Smart Pallets--RFID Journal Interview
One of the leading voices on RFID discusses the technology and how it will impact packaging.
By Chaille Brindley, Assistant Publisher
Date Posted: 2/2/2004
The entire retail supply chain industry is buzzing over radio frequency identification (RFID) technology and its potential to reduce costs. Wal-Mart, the country’s largest retailer, and the U.S. Department of Defense have both announced aggressive plans to use RFID to track case level and unit load shipments. Suddenly, everybody is starting to seriously look at the technology as prices drop and the market prepares for the next big thing.
Pallet and packaging suppliers may get stuck in the middle as shippers look to implement RFID. Tracking technology may forever change the industry and could create opportunity for progressive pallet companies. Mark Roberti, the founder and editor of RFID Journal, shares his insight to the future and how RFID technology may impact the industry. RFID Journal is a major independent news service covering RFID technology.
Reporting on business issues since 1985, Roberti’s work has appeared in Business 2.0, Fortune, The Industry Standard, The Asian Wall Street Journal, International Herald Tribune, and many other publications.
Roberti: The main reason is that they have been working to bring the price down to a level where you can put tags on cases that are going to be thrown away. Previously, tag costs were $1-2, and they had more functionality and memory. They were excellent for tracking reusable containers where the cost is amortized over the life of the asset. But now they are talking about putting tags on cases of product within the supply chain where they are going to be tossed away. Then you need to get down to a lower price point. And Wal-Mart feels that the technology is getting there and this is the time for them to move ahead.
Roberti: That’s true. The
Roberti: It’s not entirely clear. Everything in this industry is very immature and things are in flux. But it is clear that pallets and containers will need to be tracked. CHEP for example has been working with a RFID company called Matrics to develop a tag specifically that can be used on the center block of a pallet and can be read with 100% accuracy. CHEP is hoping that it will be able to charge a little bit more for pallet rentals with the tags because it will be providing a little extra value for its customers. CHEP’s customers can use tagged pallets to meet Wal-Mart’s 100% read rate requirement.
There certainly is a role for pallet suppliers, and a lot of people believe that the manufacturers will eventually begin to push the cost of the tag down to the people below them in the supply chain…Right now all the manufacturers are upset because they are going to put a label that could cost 10-20 cents right now on every box they make. Eventually they are going to go to their packaging companies and say, ‘We want this in the package.’ They’re going to go to their pallet company and say, ‘We want this in the pallet.’
Tag costs will be pushed down through the supply chain. Hopefully, the costs will be shared, and they won’t all be dumped on just one player in the supply chain because everybody benefits. There will be benefits for the container and pallet companies [that own or reuse them in a closed loop system]. You have better tracking of your assets. You’ll know where assets are being lost. It will give them better visibility over their own supply chain.
Roberti: That’s the way I see it. In order to meet the rapid deadline that Wal-Mart has set, which is putting tags on pallets and cases by January 2005, the only way to meet that is for the product manufacturers to put the tags on themselves. They also have to put barcodes on cases. Wal-Mart is not saying that you have to put a RFID tag and you don’t have to put a barcode on any more. Wal-Mart wants both. If you are putting a barcode on now, you are presumably going to imbed the RFID tag in the barcode and apply it at the same time. Eventually, companies that use barcodes that are printed on their cases may very well say that they want the RFID tag imbedded in the packaging.
Roberti: Some tags are going to be reusable. You will probably need to create a specialized tag that can be reused on pallets. You can have it injected molded into a plastic container, or you could have a tag encased in plastic that can be fitted on to a pallet, either glued or screwed onto the packaging. For pallets, you are going to need to protect the tag because forklift tines can easily hit the tag, damage it and destroy it. If you don’t want to be fined for not meeting reliability rates for reading the pallets, you are going to have to protect those tags. That of course, increases the cost of the tag. But you are amortizing that over the life of the asset.
Roberti: That’s not going to be the way it will go. CHEP has already moved on. They have done a lot of research and come up with a tag that can be bent around the corner of the center block and nailed in there. Because the tag is bent, you get the ability to read the tag no matter which way the pallet is facing. Companies may come up with a lot of specialized technology. This is one of the areas that is ripe for spending a little intellectual capital and resources to come up with the best solutions. Some of the companies that make plastic reusable containers are doing precisely that.
Enterprise: Let’s say that you do have a tag on typical wooden pallet, would there be a way to verify to make sure that the tag is still OK to reuse?
Roberti: The tags typically store a serial number…You will be able to record over time which manufacturers are damaging pallets more than others. It’s just simply scanning the tag. If you get nothing back, you know it doesn’t work any more. You may have an electric eye so that as a pallet approaches on a conveyor belt it trips the electric eye which turns on the reader and the reader reads the tag.
Roberti: RFID represents a major new opportunity to add value to just about anything. Pallets right now are dumb. There is no intelligence connected to them whatsoever. By putting microchips on them that can be connected to computers you can now make pallets or containers smart. You could add sensors. Depending on what goods you are shipping, you might combine the shock sensor with an RFID tag so that if the load is dropped, the RFID tag would record that. And when it is read, it would tell the computer system that there is a problem because this container was dropped. That is a value-added service that some customer may want because they are shipping goods that are very sensitive to shock. They want to ensure that products get to customers without any damage. There are plenty of opportunities here. I would compare it to the Internet. When the Internet came along, a lot of people found ways to use it to create new businesses or to enhance existing ones. RFID is no different.
Roberti: The standards issue is still up in the air. That is not totally a surprise. Most new technologies are not born with a single format. Remember Beta and VHS, Macs and PCs. Eventually, the market decides which standard it wants to embrace. It appears that there is significant pressure from end users, standards bodies, and technology venders to create some kind of merged EPC/ISO standard so that everything operates with everything else. There are some big challenges to doing that. You don’t want to add complexity to the systems so that you have to make a bigger microchip which is more expensive, which means that instead of putting a five cent tag on a pallet, the cheapest you can get down to is 10-15 cents. The industry is working through that. They are working together through EPCglobal, the successor to the Auto-ID center. And eventually, the industry will come up with a single, global standard. It’s just going to take a little time.
Roberti: The goal of EPCglobal is to have version 2 of the EPC protocol done and have product on the market by the end of 2005. Wal-Mart has said that it is going to use the existing class 1 and class 0 tags, but it wants to commit to the next version. That is not just an upgrade to class 1, it is an entirely new protocol that combines the existing class 1, class 0 and possibly ISO. My guess is that this goal is a little ambitious. But the timetable is eighteen months to two years.
The whole point is to make the next version of the protocol backwards compatible with the tags that are out there now…A lot of people are looking at readers that can be upgraded remotely. You basically download new software via the Internet to the reader and it is able to read the new protocol.
Roberti: Alien Technology makes the only class 1 tag available right now. Matrics makes the only class 0 tag. These two companies are focused on the low-cost tagging of pallets and cases. Other companies are moving toward having class 1, version 2 tags including Philips Semiconductors, Texas Instruments and other companies. Some vendors have specialized niches. Escort Memory Systems uses 13.56mhz tags, which have a shorter read range but uses them extensively in industrial manufacturing applications.
Roberti: Well, that’s CHEP’s solution. I don’t know what other people are going to do. They may come up with other solutions. But CHEP has spent a lot of time and money on the issue, and that is what they have come up with. The tag is imbedded in plastic and fastened with nails or staples.
Roberti: They will track the location of the goods so that they know where they are…Some product will have motion sensors. For example, if you are in the military and you have a box with a stinger missile in it and you want to make sure that it is not moved without authorization, you might have a RFID tag with a motion sensor. If it moves, it sets off an alarm. The average corrugated box will have a very simple, low cost tag that carries nothing more than a serial number.
Roberti: I cannot image that happening for a couple of reasons. One is that Wal-Mart has the most efficient supply chain in the retail industry. If Wal-Mart believes it can become even more efficient using RFID, that means that the other retailers will get an even bigger benefit. If P&G is putting RFID tags on goods for Wal-Mart, then it is very easy for Target to say, ‘Please do it for us as well.’ The economies of scale – I mean for P&G if they’re doing it for one. It’s best that they do it for everyone. They would rather not manage two sets of inventories. Efficiencies will lead to mass adoption. As Wal-Mart adopts this, the price tag comes down for everyone else. If Wal-Mart buys 10,000 readers, the reader manufacturers can take that money, invest it and use it to lower their costs. That makes it cheaper for Target, Kroger or whoever to deploy.
Roberti: In cases where people are using disposable packaging, they are going to look at it and say if I have to put an RFID tag on a package of bananas that is going to be disposed of, it is going to cost me a lot for those tags. Why don’t I put it in reusable containers and then I don’t throw away the packaging, I recycle it and use it again and again and again. The tag doesn’t cost me as much over time.
Roberti: It depends on the company. I don’t think it depends on size. There will be big companies like P&G who understand that this is a huge opportunity and they are going to take advantage of it. There will be huge companies that don’t see it as an opportunity… and the same will be true of mid-level and small companies as well. The opportunity here for manufacturers is very, very large. And there are a number of things that make this different from barcodes. If the manufacturer puts a barcode on something, it doesn’t help them do a recall. They do have lot numbers. But going back and scanning all the barcodes and finding those lot numbers is very difficult. With RFID, you have a specific serial number. Let’s say that you are an auto manufacturer and you need to recall cars. Today, you might recall a million cars to make sure that you got all the ones that potentially had a thousand parts that were bad. In the future, you would be able to find the 1,000 cars and only recall those. And if you save $10-20 million because you don’t recall a million cars, that’s a big thing.
Roberti: The technology will mature. You’re talking about UHF if you’re tracking pallets. 13.56mhz for the most part will not give you the read range that most people want. It is possible to create a portal where you can read a 13.56mhz tag on a pallet, but generally speaking you are going to be going with UHF, which gives you a longer read range. There will be readers on dock doors. Eventually, there will be more readers on forklifts. Conveyors will have RFID readers. You may have readers in the ceiling of your facility. There as many solutions as there are different types of environments. RFID is very environmentally sensitive. It is different from barcodes. With barcodes you get the laser at close range, in line of sight; you hit the barcode and read it. RFID is not close range. It is not line of sight. And so if your dock doors are slightly different from mine, you are going to need a slightly different solution.
Roberti: RFID is not going to be a technology where you see a huge leap in performance. I think you are going to see small, incremental improvements -- improvements in antennae and chip design. One of the things that is important is how to get power to the tag. Most of the tags are passive; they don’t have batteries. It is very important to get enough energy to the tag to power it up so that it can reflect back a signal. The power consumed by a chip as it is doing c
Roberti: It depends. Wal-Mart has said that the pallet needs to be read 100% of the time when it goes through the dock door. The cases on the pallet do not have to be read 100% of the time. The reason for that is that you can’t read a tag on a case of cans of soup in the middle of a pallet full of cans of soup. You can’t penetrate the metal and get power to the soup case and reflect it back. It’s just not possible. Wal-Mart wants to know what is on the pallet because its suppliers send an advance ship notice that says pallet 12345 is coming and it has 50 cases of Gillette razors on it. Wal-Mart has said that once they break down the pallet and hand scan items, they should be read 100% of the time regardless of their orientation. That means if I point at a case and the tag is on the other side, I have to be able to read through the case…Most people would probably put readers around areas where you are repacking, and those tags will be scanned as loads are assembled.
Roberti: They haven’t said. It is going to depend on a lot of different things.
Roberti: Ultra high frequency, which in the
Roberti: The biggest hurdles are going to be the problems of the capital investment that are needed. For example, manufacturers and retailers are going to have to make significant capital investments in readers. That is a big issue that will slow adoption. The even bigger question for the long term use is the investment that printing companies and packaging companies will have to make in order to imbed RFID tags in packaging.
Roberti: Right now there is a small group of people who know how to do this. Just for Wal-Mart’s top 100 suppliers, there are not a lot of people out there who can help those companies get up to speed, put readers on dock doors or install and tune them so that they can read accurately.
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