A turning point for RFID?

From the October 2021 print edition

The radio frequency identification (RFID) tag meets all the criteria of a mature technology – it’s a commodity item that has changed little in recent years, and it’s a half century old.

“RFID is pretty straightforward, so it hasn’t really changed,” says Mike Daly, vice-president of sales at Montreal-based automation solution provider Rotalec. “The only things that have changed are the speed and the competition. Ten years ago there were three or four main competitors, and now there are hundreds.”

As the technology has matured over the past 20 years, infrastructure costs have plummeted, multiplying the opportunities for profitable deployment. “RFID is a fairly old technology, however, it seems to be making a comeback,” says Kristi Montgomery, vice-president, innovation, research & development at Chattanooga-based Kenco Logistics. “When RFID first came out, you had very rigorous infrastructure requirements for being able to read those tags. I think what’s changed is that it’s become much more flexible.”

Unlike bar codes, which are scanned visually, RFID tags or labels contain tiny programmable microchips that relay identifying information to a scanner or reader. Passive RFID tags, the predominant category in supply chains, utilize the energy from the scanning signal to send their identifying information back to the code reader. While range is limited to ten centimetres, the device doesn’t have to line up with the code precisely, making it easier to automate the scanning process.

Price points for printing and reading devices are now equivalent to common desktop computing devices, making them affordable for most businesses. Tags and labels, which are available in a variety of materials, cost as little as 10 cents apiece.

Active RFID is the other category. With this technology, the tag contains its own power source and transmitter. Costs per tag are roughly a hundred times higher, but the range is much greater, making active RFID suitable for automated tracking of large assets such as railway cars.

What makes passive RFID particularly attractive for supply chain operators is that it can deliver substantially more information than bar coding. For example, a bar code on a clothing item can only relay generic product information, while an RFID label can provide unique identifier that distinguishes the item from similar items on the shelf.

Retail appears to be taking the lead in a resurgence of interest in RFID. In a global survey of retail executives that was released in December 2020, Accenture Research found that in North America, 47 per cent reported full adoption of RFID, up from 28 per cent in 2018. The results, the study says, corelate with a strong increase in omnichannel capabilities such as buy online pickup in store (BOPIS), mobile apps, and home delivery – capabilities that saw a dramatic upswing during 2020 on account of the pandemic.
The study also found that 82 per cent somewhat or strongly agree that RFID is essential for implementing emerging technologies.

“Radio frequency identification technology is a key to achieving real-time inventory visibility and thus to optimizing omni-channel fulfillment,” notes Jordan K. Speer, research manager, global supply chain for technology research firm IDC.

If RFID is a lynchpin for deploying cutting edge supply chain technology, blockchain-enabled traceability throughout the entire supply chain might be described as the ultimate goal.

“The biggest issue today, and this is where blockchain may help in the future, is visibility,” says Montgomery. “Even if I have an RFID tag, how do I force the ability to read that tag and capture the information all along the supply chain? I think blockchain has a long way to go, but I certainly see the implications of blockchain, giving us much more real-time traceability for product end to end from point of manufacture to point of delivery to the consumer.”

Another piece of the puzzle may be improvement of the tags themselves, particularly active tags, which are currently cost-prohibitive for most applications. “We’re getting better because the infrastructure is better,” says Montgomery, “but we still have a way to go on the RFID tags themselves. How do we lower the price point for active tags so that we now have full visibility all the time to where everything is?”

Barriers to adoption
Many expected RFID adoption to explode when Walmart mandated it in the early 2000s, but despite the reduced costs, ease of implementation and dramatically increased benefits, adoption is not what its proponents had hoped for.

“It’s relatively low cost, the infrastructure to capture it is not that expensive any longer, and there are so many benefits,” says John McKenna, CEO of McKenna Logistics Centres and professor in Humber College’s Supply Chain Management Program. “So, I really don’t understand why it is not being adopted sooner or faster.”

One of the challenges is determining which supply chain stakeholder should install the tags. For a retail supply chain that attaches a price tag to each item, the step is not difficult to justify.

For a 3PL like McKenna Logistics, manually attaching tags to incoming products would be cost prohibitive and of little benefit because it is so far downstream when shipping to the retailers.

“If the tag was placed when the product was manufactured, far upstream, then all the links of the supply chain would benefit with faster shipping and receiving as well as more real-time data sharing opportunities,” says McKenna.

Presently, many consumer goods have RFID tags attached or embedded in the finished goods when produced. Unfortunately, those RFID tags have the single purpose of controlling loss
prevention by triggering alarms at retail stores’ exits, he points out.

The key, ultimately, is establishing a collaborative approach that improves the end-to-end efficiency of the entire supply chain by leveraging RFID technology.

“Whether you’re talking about RFID, smart warehousing, vision enabled, if you can’t put together the package from end to end, then the value is single service,” says Montgomery. “These things may serve me really well as a 3PL inside the four walls of the warehouse, and the customer will definitely benefit. But if they can’t make that happen across their whole supply chain, they can’t get the ultimate value, which is why there’s been such a push for the last 20 years for end-to-end supply chain visibility.”