European retailers, manufacturers and logistics companies are moving cautiously when it comes to radio frequency identification (RFID), with niggling questions about how to make the technology pay for itself and how to get it to work reliably still playing on minds.
The uncertainty over just how far and how fast to go was neatly summed up recently by Philips Semiconductors, a leading maker of tags. The company used a high level meeting of the Organisation for Economic Cooperation and Development to call on industry and governments to collaborate more closely on RFID issues.
Philips said collaboration was vital in taking advantage of the technology and avoiding pitfalls. The firm claimed that by 2010, RFID will be the basis of a e10billion industry with over 100 billion tags in the healthcare, supply chain, retail and banking industries – significantly dwarfing mobile phone penetration.
‘Similar technology developments such as mobile phones, TV and even electricity standards have not been well managed by governments and industry,’ Philips warned.
‘Unless the key players – technology companies, national governments and research and academic institutions – work together, the full benefits of RFID technology will not be realised.’
Most activity in Europe still involves big players. Marks & Spencer, for example, recently scanned its millionth food container three years after the stores group first began using RFID. Around 90 per cent of trays of perishable foodstuffs sold by the company are now tagged and M&S is extending its use of RFID to other lines such as clothing.
Some retailers are closely involved in driving the technology. The German Metro Group recently announced it was setting up a testing facility in collaboration with the German arm of the standards body GS1. Companies will be able to use the lab to test the performance of tags on pallets and cases and to see how well readers and other bits of RFID kit work.
However, not everything in the garden is rosy. The canned food company Del Monte recently said it would not be expanding its initial 18-month pilot project after the company encountered problems with using tags on metal cans, which interfered with signals and were difficult to place.
Del Monte also complained that equipment from different technology companies did not work together well. However, the food firm has not given up on RFID. It acknowledges errors such as not integrating its pilot project with other supply chain systems and is convinced RFID will provide a payback eventually.
Metro has been a powerhouse behind RFID development in Europe, issuing mandates to suppliers that lay down deadlines and technical specifications for the introduction of tags. The problem for many suppliers is that they have rushed to meet mandates ahead of exploiting RFID for their own purposes. It is an approach called ‘slap and ship’.
RFID is an overhead
The result for them is that RFID is an overhead, a cost of doing business rather than an investment that provides a return.
The prospect of improved return on investment was much improved recently when several tag manufacturers announced price reductions. Tag costs are seen as critical to uptake rate. The latest price cuts amount to a 40 per cent reduction in the cost of RFID in the US, according to the influential publication, RFID Journal.
Standards too are beginning to emerge. This summer chip firms have been churning out tags built to the latest Gen2 standard. And EPCGlobal, the organisation that manages EPC standards, has begun dishing out certificates to technology suppliers whose readers and tags meet its standards.
The organisation recently announced its first software standard known as Application Level Events (ALE), which establishes how EPC-enabled software products will collect, manage and route the data that EPC technology generates in the supply chain.
Progress in the standards area was also given a boost over the summer when two of the leading RFID equipment suppliers, Intermec and Symbol, settled an acrimonious dispute over intellectual property rights.
Pundits are now predicting that next year will be the tipping point for RFID. But don’t hold your breath – they said that about 2005.