RFID for Beverages
By JOANNA COSGROVE
Its use is still limited, but RFID offers benefits for beverage manufacturers and retailers alike
During the past five years, Radio Frequency Identification (RFID) has made news in a variety of circles. Some have hailed the tagging and scanning technology as a revolutionary inventory management solution poised to replace the barcode, while others, namely consumer privacy advocates, have vilified the technology as a “Big Brother” attempt to monitor the buying habits of consumers, among other things.
Big Brother concerns aside, basic RFID technology generally consists of two components, a label (or tag) that’s imbedded with an ultra high frequency (UHF) chip, and a reader capable of picking up the chip’s signal. Some RFID tags are attached to entire pallets of shippable goods, while others are affixed to single cases. While tags can theoretically be affixed to individual packages, the technology for accurately reading those tags is still in its infancy and the tags can be adversely affected by location, package material and the type of product contained within the package.
One of the most notable uses of RFID in the beverage segment occurred during the 2002 Salt Lake City Winter Olympics where 5,500 athletes were able to enjoy complimentary Cokes with a wave of an RFID-enabled keyring from 150 vending machines equipped with readers.
More recently, major retailers such as Target, Albertson’s and some drug chains have called for their suppliers to begin implementing RFID technologies at the pallet level. But Wal-Mart is far and away the trailblazer. In 2003, Wal-Mart issued a mandate for its top 100 suppliers to be RFID compliant by January 2005, and an additional 37 suppliers volunteered to be included. Additional waves of compliance are scheduled to continue through 2006 until all of the company’s 22,000 suppliers are RFID compliant.
One of the futuristic uses of RFID-tagged goods in the United States involves “Smart Shelf” applications, which enable a shopping cart full of RFID-tagged goods to be wheeled through a portal that instantly scans the tags, making checkout streamlined and line-free. But the technology’s most typical use centers on inventory management: tracking warehoused goods and deliveries, and verifying the status and location of product shipments.
How RFID will impact beverages
Beverages are one of the final frontiers to be impacted by RFID technology at the retail level. For beverage manufacturers, tagging and scanning can be invaluable resources for in-house inventory maintenance. In the retail realm, the use of RFID technology can heighten the efficiency of supply chain replenishment, which is why retailers are so keen to follow Wal-Mart’s lead.
Better supply chain visibility is an important goal for retailers given the erosive nature of out-of-stocks. “One of the biggest problems retailers have is items not being on the shelf when customers want to buy them,” says Matt Ream, senior manager of RFID Systems at Zebra Technologies International, Vernon Hills, Ill. “Wal-Mart said if it could reduce out of stocks by 1 percent, it could hit its bottom line by $2.5 billion dollars. In order to do that, you need to examine why things are out of stock — either the retailer doesn’t realize it’s out of stock, or they don’t realize they have backup supply in the stock room or that there’s some on the way from the manufacturer. RFID provides the visibility of knowing exactly what you have and where it is.”
Ream adds that if an item is not on shelf when a customer wants to buy it, the customer will most likely go somewhere else. Not only will the retailer lose that sale, it also will lose any incidental sales the consumer might have made before exiting the store.
“If you have better visibility in your inventory, theoretically you can reduce the amount of safety stock you have to carry. You can reduce your overall inventory and create a huge savings,” says Ream. “RFID benefits are all interrelated. There are a lot of enabling features that aren’t available in other technologies. We’ve seen companies invest in RFID for one reason, and realize the capabilities of the technology and add new layers of applications.”
Some argue that barcode technology could achieve the same result; however barcodes require more physical scanning, which often results in more human errors. “Scanning today is very labor intensive; it’s a manual process. That’s the reason many companies don’t opt for added read points,” says Ream. “RFID is a much more automated technology that gives the ability to increase those read or visibility points without adding additional labor costs.”
What can beverage manufacturers expect by implementing RFID technology? The benefits will accrue in stages. The first benefit is simply compliance with retailer demands, which retains important business and avoids non-compliance fines. “Recently, Wal-Mart said it will make information about tags it has read available online 30 minutes after the initial read. This can help beverage manufacturers track the status of product in the supply chain,” says Michael Putnam, product marketing manager, RFID/AI at Markem Corp., Newton, Mass. “As the technology becomes more pervasive and suppliers integrate their systems with partners and customers, benefits will include a higher degree of automation in warehouses, a reduction of the supply-chain bullwhip effect because of better communication, lower inventory diversion and shrinkage.”
When it comes to beverages and other liquid goods, RFID is currently limited to use on pallets and cases. Beverage containers present unique challenges, and although the technology isn’t yet perfected for tagging individual packages, experts say that is bound to occur in the not-too-distant future.
At present, metal containers and liquid-filled containers pose the biggest problems, making tag placement critical. “Chief among (the limitations to RFID technology) is that for the UHF tags that standards organizations like EPCglobal have settled on, the needed radio waves are absorbed by water and reflected by metal,” says Putnam. “This makes tagging beverage products, particularly those in aluminum cans, difficult. Today this can be addressed by precisely placing tags on case or pallet areas that are ‘dead zones’ with air space behind the tag. Spacers can also be built into pallets to improve tag response.”
Cost is one of the most decision-influencing factors. Companies resistant to RFID demand to know when they can expect a return on their investment in the technology. “Many retailers, in addition to Wal-Mart, are beginning to, or will, mandate RFID, which enables a more likely return on investment for the manufacturers since they can buy higher volumes of tags, which in turn will drive the tag price lower,” says Nick Infelise, RFID product marketing manager at Omron Electronics LLC, Schaumburg, Ill. “Logistically, these manufacturers want more of their retailers to use RFID so separate sections of distribution and/or mixing centers are not needed and the application of tags can be done at the manufacturing sites.”
Another cost-related issue concerns the expense of tagging individual beverage containers. Typical tag costs range from about a 25 to 50 cents. “Most manufacturers have said that until costs drop below a nickel per tag, they won’t consider tagging individual units,” says Markem’s Putnam. “Some pundits think this will happen as early as 2008, while others say there will be a slow and steady decline in price, and this might not happen for a decade or more. Time will tell.”
In the far future, however, Putnam says there are many reasons to tag individual products. “A tag is really a combination of two technologies: a serial Electronic Product Code (EPC) which is basically a UPC plus a serial number, and non-line-of-sight wireless communication. Each comes with separate benefits. It’s not too far off to consider promotional opportunities that would take advantage of serial number, as many soft-drink manufacturers have already done with numbers that are printed under the drink cap. An RFID tag might be more convenient,” he says.
Gauging industry receptivity
In general, most consumer goods suppliers are not eager to jump on board the RFID bandwagon due to cost issues. “ROI is not evident in the near term,” says Markem’s Putnam. “The same was true of barcodes, which took 25 years to reach the level of ubiquity we see today. But recent studies of the payoff of barcode technology are absolutely conclusive: billions of dollars in benefit now accrue each year. I think the same will happen with RFID.
“In the short term, most benefits might go to Wal-Mart or Albertson’s in improving their supply chains. Reducing out of stocks will be a major benefit to suppliers as well. But five to 10 years from now, when the technology has spread more broadly, is when the large-scale, systemic benefits will become clear,” he adds. “The best advice to a supplier is to take adoption gradually and in stages, starting small, learning in a distribution environment, and moving to production when the scale makes sense and the technology is ready.” BI
Beverage-centric RFID solutions
Beverages present a unique set of challenges when it comes to RFID tagging and scanning. Moisture issues aside, metal cans and liquid contents often deflect a reader’s ability to accurately scan a tag, especially if the tag is incorrectly placed. To cut down on reading errors and simplify the process, a growing number of forward-thinking companies have developed equipment designed with the beverage industry’s needs in mind.
Videojet partnered with Accu-Sort Systems Inc. to provide a total RFID application system for packaged goods manufacturers. The Videojet FAST Tag encodes and applies RFID tags using a Videojet label applicator, an Accu-Sort RFID reader, and a patent-pending reject identification and recovery system.
“The bad tag reject system makes this a very cost-effective solution,” says Ian Carver, Videojet’s RFID product manager for Videojet, Wood Dale, Ill. “It catches bad tags before they make it to the product and into the supply chain.”
The Videojet FAST Tag is a portable, flexible, affordable RFID tag application solution that delivers high-speed performance and low maintenance. It supports Class 0 or Class 1 tags, and is EPC Global Standard upgradable.
Markem Corp., Newton, Mass., offers a variety of RFID solutions for beverage companies. Its product lineup includes the Cimjet RFID encoder applicator that places encoded tags precisely on cases or shrinkwrapped goods. It has the key feature of rejecting bad tags, keeping them on the label liner. “This is critically important, because of bad tag rates between 5 percent and 20 percent,” says Michael Putnam, product marketing manager at Markem.
Putnam points out that Markem’s RFID solution saves the headache of integration because it includes the tag applicator, RFID middleware for allocation of unique electronic product codes, line management, as well as services to get customers up and running quickly.
Colder Products Co., St. Paul, Minn., a designer and manufacturer of connectors and fittings for flexible tubing, teamed with RFID specialist Innovision Research & Technology (IRT) to help cut the cost of Colder’s RFID-enabled Smart Coupler products with built-in RFID readers. The couplings let flexible liquid-carrying tubing be quickly and easily connected and disconnected. Adding RFID technology to the couplings helps keep unauthorized liquids from being introduced into storage containers or dispensing systems. RFID-based coupling applications in food and beverage dispensers can help ensure that correct amounts are dispensed, that sugared syrup is not used in drinks advertised as sugar-free, and that products are monitored for freshness. In chemical plants, RFID tagging can be used to confirm the correct types and sequencing of ingredients.
CPC’s Smart Coupler system works by embedding an RFID tag into a coupling joined to a liquid container, such as a syrup canister. The company also incorporates an RFID reader into a matching coupling fixed to a permanent piece of equipment, such as a soda dispenser. The company’s non-RFID couplings are already included in the Bunn coffee makers installed at McDonald’s restaurant across the United States and in the water filters of GE refrigerators.