A Growing Technology
Even though use of Radio Frequency Identification (RFID) technology started as early as World War II, many people are still unaware of its possibilities. From tracking products to employee identification to fighting counterfeiting, RFID is being used in a number of industries in a number of ways. Currently, pharmaceutical companies employ RFID technology to track and authenticate drugs through the supply chain, cars bearing RFID tags can move through specially equipped tollways without stopping to pay and pets can be outfitted with tags to help identify them if lost — and these are merely some of the technology's uses.
RFID can help greenhouse businesses by keeping track of benches and carts and monitoring employees. Even those who do not plan on using RFID to streamline their operations need to be aware of this technology. With mass merchandisers mandating their suppliers use the technology, the future of retail appears tied to RFID technology.
It is important to realize RFID is not going away; Information Week magazine reported that worldwide RFID hardware and software spending will surpass $3 billion by 2010 and broader deployments across different sectors will be seen by next year. While only 9 percent of retailers and 44 percent of manufacturers currently have a timeline for implementing RFID, reported Information Week, the numbers are climbing, which is why you need to be aware of the technology, what retailers are considering and how it can help your business.
Understanding The System
A typical RFID system consists of a tag (made up of a silicon chip and an antenna) and a reader that communicate with each other using radio signals. The reader sends out a signal, and the tag will broadcast or reflect the signal back to the reader.
There are two types of tags — active and passive — that vary in price and capabilities. Active tags typically have an onboard battery and can initiate communication with a reader while passive tags have no power supply; they operate by using energy from the reader and reflecting a signal back. Readers can be mobile or stationary and vary in size, weight and power; they can also process multiple items at one time.
Unlike a bar code, which always requires a person to scan it or at least orient it to be scanned, the RFID system can operate without a person. This is because RFID tags and readers can communicate without seeing each other, that is, without a line of sight. Commun-ication distances between a tag and reader vary by tag type, with active tags able to communicate at the longest distances.
Tracking And Storing Data
Each tag can be coded with a unique number — an electronic product code (EPC) — that lets it be individually identified by the reader. Because each EPC is different it helps manufacturers and retailers track goods through the supply chain. For example, an EPC could be assigned to each plant cart, which would let facility managers know where each cart is at all times.
Information about the tagged objects is stored in a database, an important component of a RFID system. Without it, readers would not be able to obtain, interpret and understand the information stored on the tag. In addition to a company's database, a global database exists for RFID users who want to share information obtained from the tags. Known as the EPCglobal Network, it contains descriptive information about products and can be accessed by any company the manufacturer approves.
For example, a grower could assign an EPC to a cart of 4-inch geraniums. By registering that EPC in the EPCglobal Network, a range of information about that cart can be shared with retail partners, corporate headquarters or anyone else the grower approves. The information shared on the EPCglobal Network could include things like how many pots are on the cart, when the plants were shipped, where they are supposed to be placed in the store, what they are supposed to retail for and any other information you wanted to include.
The system is typically set up at shipping and receiving. As products are shipped, a reader scans them and automatically informs the retailer about the products that were shipped. Once the shipment arrives at its destination, another reader scans it and informs all parties about what was received and when.
Managing The Supply Chain
Currently, manufacturers and retailers are primarily using RFID systems in warehouses and distribution centers to manage the supply chain and increase efficiency. The 2005 Federal Trade Commission report on RFID estimates that $91.5 million was spent in 2004 on implementing RFID in the retail supply chain — that amount is expected to exceed $1 billion by 2007.
In general, product manufacturers use the technology to track shipments of their products from start to finish, and retailers use it to keep track of inventory. Along the same lines, some growers are currently using RFID tags and readers to keep track of their carts and benches.
The goal of using RFID in the supply chain is to make sure the products consumers want are on the shelves in the right amounts at the right times. The advantage for growers and others who use RFID to manage their supply chains is that they start accurately dealing with demand. "You start to pull stuff through the supply chain instead of pushing it through. The advantage of that is you're reacting to demand instead of forecasting for demand," explained Mark Roberti, founder and editor of RFID Journal.
For growers operating under a pay by scan system, RFID technology could become a vital source of information. In addition to daily reports from the retailer, growers would have their own system for tracking how much product was received at the store, how many carts remain there and, should implementation ever reach the individual item level, exactly how much product has been sold.
Consider The Future
While RFID use in the retail supply chain is fairly common, widespread item-level tagging of products is not going to be implemented in the near future, which means at this time growers do not have to worry about individually tagging every plant they grow. But do not count item-level tagging out as a possibility altogether: Some retailers are currently tagging high-price items (like televisions or gemstones) individually, and others like Levi Strauss and Marks & Spencer are experimenting with tagging less expensive items (like clothing).
Manufacturers and retailers have been slow to implement item-level tagging largely because of tag costs. "You have a tag that is going to cost anywhere from $.15 to $1 depending on the nature of the tag. You're not going to put a $.30 tag on an individual bottle of shampoo; it is just not worth it at this time," explained Roberti. "[Item-level tagging is being used on] high-value items that are fast moving, out of stock often and stolen often."
As the cost of tags decreases, the possibility of widespread item-level tagging increases. And though the price of a tag has dropped considerably in recent years, it needs to drop substantially to make individually tagging low-cost items like plants attractive, said Roberti. "For everyday items to have these tags, things that are inexpensive like a box of cereal, you're talking about a penny, and the technology is not anywhere near that low. You need technological advances to manufacture tags that cheaply."
Tag manufacturers also need to work around the constraints of a retail environment such as metal shelving and equipment that can affect RFID performance and accuracy. This problem is magnified for retail garden center applications because water, which can affect both the radio signals and electronic equipment, is introduced.
To stay on top of this developing technology, Roberti recommends growers approach one of the retailers they work with and propose an RFID pilot. According to Roberti, it is the best way to work out the kinks and see what the potential benefits of RFID are for your business.
What About the Big Boxes?
The future of RFID is especially relevant for growers who work with mass merchandisers, as the larger retailers will be first to implement widespread changes of this kind. At this point, there are only a few stores requiring their suppliers use RFID, but many are considering it. "All big companies will use this eventually; when they will require it is hard to say," explained Mark Roberti, founder and editor of RFID Journal.
One of the stores at the forefront of RFID use is Wal-Mart: CPA Journal reported that the company required its top 100 suppliers to have products on pallets or in cases with RFID tags by 2005. The 100 next largest suppliers had to adopt the technology by 2006. More than 500 Wal-Mart stores handle more than 3 million RFID-tagged cases each week, reported Information Week.
Simon Langford, Wal-Mart's director of RFID strategy, told Information Week that RFID helped Wal-Mart reduce out-of-stock merchandise in its stores by 30 percent last fall when compared with the previous year. Langford also mentioned that item-level tagging is "absolutely part of the plan" once it becomes economically feasible, though there are no individual-tagging trials occurring at this time. It remains unclear whether or not Wal-Mart will mandate tagging for all suppliers.
Target also mandates some of its suppliers use RFID; the company announced plans in 2003 to use RFID in the supply chain. Other chains such as Home Depot and Lowe's have stated their intent to start testing the technology, though no firm plans or usage mandates have been reported at this time: "Home Depot and Lowe's have talked to their suppliers and indicated some plans to move in the direction of RFID, but there is no specific date," explained Roberti.
Check Your Resources
RFID is a complicated topic that continues to evolve and change along with the technology. Learn more about RFID benefits, possibilities and concerns from the following resources.
Association for Automatic Identification and Mobility (AIM Global)
RFID International Business Association
Automatic Identification Systems (AIS)