RFID progress continues; adoption appears inevitable
RFID progress continues; adoption appears inevitable
Despite continued news reports that RFID technology is costly and its benefits are concentrated at retail, there appears to be growing recognition that adoption is inevitable.
Speaking of the advances in radio frequency identification, Bruce Peterson of Wal-Mart Stores Inc., based in Bentonville, AR, recently told The Produce News that this supply-management tool appears to be progressing on schedule. He agreed that there are on-the-ground issues that are causing some suppliers to move faster than others, but he said that the bird's eye view is that the technology is moving ahead and it is going to come sooner rather than later.
Mr. Peterson would not publicly put a timetable on how quickly this technology will become commonplace, but he said that acceptance is moving much more quickly than it did with UPC bar codes. "People forget that it took 20 years for the UPC bar codes to become prevalent. RFID is moving light years faster than that," he said.
Wal-Mart is clearly one of the major movers behind this technology, as it announced in 2004 that it expected its top 100 suppliers to be at least moving forward on an RFID adoption plan by Jan. 1, 2005. With the additional endorsement of a number of other large buyers, many suppliers, chip makers and the academic world launched RFID test programs or pilot projects.
There have been persistent reports that some suppliers do not see the potential return on investment for this technology and have dragged their feet. The Wal-Mart executive acknowledged that he has seen those news stories and believes that some in the supply community have moved more slowly than others, but overall he said that progress is good and the produce industry is receiving more attention than it was initially.
"There are some very interesting things happening in the produce industry" with numerous suppliers launching quite impressive projects, he said.
One of the hurdles to jump in the adoption of RFID technology is the ability for the radio wave to travel through a water-based environment, which is inherent in many fruits and vegetables.
In other words, if the RFID chip is located on a carton and the radio wave must go through the carton and the produce to register with the reader, accuracy is compromised. However, Mr. Peterson said that this issue is being tackled by many different researchers, including academics and the chip makers themselves.
Another major hurdle -- and probably the biggest -- is the cost. With a per-chip cost of close to 40 cents, putting one on each carton or container is an expensive proposition. Mr. Peterson acknowledged that a carton, be it from the produce industry or center store suppliers, typically costs in the neighborhood of $1. Add 40 cents to the cost of packaging and that is a significant bump in the cost of packaging. Even when related to the product cost itself, it can be very significant in the produce industry, where Mr. Peterson said the average price of a carton of produce is in the $12.50 to $13 range. Forty cents represents a more than 3 percent increase in cost -- difficult for any supplier to absorb.
It might be a little less onerous in the center store business where some products in a master container could have a wholesale price of $50 or more. And of course, the placement of a 40-cent chip in a computer or television carton where the price of the products is hundreds or thousands of dollars is relatively insignificant.
While acknowledging that cost is an issue, Mr. Peterson said that the benefits of being able to account for every product at all times is tremendous and has value up and down the supply chain.
The most obvious advantage is that out-of-stock situations can almost surely be eliminated, or at least reduced significantly. If the supplier and the retailer can know almost exactly how much product is at the warehouse and how much is in the pipeline, inventory management will improve by leaps and bounds.
For the fresh produce industry, Mr. Peterson said that the traceability factor is also important. Food safety is a very important issue, and to be able to pinpoint every suspect carton in a crisis situation would be invaluable.
When discussing the cost of a chip, Mr. Peterson pointed out that Wal-Mart's initiative with regard to the use of returnable or reusable plastic containers can cut down the unit cost tremendously. If a chip can be embedded into an RPC that has a 10-trip life expectancy, for example, the cost can be reduced to pennies per trip, even at the current cost of the chip, which is sure to go down.
A review of recent reports on RFID seems to confirm Wal- Mart's insistence that this technology is here to stay. In fact, a report recently released by AberdeenGroup says just that. The study - The RFID Benchmark Report: Finding the Technology's Tipping Point - revealed that 60 percent of the senior management people interviewed indicate that they are optimistic about finding a value proposition for RFID within their organizations. Though 48 percent of these manufacturers said that they were keeping their RFID project in the pilot stage while the technology matures, most believe that it will mature within the next few years. Almost three-quarters of those firms are developing their own in-house RFID expertise in a clear sign that they do not expect this advancement to go away.
The report found that the number of companies that have no existing RFID pilots in place will be cut in half within the next 12 months.
Chip makers are also moving ahead quickly, and 1.3 billion RFID chips were sold in 2005. The chip industry is expecting -- and planning -- for that number to explode to 33 billion chips by 2010. That will clearly create the critical mass needed for the price to drop.
The Gen 2 RFID chip, which allows for the recording of more information as well as read/write capabilities, has been introduced and is in the testing phase by many companies. A major conference exploring advances and examining the use of RFID chips in the food and livestock industry is scheduled in Dallas in early February. It is expected that there will be presentations from across the world on all aspects of RFID tagging of food and livestock.
Speaking of the advances in radio frequency identification, Bruce Peterson of Wal-Mart Stores Inc., based in Bentonville, AR, recently told The Produce News that this supply-management tool appears to be progressing on schedule. He agreed that there are on-the-ground issues that are causing some suppliers to move faster than others, but he said that the bird's eye view is that the technology is moving ahead and it is going to come sooner rather than later.
Mr. Peterson would not publicly put a timetable on how quickly this technology will become commonplace, but he said that acceptance is moving much more quickly than it did with UPC bar codes. "People forget that it took 20 years for the UPC bar codes to become prevalent. RFID is moving light years faster than that," he said.
Wal-Mart is clearly one of the major movers behind this technology, as it announced in 2004 that it expected its top 100 suppliers to be at least moving forward on an RFID adoption plan by Jan. 1, 2005. With the additional endorsement of a number of other large buyers, many suppliers, chip makers and the academic world launched RFID test programs or pilot projects.
There have been persistent reports that some suppliers do not see the potential return on investment for this technology and have dragged their feet. The Wal-Mart executive acknowledged that he has seen those news stories and believes that some in the supply community have moved more slowly than others, but overall he said that progress is good and the produce industry is receiving more attention than it was initially.
"There are some very interesting things happening in the produce industry" with numerous suppliers launching quite impressive projects, he said.
One of the hurdles to jump in the adoption of RFID technology is the ability for the radio wave to travel through a water-based environment, which is inherent in many fruits and vegetables.
In other words, if the RFID chip is located on a carton and the radio wave must go through the carton and the produce to register with the reader, accuracy is compromised. However, Mr. Peterson said that this issue is being tackled by many different researchers, including academics and the chip makers themselves.
Another major hurdle -- and probably the biggest -- is the cost. With a per-chip cost of close to 40 cents, putting one on each carton or container is an expensive proposition. Mr. Peterson acknowledged that a carton, be it from the produce industry or center store suppliers, typically costs in the neighborhood of $1. Add 40 cents to the cost of packaging and that is a significant bump in the cost of packaging. Even when related to the product cost itself, it can be very significant in the produce industry, where Mr. Peterson said the average price of a carton of produce is in the $12.50 to $13 range. Forty cents represents a more than 3 percent increase in cost -- difficult for any supplier to absorb.
It might be a little less onerous in the center store business where some products in a master container could have a wholesale price of $50 or more. And of course, the placement of a 40-cent chip in a computer or television carton where the price of the products is hundreds or thousands of dollars is relatively insignificant.
While acknowledging that cost is an issue, Mr. Peterson said that the benefits of being able to account for every product at all times is tremendous and has value up and down the supply chain.
The most obvious advantage is that out-of-stock situations can almost surely be eliminated, or at least reduced significantly. If the supplier and the retailer can know almost exactly how much product is at the warehouse and how much is in the pipeline, inventory management will improve by leaps and bounds.
For the fresh produce industry, Mr. Peterson said that the traceability factor is also important. Food safety is a very important issue, and to be able to pinpoint every suspect carton in a crisis situation would be invaluable.
When discussing the cost of a chip, Mr. Peterson pointed out that Wal-Mart's initiative with regard to the use of returnable or reusable plastic containers can cut down the unit cost tremendously. If a chip can be embedded into an RPC that has a 10-trip life expectancy, for example, the cost can be reduced to pennies per trip, even at the current cost of the chip, which is sure to go down.
A review of recent reports on RFID seems to confirm Wal- Mart's insistence that this technology is here to stay. In fact, a report recently released by AberdeenGroup says just that. The study - The RFID Benchmark Report: Finding the Technology's Tipping Point - revealed that 60 percent of the senior management people interviewed indicate that they are optimistic about finding a value proposition for RFID within their organizations. Though 48 percent of these manufacturers said that they were keeping their RFID project in the pilot stage while the technology matures, most believe that it will mature within the next few years. Almost three-quarters of those firms are developing their own in-house RFID expertise in a clear sign that they do not expect this advancement to go away.
The report found that the number of companies that have no existing RFID pilots in place will be cut in half within the next 12 months.
Chip makers are also moving ahead quickly, and 1.3 billion RFID chips were sold in 2005. The chip industry is expecting -- and planning -- for that number to explode to 33 billion chips by 2010. That will clearly create the critical mass needed for the price to drop.
The Gen 2 RFID chip, which allows for the recording of more information as well as read/write capabilities, has been introduced and is in the testing phase by many companies. A major conference exploring advances and examining the use of RFID chips in the food and livestock industry is scheduled in Dallas in early February. It is expected that there will be presentations from across the world on all aspects of RFID tagging of food and livestock.
