smart dressing rooms’ offer additional product information by scanning the tag. ‘Mobile assistants’ help employees fulfil customer requests faster. 

Voice picking
Smaller retail chains are now also picking up RFID technology. Last year, Superquinn in Ireland replaced a label stock picking system with voice picking technology. The voice system that is installed in one of the warehouses automates a formerly manual process. Electronic orders are converted to speech, using an interface platform of Psion Teklogix. Orders are directed to the warehouse operators via a wireless network, thus helping to speed up the process and accuracy of stock picking. Results are promising. The system has improved Superquinn’s pick rate by 20 per cent. Accuracy rates last year approached a near 100 per cent.   

Revolution?
Retailers may wonder how RFID tags will ever become affordable for labelling daily grocery needs. In 2005, the price of a single (passive) chip was well above US$0.05. This may be considerably cheaper than in 2000 but is still far above the food retailer’s budget. However, there are signs that prices are to drop sharply thanks to radical new advances in technology. For example, ink jet printing silicon nano particles can reduce chip costs by 80 to even 90 per cent in the coming years. And once demand rises, tag production will increase and prices will become even more competitive. While some suppliers focus on cutting tag costs, others are working on multi-tag reading, improved reading range, better reader power or tolerance of environmental and electrical interference. This has already resulted in improved signal handling and better readers at the favourite HF frequency, the one that is accepted worldwide for industrial, scientific and medical purposes. An increase of the limited read range by 50-400 per cent is foreseen, solving some readability problems. Positive news is also coming from the field of ultra high frequency. Here the read-range potential is getting longer and commercial use is growing. This and other developments like unleashing some of the tough EU regulations that currently impair readability in Europe, may persuade and stimulate more retailers to share the financial benefits of today's tagging of pallets and cases. Step by step, chips will become cheaper and show better performance. Parallel to this, equipment will operate faster, gradually reaching 100 per cent readability. When all technological advancements are combined, even greater gains can be obtained. So again, it is synergy through partnerships that can make the difference between success and failure. All partners involved in the supply chain have to turn the key to start the RFID revolution. First primarily behind the scenes and finally extending up to every single product on the store shelves.