Supply Chain Management: RFID Gains Ground

Mandates from retailers around the world are a driving force behind the adoption of radio frequency identification (RFID) in the supply chain. But mandates do not tell the whole story. In fact, RFID is becoming the solution of choice for food processors seeking benefits beyond compliance in inventory optimization.

Concerns about food contamination in processing, shipment or storage or through accident or bioterriorism make up just one factor propelling RFID adoption. As consumers around the world become increasingly concerned about the quality and safety of their food, RFID is growing in importance in food processing as a critical means of securing the food supply chain. Mad cow disease (bovine spongiform encephalopathy, or BSE), the avian flu pandemic and other international biological assaults are among the other factors. Finally, consumer awareness about food quality, nutritional content of ingredients, genetically modified foods and a move towards more organically grown foods embody the rest of the driving forces.

RFID can provide track-and-trace capabilities across the entire food value chain. For example, the sources of every ingredient in a single production lot can be traced. With RFID it’s possible to track where, how and by whom it was handled at each step from point of origin to processor, wholesaler, distributor and retailer.

However, the cost of RFID stands in the way of widespread implementation. Passive tags in the ultra-high frequency (UHF) band, the kind used for supply chain tracking of pallets and cases, range in cost from 20 to 50 cents each. The cost of applying the tags can raise that expense to a dollar or more. Hardware infrastructure can run from several thousand to tens of thousands dollars.

Not surprisingly, as in other areas of industry, RFID implementation is first occurring at the periphery, where the immediate impact to operations is less significant but where the immediate return on investment is more obvious. The food processing industry is beginning to adopt RFID tagging to uniquely identify each object and likewise to uniquely identify the successive steps in product transformation up to and including the point of purchase. Cost prohibits item-level tagging for the moment, but costs will be reduced in the future with the development of promising technologies such as ink-based tags as well as operational efficiencies such as tags incorporated into packaging. RFID Basics RFID technology is a relatively simple means of communication between a computer chip and antenna. The information on the tag—a unique identification number identifying the tag and optionally other information—is transmitted on request to an RFID reader. Within the supply chain, the most common application of RFID today is the communication of an Electronic Product Code (EPC). Active tags contain a battery and transponder and emit their information over a distance of up to 30 meters. Passive tags contain neither and respond to a radio signal emitted by reader, also called an interrogator. These tags have a communications distance of less than one inch to up to 10 meters. Data is then sent from the reader to a computer. From there it may be incorporated into a software application such as a warehouse management, enterprise resource planning or a real-time locating system. Retail Driven Technology

A number of major consumer-goods retailers—such as Wal-Mart, Metro and Tesco—have started implementing RFID to help them: 1. Reduce product handling costs across the supply chain from raw materials handling to final sales in retail outlets 2. Improve stock level accuracy and reduce out-of-stock situations by speeding up reporting and frequency of stock taking 3. Reduce theft at all levels in the supply chain 4. Establish a base from which to build systems that will one day be able to track the entire life cycle of a single item. Manufacturers are having to respond to retail-driven initiatives, such as those of Wal-Mart, Metro and Tesco, by complying with EPC standards, generating unique IDs for each unit they produce, and attaching RF tags to their products before shipping them to retailers. Other than satisfying the demands of retailers, there are many other reasons why food and beverage companies should take a proactive approach to RFID. For example, some companies in the dairy, beverage and bakery industries—such as the Swedish dairy company Arla—have discovered the value of RFID as a means of tracking valuable steel carriers and other equipment. These applications of RFID technology are just the beginning. Take a look at your supply chain and consider how RFID might help you enhance your efficiency and get ahead of the competition. BY INTENTIA Traceability and more.... Ranchers and beef processors in the state of Kansas are using RFID to track and monitor beef cattle in transit in order to maintain high product value and minimize herd loss due to stress. Livestock trucks and processing sites have been equipped with readers to track cows individually with Global Positioning System (GPS) location, serial number, and a timestamp. The project is now in pilot, and over the next several months, the trucks will transport 20,000 head, each outfitted with a passive RFID tag, to beef processors in the state. As cattle move on and off the trucks, the system uploads tracking information via cellular connection to a central database using readers located on the trailer loading doors. Other information uploaded includes transaction number, load location, truck and trailer numbers, and date. The information is integrated with the trucks’ existing communications system used by the logistics managers. The experiment is funded by a $800,000 grant from the US Department of Agriculture to the Kansas Animal Health Department and is part of a nearly $12 million nationwide test program. The project was created by Osborne Industries, Digital Angel Corp., and researchers at Kansas State University. “Animals are perishable. They get dehydrated,” notes Dr. Dale Blasi, professor and beef specialist at Kansas State University. Even mild dehydration can cause changes in the meat that reduce its market value or make it unsuitable for sale. “With this system, we have better scheduling of unloading and can minimize stress to the herd.” Blasi anticipates that the tracking data will yield other benefits. “With the system in place, we will be able to collect data we can’t collect now, and then we can do data mining. We don’t know what we will learn from that data yet.” “We’re assuming that the packaging plant is willing to pay a premium for the load of perhaps $20, especially with the opening of the Japanese market for those who meet certification requirements,” says Blasi. Japan is a large importer of beef, but Japan won’t open its market without a complete end to end animal tracking program in the US. In the future, such a system may be part of a national tracking program designed to increase safety in the US food supply. Animal tracking systems may also decrease the cost of tainted-meat recalls and improve production efficiencies. “RFID in animals is an incredible market and potential,” says Jeff Schaengold, president of RF Commerce. “If a rancher can somehow be advised of an animal going into distress early enough, the rancher can take action,” Schaengold says. “This is a significant ROI in the food chain.” Monitoring quality of produce and frozen foods Food service company Sysco and 3PL Solutions completed two pilots last fall, one for frozen foods and one for fresh foods. The 3PL Solutions Distribution Access eXception (DAX) system includes application software, Alien Technology’s battery-assisted passive technology, with multi-point sensors and options for Infrared Data Association communications, GPS, and integrated RFID data capture. It combines RFID tags with a variety of sensors that measure temperature, humidity and other factors to determine whether food is handled safely and securely. Tag data is captured as cases pass through a portal and that data is written into a single tag that travels with the driver, much in the way of a manifest. The asset tags can be recycled for five years and cost about the same as “the Class 1 tags on two pallets on the first shipment,” says Rick Clemons, vice president of logistics company 3PL Solutions. “We knew that while best practices weren’t being followed, now Sysco has proof and it has proof of container integrity,” says Clemons. “Nothing went according to expectations for many reasons, mostly human factors and best-practice reasons.” Among the findings were these issues: • trucks that were not cold enough before product was loaded • trucks waiting for hours to unload with refrigeration units turned off • refrigeration unit cycles that allowed product to exceed required temperatures • trucks with significant temperature changes in different areas of the container While both frozen foods and fresh produce are logical targets for RFID, each poses technical challenges to RFID communication. The primary obstacle with frozen foods is moisture in and on the label. The primary obstacle with fresh produce is moisture within the product itself. Clemons explains: “As the label accumulates moisture, its ability to transmit the signal begins to deteriorate.” In an ideal world, temperature is properly controlled where frozen products are staged for loading or off-loaded from a truck. And in that same ideal world, moisture is not generated either within or on the label. “If that integrity is breached, then you have a problem,” Clemons says. The solution is easy, but time-consuming and cost-inefficient: return the case to the freezer and refreeze it. “The problem today is that 8% to 14% of goods are damaged,” says Tim Shideler, co-founder of VI Agents, a software firm whose applications are used to track products using RFID data. This damage means that as much as 8% of the total value of retail foods is lost across the supply chain. “Suppliers and retailers are both looking for means to account for and track shipments internationally,” reports Shideler. “They want to be able to use smart tags plus time and temperature data logging plus the ability to put additional information such as where the product is located on the pallet.” “What you’re trying to accomplish is increase quality of products and reduce spoilage, and account for who in the value chain is responsible for the damage,” Shideler says. Data Integration is Key RFID-compliant suppliers to Wal-Mart are now receiving the EPC number, associated times, dates and locations from every tag and every read. Tags are read at a dozen or so points from the dock door to case box disposal. The information is relayed as block data via Wal-Mart’s Retail Link portal. The EPC number permits associations back to other data at the supplier or the retailer. The resulting mound of data can overwhelm a typical information architecture. The biggest challenge now isn’t the volume of data, which can still be handled by large database systems—it’s the data cleansing and elimination of spurious reads that’s important. Peter Riemen, executive vice president for T3Ci , a business intelligence company, reports that companies are “all over the map, from very advanced to not. Some people have succeeded in pulling this together into a centralized system. Others are just housing it.” Managing the amount of data at the level of detail created by RFID tagging requires that companies add a layer of data to the enterprise data warehouse model they are currently using. “It’s just as important to keep bad data out as it is to keep good data in,” says Richard Beaver, director of global retail and RFID for Teradata, a division of NCR. To take full advantage of the data RFID can generate, it all comes down to RFID infrastructure. “The critical part is first getting the infrastructure right. It’s more than a middleware or integration issue. If you don’t get the infrastructure right from the beginning, then the data isn’t right,” says ODIN technologies president and CEO Patrick Sweeney. Telephone service is his analogy. “You can have the fanciest phone in the world, but if the dial tone works only half the time, it doesn’t matter how many people you can conference-call in.” "Don't forget the back end," adds Jeff Miller, director of supply chain solutions for Unisys Global Public Sector. Datamonitor agrees, it says the ultimate crux of using RFID as a competitive advantage will be the manipulation of the data it provides. Companies that are able to translate tag locations and associated data into intelligence to support, or even redefine business processes will see quantifiable results in multiple areas of their organization. With a need to transform this data and pass it to enterprise applications, the emphasis is therefore on RFID middleware. According to the intelligence group : • RFID applications are best broken down into six functional groups: production line processes, labor applications, asset management, ordering and distribution control and managing upstream and downstream data. • Datamonitor expects very few manufa cturers to revolutionize their supply chains with RFID in one go. For those facing customer mandates, the obvious choice in order to meet strict deadlines is to implement pallet- and case-level tagging. While Japan’s market share is twice that of China in 2004, after 2009 the economic giant takes over with a superior share of 33% compared to 28%, equating to an extra $50 million revenue opportunity. Japan’s historic strength and its upbeat approach to manufacturing and the use of technology means that it will be a key country in the adoption of RFID. RFID Enables Efficient Food Production Danish snack manufacturer KiMs knows first-hand how the adoption of RFID can deliver value to the bottom line. The company makes and ships approximately 100,000 pallets of crispy snacks per year. It has completed a pilot project that included upgrades to the company’s demand planning, event management and warehouse management systems, and the addition of passive RFID. With the automatic data collection capability of RFID, the company is able now to monitor pallets of finished goods as they move from production to third-party warehouses, and to know the exact location of products within the supply chain. By using RFID, the company has been able to trim inventory levels at its distribution centers because it has more accurate information about how much product is on hand. Reluctance to Embrace RFID • Technology choices are too complex. To address this concern, ODIN technologies has issued a benchmarking report providing end users with greater insight into how well tags actually work and what criteria should be considered when making tag selection decisions. The 2005 report is based on analysis of 14 leading electronic tags for RFID. ODIN, a leader in the physics of RFID infrastructure testing and deployment, studied EPC tags used to support the Wal-Mart, Target and US Department of Defense RFID programs, and provides a scientific and objective comparison of how leading tags work with standard packaging materials. • There’s no ROI. At current price points, it’s true that tag costs alone can exceed the entire profit margin on a case. There’s no ROI in slap-and-ship compliance. But experts caution that companies must recognize that the business value achievable from the technology may not be known at the onset. “Most of the value we see, in end-to-end supply chain visibility, operates somewhat independently of tag price. The value of track and trace is not dependent on tags hitting a certain price point, it’s the cost of the tag relative to the cost of goods,” says Jeff Miller, director of supply chain solutions for Unisys Global Public Sector. • New Class 1, Generation 2 technology products will be out soon, rendering current technology systems obsolete. The new Gen 2 tags and readers offers several advantages including encryption, a potential for deactivation at point of sale, and greater global compatibility. Products meeting Gen 2 standards are beginning to appear already. In the meantime, vendors selling current products are warranting that their products can be upgraded to Gen 2 through new software and firmware at little or no cost.