Bar codes are still getting the job done

Although you wouldn't always know it by the amount of attention given to technology initiatives, not every company needs all the latest bells and whistles to capture information from vendors and pass data along to customers. Many small to mid-size companies, such as Pendleton Woolen Mills, are taking a wait-and-watch approach to evaluating data capture technology.

For now, Pendleton's planning and control staff operates from a simple spreadsheet. Orders are sent to a factory. Updates arrive via e-mail, fax and phone. There is no radio frequency identification (RFID) and no electronic data interchange (EDI).

"Updating electronically in real-time would be great," says Steve Dethlefs, distribution manager with Pendleton, "but it's hard to cost justify."

With on-time delivery to customers at 95% — well above the apparel industry norm — Pendleton satisfies its customers. The garment maker, known for its fine wools, has an internal goal to deliver 95% of orders within 10 days, far more efficient than the apparel industry's typical 30-day delivery window. Even when large retail customers such as May Company and Dillard's demand a tighter window — after all, fashion products are perishable — Pendleton has no difficulty fulfilling in seven to 14 days.

Pendleton contracts with offshore vendors to meet required departure dates. Those vendors phone, fax, or e-mail shipment status, including container number and vessel, allowing Dethlefs to track ship movement.

"With the small volume we do, manual tracking is sufficient," he adds.

However, Pendleton ramps up the use of technology for outbound information flow. The company scans bar codes on individual garments as they are packed into cases, gathering the data necessary for advance ship notices to customers who require information via EDI.

"We average two dozen garments per case," notes Dethlefs, "and the customer wants purchase order number, vendor and the SKUs of each item in the case." In this application, he suggests, RFID could be a significant benefit to apparel supply chains.

Eventually, Dethlefs expects customers to demand RFID tags. He believes department stores are waiting for Wal-Mart Stores Inc.'s push to RFID to play out and for the price of an RFID tag to drop to five cents.

The quest for a low-cost RFID tag will get a serious boost if conductive inks actually work well enough to make printed antennas. That reality is near, according to Rick Owens, RFID sales manager with MPI Label Systems. Currently, chips are 25 to 40 cents per label. Getting the copper antennas out of the picture should lower the price dramatically, Owens believes.

"The challenge will be the degree of printing accuracy required. The antenna will have to be printed where it will touch the chip," says Owens. He claims MPI already has the ability print its labels with the necessary accuracy.

Another challenge is how to avoid applying RFID-tagged labels that don't work to boxes or items. Owens notes today's printers will program and verify an RFID chip, but they won't tell the user when a label fails the test and is voided.

Since nothing tells the applicator not to apply the label, and no one is watching the process, the applicator puts the voided label on a box. With the current RFID chip reject rate in excess of 20%, according to Owens, a lot of cartons could end up with worthless labels.

In spite of these technology glitches yet to be resolved, users are finding real benefits to RFID as a data capture tool. When a grocer found it was spending $500,000 annually just replacing plastic returnable containers, it turned to RFID tags to track location of all those returnables. The savings make it easy to justify the cost of the system and tags. While the grocer might have achieved the same return rate with bar codes, it would depend on someone scanning the code at each step, notes Owens.

Up-front costs may be high to set up a data capture system using RFID chips, but the tags can be reprogrammed thousands of times before they wear out. And chips can be reprogrammed on the fly. Owens cites a manufacturer that substituted RFID tags for the seven bar codes used in its manufacturing processes. By providing better history of who made the product and when, a single RF tag can yield improved quality control.

A pharmaceutical product company uses RFID to track very small bottles of product with a black market value of $50-$100 per bottle, reports Owens. The RFID tags are tied to a global positioning system (GPS). Antennas on the back door of the truck alert the company's security people when a bottle leaves the truck. The GPS unit notes the location of the truck and the bottle to within three feet.

Another RFID user operates a line of dump trucks hauling 7,000 loads per day. The system's RF tags ensure a driver goes to the correct bin and loads the right material. When the driver leaves the yard, the system verifies the weight, takes a picture of the driver, ties the driver to the weigh bill and routing plan. It's the first system this company has employed successfully to prevent its drivers from delivering loads for personal use, explains Owens.

While the promise of fast and easy data capture via RFID sounds appealing, it will be a long time before bar codes disappear.

"Wal-Mart eventually wants chips on every package," notes Owens, "but there's not enough chip production capacity now to meet that demand, nor will there be soon. We are close to standards for the second-generation chip. If standards came out today, however, it would be fourth quarter 2005 before production would be up to speed."

Patrick Sedlak, vice president with consulting firm Sedlak, also predicts a long life for bar codes. "They're cheap, everyone recognizes them, the technology is easy to adapt to, and there's no negative image for consumers who may feel RFID, at the item level, could be an invasion of privacy," he comments. "Unless you're a manufacturer or supplier to Wal-Mart, there's no real need to use RFID. For example, closed loop manufacturers who supply their own stores see no need to use RFID."

In many instances, manufacturers need both bar code and manreadable labels in addition to RFID. "Most vendors supply multiple clients," notes Sedlak. "All have bar code readers; only Wal-Mart has RFID readers. So manufacturers/suppliers will continue to use bar codes at the case level. They will use RFID only for customers using the technology."

Damage is still a concern with RFID tags. Drew Forte, director of client distribution improvement with consulting firm Forte, sees companies continuing to use bar codes as backup in case the RFID tag is damaged.

RFID is a very expensive solution compared to bar codes, Forte notes. "Lots of companies aren't willing to invest [in more technology]. If their suppliers use both RFID and bar codes, it allows customers to choose which to use. For now, bar codes have a faster payback. Once use of RFID spreads, the price will be closer to bar codes," Forte suggests.

Pendleton's Dethlefs sees uses for both bar codes and RFID long into the future. "On our product, with a retail price point in the $200 range, a 5-cent RFID tag would not be a big deal. But I don't see manufacturers putting a nickel RFID tag on a $1.00 item."

Today, bar coding is the workhorse of data capture. Tomorrow, expect RFID to add speed and efficiency as the technology reaches its potential.

Tallying the benefits of RFID

From preventing theft to streamlining its supply chain, some industry observers predict retail giant Wal-Mart Stores Inc. could save $1 billion per year through its use of radio frequency identification RFID. That dollar figure is reason enough to explain why Wal-Mart — as well as other retailers such as Target Corp., Albertson's, Home Depot Inc. and Best Buy Co. Inc. — are pushing their top suppliers to cooperate. Other retailers surely will follow suit if the expected benefits pan out. Potentially winning uses for RFID include:

Speed and security With item-level RFID tags, customers could push a cart through checkout readers that read the entire cart in seconds, totaling the bill and updating inventory at the same time, a concept that's being tested by German retailer Metro. Readers at the exit could tie to readers at the checkout line to catch items not paid for and deactivate other security features. In fact, employee badges containing RF tags could track who handles product, legit or not.

Say goodbye to errors RFID could be a valuable tool for dealing with shortage claims. While scanning bar codes doesn't eliminate human error such as grabbing too many garments, RFID readers gather data from every item in a carton, suggests Steve Dethlefs, distribution manager with Pendleton Woolen Mills. RFID tags also could be used to locate misplaced or hidden items in retail or warehouse space.

Mix and match With bar codes, when building a mixed-SKU pallet, you have to scan each item to tie those items to the pallet. Using RFID, you simply drag a mixed-SKU pallet past a reader and the RFID system will tie all the SKUs to the pallet and confirm the load, says Patrick Sedlak, vice president with consulting firm Sedlak.

Hands-free Data capture can be just as effective with bar codes or RFID tags, but RF is more efficient, according to Rick Owens, RFID sales manager with MPI Label Systems. "If I deliver goods to a dock, a reader reads it as it comes in," Owens notes. "I don't have to have an attendant or line of sight."

Flawless inventory Depending on signal strength and range, RFID could make maintaining real-time inventory throughout a distribution center faster and easier. The system could even detect inventory in the facility but in the wrong location.

Trends revealed Vendors and retailers can accurately check movement in the supply chain. For example, tracking sales per store builds better forecasting ability. If a store always takes a certain amount of goods, vendors could ship direct to the store.

The whole idea is reducing inventory by reducing the number of stops. As people get information earlier, they can decide what to do with inventory, deciding where it needs to be while en route, suggests Sedlak.