RFID progress lags behind initial projections
RFID progress lags behind initial projections
It might be at least another year before the produce industry sees big gains in the use of radio frequency identification, according to two industry executives closely in tune with the situation.
Bob Spence, vice president of business development for Pacific Tomato Growers Inc. in Wimauma, FL, is chairman of the Produce Marketing Association's RFID Issues Committee. Both he and PMA's RFID expert Gary Fleming agreed that 2007 appears to be a year with more testing and evaluation of the technology rather than implemention even by the industry's most progressive companies.
In separate interviews with The Produce News, both men said there are various factors that are slowing the adoption of this supply management tool, including its cost and some inherent difficulties specific to the produce industry.
It has been several years since a couple of large buyer factions -- most notably Wal-Mart -- initiated the RFID program. Wal-Mart originally asked its top 100 suppliers to be moving in the direction of radio frequency identification by Jan. 1, 2005. The nation's largest chain has continued to ask more and more of its suppliers to be RFID-compliant or at least moving in that direction ever since. PMA's Mr. Fleming said that in 2007 another 700 suppliers have been asked to come aboard, which will bring the total number of companies expected to be RFID participants to 1,400 by one year from now. He said that about 40 produce companies are in this group.
From Wal-Mart's perspective, Mr. Fleming said that the program has to be considered a success. Very early, Wal-Mart identified RFID technology as a worthwhile venture that would streamline its inventory management system and create real savings, especially in the area of eliminating or greatly reducing out-of-stock situations. Reports indicate that Wal-Mart is extremely happy with the progress and the results it has achieved, albeit on a limited basis. For the most part, most suppliers are RFID-compliant only on a limited number of SKUs and not to all Wal-Mart distribution centers.
Mr. Fleming said that RFID appears to work best on a case level when those cases are moving in and out of the Wal-Mart distribution centers on a conveyor belt. In those situations, which include most of the chain's non- perishable items, the RFID chips have a high level of accuracy and can track the whereabouts of the company's inventory as it moves through the system.
Wal-Mart typically does not move its produce through its warehouses on the conveyor belt system at this time. That is just one of the reasons that produce suppliers are not the early adopters of this technology. There are other reasons that will also keep the industry lagging behind a bit. Anytime the RFID concept is explored, the cost factor rears its ugly head. Chips are still very expensive -- 25-30 cents each at least -- and still prohibitive for suppliers of most products, whether they are center store or in the produce department. But that is not the biggest limiting factor for fresh produce. In fact, with the relatively high cost of produce packaging and the relatively high markup at retail, many produce items could absorb the retail price increase more easily than grocery items.
The biggest limiting factor for produce remains the issue of being able to read the radio waves through liquid. The first few generations of RFID readers have had difficulty reading the radio waves as they pass through liquid - or in this case the water than is inherent in most fresh produce commodities. From the standpoint of an RFID reader, a carton of lettuce is a carton of water.
Mr. Fleming said that PMA's RFID Issues Committee is specifically looking at, and working through, the various produce-specific concerns that accompany the RFID concept. High on that list is the readability of the tags. At the next meeting of the committee, he expectes to see a presentation by manufacturers of chips that can be read while submerged in water, let alone through it. Of course, those chips will undoubtedly have a cost issue, but first things first.
Also very important for the industry -- and a very limiting factor at this point -- is the coding system used by the RFID tags. When an RFID reader identifies a tag, it is actually identifying a coding system that is used extensively by center-store products. That coding system is used by very few produce companies. The produce industry must adopt this generic coding system for its products to take full advantage of RFID in the future.
Both Messrs. Spence and Fleming agreed that RFID progress within the produce industry is currently being fueled primarily by the desire to please one of the industry's larger customers. Because of the lack of critical mass, the price of the tags has not come down to such a level that a return on investment is even fathomable at this point. Also, a produce company using RFID tags for only one customer must maintain separate inventories of like product, thus creating a bigger inventory issue than the benefit it derives from the chips themselves. But both men also believe that the return on investment will be there in the future and that the energy spent on the program is well worth the effort.
Mr. Fleming said that for the last two years, almost all the effort expended has been on trying to make the system function properly. Very little time has been devoted to figuring out the return on investment, but he is convinced it is there. He admitted that functionality will still be the top priority in the short term, but he believes that the information that can be mined from an RFID tag will be very worthwhile in helping a supplier manage his or her own inventory and the distribution of his product. He said that each "read event" (every time the product goes through a reader) will give the shipper more information about that product, which will be valuable information once he can focuse on how to use that information.
But while that ROI is down the road, Mr. Fleming said that the PMA committee continues to move forward to put the produce industry ahead of the curve - when the time comes for full adoption of the technology. The committee currently meets quarterly to attack the various RFID issues it has identified. "We usually get through about three or four issues each session," he said.
Both Messrs. Spence and Fleming said that the committee and the information it disseminates provide an excellent way for industry members to get up to speed on RFID.
Bob Spence, vice president of business development for Pacific Tomato Growers Inc. in Wimauma, FL, is chairman of the Produce Marketing Association's RFID Issues Committee. Both he and PMA's RFID expert Gary Fleming agreed that 2007 appears to be a year with more testing and evaluation of the technology rather than implemention even by the industry's most progressive companies.
In separate interviews with The Produce News, both men said there are various factors that are slowing the adoption of this supply management tool, including its cost and some inherent difficulties specific to the produce industry.
It has been several years since a couple of large buyer factions -- most notably Wal-Mart -- initiated the RFID program. Wal-Mart originally asked its top 100 suppliers to be moving in the direction of radio frequency identification by Jan. 1, 2005. The nation's largest chain has continued to ask more and more of its suppliers to be RFID-compliant or at least moving in that direction ever since. PMA's Mr. Fleming said that in 2007 another 700 suppliers have been asked to come aboard, which will bring the total number of companies expected to be RFID participants to 1,400 by one year from now. He said that about 40 produce companies are in this group.
From Wal-Mart's perspective, Mr. Fleming said that the program has to be considered a success. Very early, Wal-Mart identified RFID technology as a worthwhile venture that would streamline its inventory management system and create real savings, especially in the area of eliminating or greatly reducing out-of-stock situations. Reports indicate that Wal-Mart is extremely happy with the progress and the results it has achieved, albeit on a limited basis. For the most part, most suppliers are RFID-compliant only on a limited number of SKUs and not to all Wal-Mart distribution centers.
Mr. Fleming said that RFID appears to work best on a case level when those cases are moving in and out of the Wal-Mart distribution centers on a conveyor belt. In those situations, which include most of the chain's non- perishable items, the RFID chips have a high level of accuracy and can track the whereabouts of the company's inventory as it moves through the system.
Wal-Mart typically does not move its produce through its warehouses on the conveyor belt system at this time. That is just one of the reasons that produce suppliers are not the early adopters of this technology. There are other reasons that will also keep the industry lagging behind a bit. Anytime the RFID concept is explored, the cost factor rears its ugly head. Chips are still very expensive -- 25-30 cents each at least -- and still prohibitive for suppliers of most products, whether they are center store or in the produce department. But that is not the biggest limiting factor for fresh produce. In fact, with the relatively high cost of produce packaging and the relatively high markup at retail, many produce items could absorb the retail price increase more easily than grocery items.
The biggest limiting factor for produce remains the issue of being able to read the radio waves through liquid. The first few generations of RFID readers have had difficulty reading the radio waves as they pass through liquid - or in this case the water than is inherent in most fresh produce commodities. From the standpoint of an RFID reader, a carton of lettuce is a carton of water.
Mr. Fleming said that PMA's RFID Issues Committee is specifically looking at, and working through, the various produce-specific concerns that accompany the RFID concept. High on that list is the readability of the tags. At the next meeting of the committee, he expectes to see a presentation by manufacturers of chips that can be read while submerged in water, let alone through it. Of course, those chips will undoubtedly have a cost issue, but first things first.
Also very important for the industry -- and a very limiting factor at this point -- is the coding system used by the RFID tags. When an RFID reader identifies a tag, it is actually identifying a coding system that is used extensively by center-store products. That coding system is used by very few produce companies. The produce industry must adopt this generic coding system for its products to take full advantage of RFID in the future.
Both Messrs. Spence and Fleming agreed that RFID progress within the produce industry is currently being fueled primarily by the desire to please one of the industry's larger customers. Because of the lack of critical mass, the price of the tags has not come down to such a level that a return on investment is even fathomable at this point. Also, a produce company using RFID tags for only one customer must maintain separate inventories of like product, thus creating a bigger inventory issue than the benefit it derives from the chips themselves. But both men also believe that the return on investment will be there in the future and that the energy spent on the program is well worth the effort.
Mr. Fleming said that for the last two years, almost all the effort expended has been on trying to make the system function properly. Very little time has been devoted to figuring out the return on investment, but he is convinced it is there. He admitted that functionality will still be the top priority in the short term, but he believes that the information that can be mined from an RFID tag will be very worthwhile in helping a supplier manage his or her own inventory and the distribution of his product. He said that each "read event" (every time the product goes through a reader) will give the shipper more information about that product, which will be valuable information once he can focuse on how to use that information.
But while that ROI is down the road, Mr. Fleming said that the PMA committee continues to move forward to put the produce industry ahead of the curve - when the time comes for full adoption of the technology. The committee currently meets quarterly to attack the various RFID issues it has identified. "We usually get through about three or four issues each session," he said.
Both Messrs. Spence and Fleming said that the committee and the information it disseminates provide an excellent way for industry members to get up to speed on RFID.
