A sizeable amount of frustration is evident in many of the radio frequency identification (RFID) pilot tests currently underway. Wal-Mart Stores Inc. (www.walmart.com) is the focal point of those tests, as the retail giant is driving RFID implementation with its mandate that the top 100 suppliers to its three Texas distribution centers affix RFID tags to cartons and pallets by January 1, 2005.
"The testing process is generating more questions than answers," observes Don Mowery, director of e-business supply chain at Nestle Purina PetCare (www.purina.com).
Mark Engle, senior director of IT for Campbell Soup Co. (www.campbellsoup.com), is one of many trying to find some of those answers. Campbell is testing various products at its "We Pack" facility in Paris, Tex. The RFID tags Campbell is using in the tests with Swanson Chicken Soup, Prego Spaghetti Sauce and some other products cost between 19-60 cents apiece.
The information Campbell puts on the tag is dictated by EPCglobal, an international standards group affiliated with the Uniform Code Council. This information will help the soup maker track product cartons and pallets, as they will help Target Stores, Albertsons and the other retailers, most recently Best Buy, who are now following in Wal-Mart's footsteps. Barebones Class 0 and Class 1 EPC standards are already published, and are being used by some consumer goods companies to meet the Wal-Mart deadline. However, these tags — referred to as "slap and ship" because of their lowtech nature — represent all cost and little to no benefit to the packager.
"We are looking at these projects as cost-plus for us," Engle states. The data on the low-tech tags, he notes, will not help Campbell internally, in terms of improving its business processes. "ROI is not evident for the foreseeable future."
The introduction of what are being called Gen2 UHF tags may change the ROI equation for the better, although probably not immediately. Mike Meranda, president of EPCglobal U.S. (www.epcglobalinc.org), says the standard, which he hopes the EPC board of governors will approve by the end of 2004, will have some "critical advances," including global interoperability and "significant performance enhancements."
Asked at the recent EPC Global Conference 2004 whether the Gen2 standard would result in semiconductor companies being able to produce cheaper RFID chips, which would both increase the user base and improve prospects for positive ROI, Meranda answers, "That is hard to predict." But he adds that he expects RFID chips to be sold much like television sets and game boxes, with different models at different prices. "We want to create a competitive marketplace," he explains.
Tony Sabetti, director of retail supply chain products for Texas Instruments (www.ti.com), says that initially the cost of the Gen2 tags with minimum functionality — 96-bit identification and track and trace capability — will be about the same as the Gen1 tags because the silicon die size is about the same. "But in the long term, their price will decrease because they have an open architecture, and more suppliers will start producing them."
Besides global interoperability, the main advance in Gen2 tags and readers will be their "anti-collision" properties. This means there is less chance of interference when two different readers are in close proximity, for example, mounted on a warehouse door and on the belt on a warehouse employee passing through that door.
Sabetti adds that TI and chip manufacturers will produce a variety of RFID tags, some with added features such as 256-bit identification, which means the tag is more secure.