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
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,”
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.
Beverage Industry’s November issue highlights the 100-year advocacy of the American Beverage Association and what’s next for CEO Katherine Lugar and a new plastics initiative, Every Bottle Back. This issue includes a special report on craft beer, an Up Close With feature on PRESS hard cider and what is sparking innovation in natural colors. Read more about how protein is powering up beverages and how warehouses are using WMS and WCS systems to streamline operations. As usual, the latest trends in new products, packaging and ingredients are highlighted.
Check back throughout the month for additional content.