Feature Article May 2007

Long before Wal-Mart cemented its connection with RFID in a 2005 mandate, before radio frequency tags began showing up in passports, on luggage and at Target, an innovative print manufacturer was sticking them on lettuce in California.

Five or six years ago, Wes Maughan, president of Pointil Systems in Portland, Ore., helped one of Wal-Mart’s produce suppliers leap into the future with a tracking solution that’s still considered progressive.

“Our customer—Mr. Lettuce—couldn’t read the bar coded tags we sent him,” Maughan remembers. “He ships 5,000 pallets of lettuce a day, and he can’t use the darn bar codes. Now, I know they work, because we test before they leave the facility.” Overwhelming curiosity and a desire to keep the customer happy led Maughan south to Mr. Lettuce’s farm. He found that the blinding California sun diffused laser beams from the bar code scanners, rendering the tags unreadable. So Maughan suggested a radio frequency solution.

RFID tags essentially function as remote bar codes. Each passive tag—the low-cost ones without a battery—contains an EPC code. EPC is “a UPC code with a serial number behind it,” Maughan explains. A UPC, or universal product code, denotes which product it is, as a generic SKU. The serial number identifies the individual item—the fortieth can of Diet Coke produced on March 4, 2007 at the St. Louis facility, for example. Newer versions of the tag can store up to 96 bits of data, which was the serendipitous solution Pointil Systems gave Mr. Lettuce.

“We backed into this solution,” Maughan admits. But once the company found the RFID tags to be a better identifier than the bar coded ones, it began to use the information in a new way. “Lettuce is cheap, so why put an expensive tag on it?” he asks, echoing an industry mantra that RFID is “like wrapping money around a box.” The two companies learned to use RFID for greater efficiency.

“There were three dynamics,” Maughan says. “How far do they ship it, where was it picked and when?” The company scanned the lettuce tags in the field, which wirelessly transmitted the time and temperature data to the main processing plant. As trucks of produce approached, the integrated system lined them up in order: hotter lettuce got chilled first and shipped to local destinations; cooler lettuce could wait longer for washing and was ultimately shipped farther away. Mr. Lettuce realized tremendous improvement in quality and savings.

Eventually, this closed-loop application had its day in the sun: “A year and a half later, Wal-Mart came up with its first application, and our plan became Wal-Mart’s plan,” Maughan says.

A False Start?
In the intervening years, the niche market of RFID has become the buzzword on everyone’s lips. Wal-Mart later expanded its mandate from 100 suppliers to 300 and now 600, but has changed its internal focus: instead of equipping 12 of its 120 distribution centers with RFID scanning equipment (only 6 were outfitted by the Dec. 2006 deadline), it’s working to bring RFID capabilities from 500 to 1,000 of its 3,900 retail stores. The Department of Defense, Target, and the UK retailer Tesco also have implemented RFID solutions, but none so visibly or aggressively as Wal-Mart.

The major roadblocks to widespread implementation of RFID are, of course, cost of the solution and technological kinks. RFID isn’t right for every situation, but it does represent new opportunities for data mining and processing. “Really, RFID and bar codes are complementary technologies,” says Dave Marin, owner of Bar Code Specialties in Garden Grove, Calif. “These are just the tools. The important parts are the data and what you do with them.”

Current reports say passive RFID tags are about 15 cents each, although estimates vary by volume and manufacturer. Still, that’s three times the industry “holy grail,” rumored to be the “tipping point” price of five cents per tag. “Wal-Mart’s suppliers print the tags they need because they have to—it’s a slap and ship,” Marin says. “But RFID is a big train—do you want to be on it or in front of it? Mid-tier suppliers are minimizing costs, waiting to be forced to do more with it.”

Marin points out that Wal-Mart has changed its original RFID rollout schedule, which he thinks is indicative of initial hubris that’s deflated. Maughan is more optimistic about the future:

“Someone’s got to be the 800-pound gorilla,” he says, confident that the technology won’t become widespread without a leveraging force like Wal-Mart. Rumors about a slump in the radio frequency niche market have been rampant since last fall, when chip manufacturer Alien Technologies cancelled its IPO for nine million shares of stock. In February, a Wall Street Journal article cited complaints of many of Wal-Mart’s suppliers, alleging “illusory savings.”

RFID Explained
“RFID” means “radio frequency identification,” which uses low-power (902 to 928 MHz) radio waves to wirelessly transmit information from a tag to a computer system—like bar codes do, but at a distance.

RFID was first used to identify friendly aircraft during WWII. They were popularized in commercial use in the late ’80s and ’90s through Electronic Article Surveillance, or EAS tags. The tags (sometimes “Gen 1”) are passive, and the transponder inlay consists of a silicon chip connected to a copper, silver or aluminum antenna. This can be as small as a grain of sand, but most are an inch or so square. EAS tags hold only tiny bits of data, are generally inexpensive and cannot broadcast.

Rather, when passed through an electromagnetic zone, the antenna reflects information back to the transceiver. Common customers include libraries, bookstores and clothing retailers.

RFID tags have become popular in recent years for several reasons: the amount of information they can hold has increased by an order of magnitude, and they can now be equipped with a battery that actively relays information to transceivers.

Gen 2 tags, the grandchild of EAS, can store up to 96 bits of data, according to University of Pittsburgh research professor Marvin Mickle, who works with electrical engineering and radio frequency. They can be rewritten and reused time and time again.

“We’re focused on the store level,” said Simon Langford, director of RFID and transportation systems at Wal-Mart in a February interview with Computerworld. “If we focused internally [at the distribution centers], it would provide no value to our suppliers.”
“I think they’re committed to it; they’re just better able to find immediate ROI on a different use,” Maughan says. “Wal-Mart realized that the project is going to take many, many years, and their quick payback is controlling inventory turnover with perishable items like food at the retail stores.”

RFID might be an innovative solution, and it might provide a great deal of new data for manufacturers, suppliers and retailers. But the fact remains that cost savings won’t be realized without economies of scale, and widespread adoption won’t happen without cost savings: a catch-22.

“The more economical way to do this is with closed loop applications,” Marin says, which may eliminate some logistics headaches with versions of scanners and computer software. Closed loop applications, which keep the data in-house, are more likely to be profitable.

Repacorp, a Tipp City, Ohio, manufacturer that analyzes RFID savings and inserts the chips into traditional print documents, agrees. “It’s positive for certain applications,” says Rochelle Heinl, account manager. “The right solution is one with a security value, or a time value, not in commodity pricing. We’re still very far away from that.” Fifty years or more, she estimates.

Active Tags
The other hurdle to surmount in implementing RFID is the technology: the tags can be difficult to read. Most passive tag readers have a range of only a few feet, and orientation on a vertical or horizontal axis could cut the readability rate in half. Nearby water and metal can send signals haywire. “Unfortunately, we’re going to strip Superman of his cape,” Maughan laughs. “This is not a silver bullet.”

Some creative users have learned to put the tag readers in unique positions, or have invested in more of them. AeroScout, a company in San Mateo, Calif., has a better idea: use WiFi.

AeroScout’s closed loop applications meet a different marketplace need: asset, not inventory, tracking. They are admittedly more expensive to implement—$50 to $70 per tag—but remain unaffected by water, metal or other interferences. The tags use the WiFi standard frequency, 2.4GHz. In comparison, ultra high frequency (UHF) RFID tags operate on the lower 902-928 MHz frequency, above cellular phones and below satellite radio.

“We emphasize: active RFID is not a substitute for bar codes, whether they’re our WiFi tags or not,” says Josh Slobin, AeroScout’s director of marketing. The company works with systems installers such as IBM, HP, NEC and Phillips Medical to keep track of items in an area where there are already WiFi access points, such as a hospital, airport or manufacturing facility.
The system uses radio frequency, but at a much higher level, with a range of up to several hundred feet. The tags, about the size of a credit card and with a 4-year battery, are re-writeable. They actively “push” a signal to nearby readers, which are similar to WiFi equipment used for home Internet connections.

“You put these tags on people,” Slobin says. “Or IV pumps, or heart monitor machines, or vehicles or equipment. Think of this like a GPS system but within a building.” The tags are more expensive, but that cost is offset by the value of the assets monitored and the low cost of the system, if a WiFi network is already in place.

Bar Codes Be Gone?
Next month, the International Air Transport Association, an airline industry organization, will vote on mandating RFID tags on all luggage. This could reduce lost luggage 10 to 20 percent, but there are price roadblocks. Luggage bar code tags are a few cents apiece; RFID tags can be more than $1. Airports in Las Vegas and Hong Kong have successfully implemented RFID programs; the same idea faltered in Denver, San Francisco and Seattle. The airline industry is just one of many hesitant RFID adopters, in fields from security to manufacturing. Old, reliable, cheap bar codes? Or new, data-rich, expensive RFID?

In some markets, bar codes have taken strides forward. A group of cell phone companies, including Nokia, Ericsson and Vodafone, met in London in February to consider standards that would allow cell phones to read “invisible bar codes.” These bar codes are actually yellow ink overprinted on photo images, which is difficult for the naked eye to detect but easy for bar code readers and camera phones to pick up. Most current American cell phones would have to download a Java application that would translate the bar code into a URL, automatically opening a website in the phone’s browser. That website would play music, video or display more information.

“Invisible” bar codes have been around since the 1990s, but weren’t popular because almost no one carries a bar code reader around, much less a web-enabled one. In the last year, the technology gained worldwide press after tech company Fujitsu embedded bar codes in a music club advertisement circulated in Japan, according to BBC News. Audi recently placed ads in French magazines with the same technology. Readers were asked to snap pictures of an area on the ad, and when the application opened, they saw video of the Audi in motion. A UK newspaper is considering printing the codes on its Sunday edition, which would link viewers to video highlights of sporting events.

A McLean, Va. inventor has also offered a solution that may compete with RFID, called CRIS, or chipless remote identification. Using micropower radar—the same frequency that some automatic doors use, says inventor Mort Greene—his special paper has applications in security, anti-counterfeit and tracking.

Acronym Soup
Stumped by electronic-gadget shorthand? Here’s an abridged primer to the jargon:

EAS—Electronic Article Surveillance; older versions of RFID tags. They are passive (no battery), just an integrated circuit and an antenna. They hold very little information and are use in closed-loop short range applications.

EPC—Electronic Product Code. It’s the serial number encoded in a newer-version RFID tag; the code that allows unique identification of individual items.

Gen 1—Not often used, can refer to EAS tags.

Gen 2—The EPC global standard for the new, data-rich tags.
Middleware—Software program managing the system. In the RFID world, this is software on a server that filters data from scanners to central applications.

UHF—Ultra high frequency. From 300 MHz to 3 GHz, but denotes RFID tags that operate between 866 to 960MHz—those are Gen 2. They can send information faster and farther than high- and low-frequency tags, but still can’t pass through water or metal.

Sources: RFID Journal Glossary, Dr. Marvin Mickle, Tech Encyclopedia by the Computer Language Company.

Microscopic flecks of aluminum, called “taggents,” are embedded in paper products, glass, rubber or plastic. Depending on the frequency and the way the paper is “read” by the scanner, each tag or document has a unique “signature” or number. These numbers are chaotic and irreproducible, explains Bob Hakman, CEO of Diversified Labeling Solutions in Itasca, Il. Once that unique number is known, it’s secure, meaning that it’s impossible to embed the aluminum flecks in the exact same position a second time. Unlike most anti-counterfeit measures, it can’t be forged by copying, because the metal must respond to radio waves.

“We’re proposing an alternative to RFID,” Hakman says. “That doesn’t mean it couldn’t be used in conjunction with RFID, but it’s part of a solution. It’s not even a system sell, it’s a concept sell.” Most end users won’t acknowledge a counterfeit problem with their brands, he says, so it’s difficult to find the right customer and explain the options. But that day will come, he says.

In the Meantime
“Ultimately, RFID will see double-digit growth over a longer period of time,” Marin says. Right now, profit remains in custom niches, closed loop applications and high-value items, with government agencies like the Department of Defense and the FDA nudging the market along.

Deeper integration of RFID middleware with shippers’ back-end accounting systems has the potential to solve other business problems, too: for example, creating a pedigree, or chain of custody, for certain goods. RFID can capture information about where a product’s been and for how long, which could be useful in security applications and for environmental certification. It could follow up on a customer’s claim that what he ordered was not in the box, and where the items went missing.

“When they invented bar codes, did they get rid of numbers?” Maughan asks. “Of course not. The people with really good bar code systems, like UPS and FedEx, will be the last to convert. The pharmaceuticals industry will be the first.” In the years until then, companies will slowly try on RFID for size.

“Pharmaceuticals will be the first thing you see on the shelf with an RFID tag,” Maughan says. “People complain that this is a price-competitive, commodity market, but you try to sell something to Proctor & Gamble that isn’t price competitive! We’re still back on the cutting edge,” he laughs. “That’s what happens before the bleeding edge.”

Rebecca Trela is assistant editor at Print Solutions magazine. Email comments to rtrela@PSDA.org.

RFID: Wait and See