Searching for the value proposition in RFID
Searching for the value proposition in RFID
There is little doubt that the Wal-Mart mandate " as it has been called " is the impetus that has propelled radio frequency identification technology into the limelight and produced significant development in the past year.
There also seems to be general agreement that the use of RFID will offer unknown value in many different areas in the years to come, which is a very good thing because for the fresh produce industry, the value proposition as put forth by the Wal-Mart mandate isn?t evident.
?Certainly not at 40 cents a tag," said Gary Fleming, RFID expert for the Produce Marketing Association in Newark, DE. "The value isn?t there [as an inventory aid], at least not for the produce industry. But the biggest applications for RFID are yet to be seen. Then you will start to see the value as companies get involved in things such as time and motion studies, and utilization of resources."
Wal-Mart?s RFID mandate called for its top 100 suppliers to be progressing along the RFID path as of Jan. 1. The concept involves adding a tag to a unit of product so that product can be tracked throughout the distribution system in real time using an RFID reader. For Wal-Mart?s purposes, theoretically, if all the products coming into its warehouses and dispatched to its stores were equipped with RFID tags, it would always have a very accurate account of all product within its system. The immediate advantages of such a system for a retail giant such as Wal-Mart are obvious, even if one looks no deeper than inventory control.
For the shipper of grocery products as well as perishable items, the advantages aren?t nearly as clear considering the current cost of tags, aside from the obvious benefit of remaining a Wal-Mart supplier. Nonetheless, Wal-Mart?s top 100 suppliers are moving toward being RFID-compliant, as are a number of its produce suppliers (see The Produce News, Jan. 24, page 1).
Mr. Fleming said that because of the perishability of fresh produce, inventory control is already top of mind, and so the value of RFID chips specifically for this purpose are not as great as they might be for general merchandise. But he said that given time and research, RFID will nonetheless add real value for the supplier community. He envisions a time when the data provided by RFID can help a shipper cut costs and increase shelf life.
For example, with an active RFID tag on each carton of produce from the field to the end user, a shipper might learn that the average time his product sits in the sun after harvest and before cooling is four hours. "That could definitely impact a product?s shelf life," Mr. Fleming said. "The shipper may use this information to realize he needs a change in his operation to reduce the time between harvest and cooling."
PMA?s RFID expert said that systems have not been developed yet to capture and store all this available RFID data, but he expects that it will happen and that the information will lead to the development of better processes.
?People are currently talking about track and trace, and we can?t even do that yet," he said. "But one day we will devise systems that will gather the data, store them and retrieve them."
It is this promise that has PMA enthusiastic about the future of RFID and about taking an active role in the development of the new technology. The association has become the platform for a produce industry RFID Action Committee, and it is also moving ahead with the development of a Technology Council. Mr. Fleming said that other PMA initiatives will be forthcoming. But others are also working on practical utilization of RFID technology.
John Connor of Global Berry Farms, headquartered in Naples, FL, said that RFID technology does offer some real potential benefits for the grower-shipper community, although he is not sure inventory control on a per-carton basis is one of them. "We are not focusing on the Wal-Mart mandate," he said. "We are focusing on other areas where the technology may be useful."
He said that one application that seems very feasible and rewarding from a value proposition perspective would be for real-time temperature monitoring. Putting a tag on each pallet that can give some type of temperature reading and relay that information through a reader to a computer is certainly of value, he said. When dealing with just one tag per pallet, the price of the tags is not a limiting factor.
In fact, Mr. Connor said that using one tag per pallet for inventory control is also a feasible proposition that would probably fit the needs of most shippers. The issue, as it relates to the Wal-Mart mandate, however, is putting one tag on each carton.
?The price is the problem," Mr. Connor said. "When it comes down, that will be a different story. But at 40 cents per tag, the [return on investment] isn?t there. It might be there for retailers, but it is not there for suppliers, even in the grocery side of the business."
Mr. Connor said that if the price of a tag gets down in the 15-20 cent range, "we could probably do something. We don?t need it to get down to 5-10 cents, but 40 cents is definitely too high," adding that the margins in the produce industry are just not there to justify 40 cents per carton.
Also working on RFID as it relates to temperature recording is industry leader Sensitech. Dan Vach?, vice president of sales, is in charge of the RFID project for the firm. "We are in the testing phase right now, but we have developed the product and it does work," he said.
Sensitech is not involved in creating tags but rather in marrying RFID technology to its existing electronic recording device. A temperature recorder, from Sensitech or one of its competitors, is standard issue on most cross-country shipments of produce.
The standard electronic recording device is typically placed in a carton. It must be retrieved at destination, and the data are downloaded into a computer.
With the addition of RFID, Mr. Vach? said that the device does not have to be retrieved but rather immediately begins giving information through a reader once the truck backs up to the distribution center and the doors are opened.
?The information is immediately available and is even equipped with a warning system that can alert the receiver to any immediate temperature problems," he said.
But even more important, Mr. Vach? said that the device no longer has to be retrieved but instead can stay in the carton of produce throughout the continued distribution of that box " through the distribution center and even into the store " until the time the carton is taken from the back room of the store and unpacked for display.
?During this whole time it continues to record, and the information can be retrieved through a reader or downloaded to a computer," said the Sensitech executive.
Although only one recorder usually accompanies each load so only one carton is being recorded throughout transit from the field to the retail display shelf, Mr. Vach? said that in the aggregate, all this retrievable data should help everyone along the system improve the process.
And as PMA?s Mr. Fleming suggested, this is just another application of RFID technology which will prove its value over the long run.
There also seems to be general agreement that the use of RFID will offer unknown value in many different areas in the years to come, which is a very good thing because for the fresh produce industry, the value proposition as put forth by the Wal-Mart mandate isn?t evident.
?Certainly not at 40 cents a tag," said Gary Fleming, RFID expert for the Produce Marketing Association in Newark, DE. "The value isn?t there [as an inventory aid], at least not for the produce industry. But the biggest applications for RFID are yet to be seen. Then you will start to see the value as companies get involved in things such as time and motion studies, and utilization of resources."
Wal-Mart?s RFID mandate called for its top 100 suppliers to be progressing along the RFID path as of Jan. 1. The concept involves adding a tag to a unit of product so that product can be tracked throughout the distribution system in real time using an RFID reader. For Wal-Mart?s purposes, theoretically, if all the products coming into its warehouses and dispatched to its stores were equipped with RFID tags, it would always have a very accurate account of all product within its system. The immediate advantages of such a system for a retail giant such as Wal-Mart are obvious, even if one looks no deeper than inventory control.
For the shipper of grocery products as well as perishable items, the advantages aren?t nearly as clear considering the current cost of tags, aside from the obvious benefit of remaining a Wal-Mart supplier. Nonetheless, Wal-Mart?s top 100 suppliers are moving toward being RFID-compliant, as are a number of its produce suppliers (see The Produce News, Jan. 24, page 1).
Mr. Fleming said that because of the perishability of fresh produce, inventory control is already top of mind, and so the value of RFID chips specifically for this purpose are not as great as they might be for general merchandise. But he said that given time and research, RFID will nonetheless add real value for the supplier community. He envisions a time when the data provided by RFID can help a shipper cut costs and increase shelf life.
For example, with an active RFID tag on each carton of produce from the field to the end user, a shipper might learn that the average time his product sits in the sun after harvest and before cooling is four hours. "That could definitely impact a product?s shelf life," Mr. Fleming said. "The shipper may use this information to realize he needs a change in his operation to reduce the time between harvest and cooling."
PMA?s RFID expert said that systems have not been developed yet to capture and store all this available RFID data, but he expects that it will happen and that the information will lead to the development of better processes.
?People are currently talking about track and trace, and we can?t even do that yet," he said. "But one day we will devise systems that will gather the data, store them and retrieve them."
It is this promise that has PMA enthusiastic about the future of RFID and about taking an active role in the development of the new technology. The association has become the platform for a produce industry RFID Action Committee, and it is also moving ahead with the development of a Technology Council. Mr. Fleming said that other PMA initiatives will be forthcoming. But others are also working on practical utilization of RFID technology.
John Connor of Global Berry Farms, headquartered in Naples, FL, said that RFID technology does offer some real potential benefits for the grower-shipper community, although he is not sure inventory control on a per-carton basis is one of them. "We are not focusing on the Wal-Mart mandate," he said. "We are focusing on other areas where the technology may be useful."
He said that one application that seems very feasible and rewarding from a value proposition perspective would be for real-time temperature monitoring. Putting a tag on each pallet that can give some type of temperature reading and relay that information through a reader to a computer is certainly of value, he said. When dealing with just one tag per pallet, the price of the tags is not a limiting factor.
In fact, Mr. Connor said that using one tag per pallet for inventory control is also a feasible proposition that would probably fit the needs of most shippers. The issue, as it relates to the Wal-Mart mandate, however, is putting one tag on each carton.
?The price is the problem," Mr. Connor said. "When it comes down, that will be a different story. But at 40 cents per tag, the [return on investment] isn?t there. It might be there for retailers, but it is not there for suppliers, even in the grocery side of the business."
Mr. Connor said that if the price of a tag gets down in the 15-20 cent range, "we could probably do something. We don?t need it to get down to 5-10 cents, but 40 cents is definitely too high," adding that the margins in the produce industry are just not there to justify 40 cents per carton.
Also working on RFID as it relates to temperature recording is industry leader Sensitech. Dan Vach?, vice president of sales, is in charge of the RFID project for the firm. "We are in the testing phase right now, but we have developed the product and it does work," he said.
Sensitech is not involved in creating tags but rather in marrying RFID technology to its existing electronic recording device. A temperature recorder, from Sensitech or one of its competitors, is standard issue on most cross-country shipments of produce.
The standard electronic recording device is typically placed in a carton. It must be retrieved at destination, and the data are downloaded into a computer.
With the addition of RFID, Mr. Vach? said that the device does not have to be retrieved but rather immediately begins giving information through a reader once the truck backs up to the distribution center and the doors are opened.
?The information is immediately available and is even equipped with a warning system that can alert the receiver to any immediate temperature problems," he said.
But even more important, Mr. Vach? said that the device no longer has to be retrieved but instead can stay in the carton of produce throughout the continued distribution of that box " through the distribution center and even into the store " until the time the carton is taken from the back room of the store and unpacked for display.
?During this whole time it continues to record, and the information can be retrieved through a reader or downloaded to a computer," said the Sensitech executive.
Although only one recorder usually accompanies each load so only one carton is being recorded throughout transit from the field to the retail display shelf, Mr. Vach? said that in the aggregate, all this retrievable data should help everyone along the system improve the process.
And as PMA?s Mr. Fleming suggested, this is just another application of RFID technology which will prove its value over the long run.
