RFID Gazette

The level of efficiency achieved with the currently structured supply chains is a function of the existing standards, practices, and technologies. Timely access to information in order to prevent accidents and proper steps to mitigate damage can save companies a lot of money. RFID tagging helps companies to be in the know at all times and thus enables better management. Supply chains affect not just businesses but also the socio-economic aspects of nations.

TAV is crucial to industry because of the following reasons. According to figures provided by WHO, close to 32 million children below the age of five yeas die due food-related illnesses, several of which can be traced to a faulty supply chain. Food poisoning causes 5,000 deaths every yeas and a lot of these casualties are related to the improper management of convenience foods. Almost three fourths of a product’s retail price is in the supply chain process. One-third of stockouts that occur at retail stores involve products that are available at the distribution center. Incorrect assessment of the stocks in hand leads to overstocking to the tune of $ 50 billion globally. With current logistics capabilities, products such as vaccines, glass, etc that need to be handled with care are sometimes mishandled, i.e. they are either dropped or overheated. This leads to an increase in the cost that is ultimately borne by the consumer. In the healthcare sector, there is no quick and reliable monitoring technique to check whether tools have been sterilized. Gray markets are a major source of loss for the manufacturers and products purchased in the gray market can be dangerous to the consumers. This is because of differences in regulations involving voltage and radiation levels.

The global FMCG industry accounts for sales of around $ three trillion and has to suffer losses due to shrinkage to the tune of $ 60 billion. Europe suffers shrinkage losses worth $ 18 billion per annum. In the US, instances of theft by staff and in the supply chain are more than the instances of theft by customers. Apart from the cost of goods, shrinkage leads to expenses in improving security, filing and paying claims, increase in insurance premiums, etc. RFID, with its promise of Total Asset Visibility, can help to overcome the shortcomings that exist in the supply chains today.

Total Asset Visibility (TAV) projects can achieve their purpose by using license plate tags as well as data-rich tagging methods. RFID tags that can be remotely written are capable of carrying up-to-date information that includes more than just the item ID, for example, it may include service manuals, warranty status, security features, etc.

In large-scale TAV projects where tag cost can be a constraint and for time-critical applications, the data can be kept on a network. Tags with processing capabilities are useful for reasons such as providing updated information even when the network is down, high cost of network programming, ensuring redundancy, low network speed, etc.

A universally accepted standard is key to the deployment of any technology at a global level and RFID is no exception to that. idtechex.com reports:

The relevance of RFID, including smart labels, to virtually every sector of industry, commerce and services where items and data are handled points to the need for appropriate standards.

Read More: Open and Closed RFID Systems

A reduction in costs is the main driver of RFID adoption in the retail sector. The cost reduction is going to be a result of automation, reduced shrinkage, better stock management, reduced time to market, etc. Item level tagging will help businesspersons to target these activities in a very direct manner. Immediate benefits of implementing item-level tagging in retail include managing stock-outs with items such as limited edition books, souvenirs, and fashion accessories, which are high-stockout items.

In the retail industry, stock-outs can account for as much as 4% of the total sales and up to 11% of the high selling items. A stock-out can lead not only to a one-time loss of sale; it can result in a lost customer who may switch over to a competitor. Tagged items are easier to locate; this helps the staff to deliver prompt service. An empty shelf resulting from a stockout can be filled with the next best item. In-store uses of RFID are based more on bettering the existing processes and improving their efficiency rather than revolutionizing the process, for example, monitoring traffic pattern and studying consumer behavior becomes easier with RFID.

According to Lee Scott, president and CEO of Wal-Mart, RFID will help to improve visibility in the supply chain, which will reduce inventory costs by $ 1 billion. According to analyst Erwin De Spielgelere, Wal-Mart could save up to $ 8.35 billion. The elimination of manual scanning at the pallet-level will result in labor savings worth $ 6.7 billion; reduction on out of stock will save $ 600 million; $ 575 million will be saved due to reducing shrinkage and better administration.

Consumer packaged goods (CPG) look upon RFID as a means to improve the visibility of goods in the supply chain and thereby improve inventory management. In contrast, retailers are keen to utilize RFID to reduce out-of-stock and shrinkage. According to the FDA, as much as 20% of the food items have to be discarded due to spoilage. Item-level tagging helps to locate the causes and the points in a supply chain where spoilage occurs. Almost all the benefits that result from RFID implementation get passed onto the consumer, this is because retailers try to reduce their margins wherever possible to try and stave off competition.

A fully implemented item-level tagging system can help in reducing the following costs in the CPG industry. Shrinkage due to theft, damage, etc and expiry of perishable items cause a global loss of $ 60 billion each. Stockouts lead to losses to the tune of $ 120 billion per year with a third of the stockout occurring at the retailer warehouse. Thus, by contributing to reducing costs and increasing sales in a very direct manner, item-level tagging has the potential to impact businesses in a major way.

China’s national standards plan 2005 will include the ISO/IEC 18000 RFID standards. The Article Numbering Center of China (ANCC) and the Electronic Industry Standardization Institute of the Ministry of Information Industry (MII) will be the two main bodies involved in the activity of transforming the ISO standards into a national standard, which will be completed by 2006. This should facilitate the easy acceptance of RFID by the Chinese industry.

By the year 2025, the market for printable and organic electronics could touch $ 300 billion. idtechex.com reports:

Enormous markets will be created where conventional silicon chips cannot go today because they are too costly, large and brittle. A full range of electrical and electronic components will be printed - from transistor circuits to displays, power and even speakers.

Read More: The convergence of Printing and Electronics

Industry experts on RFID technology had remarked that affordability was the key to wide spread adoption of the technology. Their words may soon be proved right with two companies announcing a cut in the prices of their RFID products. Alien Technology and Avery Dennison have both reduced the price of their RFID tag components. Though the experts believe the cut is not enough, the new prices are expected to succeed in drawing more and more customers, especially those who are not too techno savvy.

ABI Research, an organization that monitors and evaluates RFID markets, is of the opinion that the price cut along with the recent announcement of EPC Gen 2 will definitely have a positive impact on the demand for RFID technology. ABI Research expects both Alien technology and Avery Dennison to lead the others into cutting their prices and starting a new trend.

RFID technology has also shown remarkable improvement in terms of performance. The development of new software has encouraged non technical users to explore RFID products. If along with these encouraging factors, a cut in the price is also announced it will definitely push up the demand for RFID. morerfid.com reports:

"These new low prices may represent loss-leaders,"comments Erik Michielsen, ABI Research's director of RFID and ubiquitous networks. "But when you tie them to the new products and services offered by software companies to help end-users make sense of their RFID data, and to the recent spate of EPC Gen2 announcements, we may have three-headed 'benevolent monster' that will promote demand."

Read more:Price Cuts Will Speed RFID Adoption

A new software standard known as the Application Level Events (ALE) was sanctioned by EPCGlobal, the organization responsible for promoting the global adoption of Electronic Product Code (EPC) technology in collaboration with EPCGlobal Network. The new standard will establish an approach by which EPC-enabled software products will collect, manage and route data generated in the supply chain.

The new software was developed by the EPCglobal Software Action Group along with  100 other interested companies. Considering the wide scale adoption of RFID in industries ranging from livestock to automobiles, the new standard seeks to define a globally accepted method of filtering and collecting EPC information. The new software will have no royalty. EPCglobal network believes the new standard will promote the development of new systems that will help business houses to achieve more.integratedmar.com reports:

"This software standard will facilitate the creation of a standardized approach for filtering and collecting EPC information within the EPC-enabled enterprise, allowing the development of systems that will achieve business value more effectively and efficiently."

Read more:EPCglobal ratifies software standard for EPC/RFID

Tracking the origin of the food on the plate has become a high priority issue with several governments due to outbreaks of diseases such as avian flu and mad cow disease. The threat of bioterrorism is another reason that food producers and the livestock industry have to face strict regulations. However, those in the food and livestock business are also aware of the swift paybacks that can result if RFID is employed.

MacDonald, which is one of the largest sellers of food items, has mandated full traceability of the meat used in its products and its suppliers have to comply. Wal-Mart too has laid down mandates for pallet-level tagging and a lot of these pallets contain food items. RFID tracking in the livestock industry should consider the following points:

• The level of track and trace required.

• Issues to be tackled, such as theft, outbreak of disease, bioterrorism, contamination, improvement in supply chain, etc.

• Accurate animal identification as well as identification of food items. The market potential of these two is linked with each other and with future legislations that will stress upon complete traceability.

Implementing RFID will help in identifying and isolating sick animals before the disease can spread and wipe out the entire livestock. Easy traceability of food items will make item recall easier and less costly. RFID can play a major role in improving the efficiency and transparency of the supply chain and in gaining the confidence of the consumer.

Currently, up to 20% of food items reach the stores after their expiry date has passed. The real-time information provided by RFID should help to contain these events by bridging the gaps that exist in the supply chain. RFID will play a prime role in achieving traceability objectives in the livestock industry.

Livestock can be tracked with the help of visual ear tags, bar-coded ear tags, RFID ear tags, DNA testing, retinal scans, etc. The meat in the slaughter houses can be tracked with the help of RFID tags, molecular bar codes, etc. At the retail stores, paper bar codes, smart packaging, etc can be used to track products.

Smart tags and labels can be used by the pharmaceutical industry to reduce food-related deaths and illnesses and deaths due to non-compliance with medication. The radio tags can play a big role in controlling the proliferation of spurious drugs and smart packing can alert users as the medication and food items approach their expiry date.

Given that 10% of all drugs are spurious, RFID’s track and trace capabilities can be used to eliminate product diversion and save peoples’ lives. Food can be tested for disease causing pathogens by labels that are printed with ink that changes its color under certain conditions. RFID-enabled containers keep track of the medicine packages added or removed from them. Patients can be prevented from consuming contraindicated medication by RFID systems. RFID can also be used as a drug-delivery mechanism, for example AstraZeneca uses a chipless RFID tag to administer the correct dose of an analgesic that it produces. RFID is also used on electronic skin patches that aid in the penetration of ointments. Smart healthcare packaging has the potential to account for almost 10% of the $ 86.3 billion healthcare packaging market.