Logistics & Technology: The snags with tags

The technology already exists for ‘intelligent’ labels that allow constant stock traceability, but the sensitive issues of price and privacy must be addressed before its widespread application. Sally Easton MW reports

The current crackle in the supply chain is all about radio frequency identification (RFID) as a means of improving efficiency and real-time product tracking. But what exactly is it, and where does the wine industry stand with this technology?

RFID, like the barcode, is set to revolutionise the way we track products. As well as providing supply chain efficiencies and real-time tracking, it looks to be a marketeer’s dream – everything you ever purchase again could be stored in data warehouses to be mined, ostensibly to better target merchandising and stock levels of the things we like to buy. But the other side of the marketeer’s dream – this “retail DNA-fingerprinting” nightmare of our every purchase – gives rise to some potentially serious privacy issues, still to be addressed in a technology that is as yet unregulated.

An RFID system is an automatic identification method comprising tags (or transponders) and readers (or transceivers). A tag is a very small object which contains a silicon chip, typically less than half a millimetre in size, and an antenna. This can be attached to or incorporated into a product, animal or person. The chip contains digital information about its host. Readers communicate electronically with the tag using radio waves. The readers are usually fixed, on entry to a warehouse for example, so can pick up data from the tags as a truck enters the warehouse, collecting data from every item that has a tag, be it the pallet, the case, or the individual bottle.

Each tag carries unique information about the product, such as serial number, colour, place of origin, location information and price. When the tag passes within range of the reader, the tag transmits its information to the reader, thus identifying itself.

The lack of regulation and standardisation is a clear barrier to entry. Stephen Hunter, MD logistics at Nisa Today’s says, “We need to regulate to standardise the technology, or allow its evolution to produce something so that we then know what it is we can standardise.”

Betamax or VHS?
No one technology is yet dominant. Readers must be compatible with the tags, so until the supply chain decides whether it wants the Betamax- or VHS-equivalent models of RFID, evolution of the technology is being held in check. In terms of international movements David Mawer, joint managing director, FFG Hillebrand says, “There is no global body, so individual countries set their own rules. This makes it difficult for ourselves to arrive at a common standard, which is why it will probably be retailer-led.” 

The cost implications are also clear. Mawer, says, “At pallet level it is just one tag, at case level it is 140 tags, etc.” At about 15 pence per tag this represents a significant cost per bottle, but costs continue to come down, making the attraction of investment more enticing.

The difference in the level of tagging is significant. A per-case tag would provide thorough traceability to the point of distribution i.e. goods inward at the retailer. A per bottle tag would enable the retailer to see the bottle right the way through the system to the point of sale, and potentially beyond. It is this level of tagging that raises privacy-invasion concerns. 
Technical issues still to be overcome include successful reading of tags, where there may be interference from packaging and products.

Uses in the drinks industry
Current uses tend to be internal rather than cross-company through the supply chain. Hunter says, “Because it is a flexible technology and can do so much, folk are aware of it but not sure where it might fit in with their business. Where you deploy it in grocery and how you justify the expenditure are probably the issues for the grocery sector.”

But Nisa Today’s is already using the technology internally. Hunter says, “We’re using it in a restrained and constrained sense. We’re not deploying RFID in the conventional sense of traceability and tracking product through supply chain. We’re using the technology to track assets around our distribution centre, i.e. lorries and trailers.

“The warehouse opened in November 2005. We’re still deploying and testing RFID. We are rolling out asset-tagging on equipment in our warehouse and yard in our new £30 million, 628,000 square foot, national distribution centre. It makes you more efficient and, because you know where it all is, you don’t need any spares. It’s real-time information: where it is, what its status is, where it needs to go next.“

As far as the whole supply chain is concerned, Mawer says, “The main use for the wine industry is inventory management. We’re aware of it and prepared for it, but at this stage there’s not an awful lot of activity on international product flow.”
Mawer sees clear benefits of streamlining: “It removes the issue of reconciling actual stocks with paper stocks, nothing gets past the electronic recognition. But there’s quite a high cost of implementing such a strategy – the tags, the readers.

Wherever you want to know where stock is, you need a reader. Potentially you are installing RFID readers at goods inwards and goods outwards of each retail outlet, and at the distribution centre door.”

As regards international product flow Mawer has not seen much evidence of this technology yet. He says, “As the need arises, we would work with carrier partners and transport infrastructure with regard to installing readers e.g. if stock has left port of departure, or has just gone on a ship.“

For the shipping industry the ability to know where their stock is, i.e. containers, is a clear benefit. RFID will not prevent theft, but using tagging helps container equipment loaders to know where their stock is sitting. And a bit like the tracker scenario on the car, if something is stolen, it might help you trace the location of the container.

It will probably be the large retailers that drive the technology through the supply chain. Since the beginning of last year Wal-Mart has required top suppliers to apply RFID labels to shipments. And other retailers such as Metro and Tesco have been trialling the technology, but it seems a long way yet from filtering down to drinks.

Nikolaus Schritz, managing director of wine producer Reh Kendermann, says, “RFID chips do not reliably function near metals or liquids, so we can’t use them on bottles. It would  probably be fine on a pallet so this is where it would most likely be utilised. However, the price per chip is still very high, and you need to have customers who actually want it.

RFID trials
“We deal with 52 countries around the world,  and there is only one customer, Metro in  Germany, which is doing a trial with RFID to gather experience, albeit only in one store.  None of our other customers appear to want it  at this stage. For all stock movement control within our Reh Kendermann winery and warehouses, we have an alternative internal  system based on state-of-the-art scanning technology, which could be adapted to RFID technology if required.”

UK supermarkets are still evaluating benefits for the beers, wines and spirits (BWS) categories. Ed Watson, spokesperson for ASDA says, “We’ll be piloting RFID technology this year initially with internal trials, but as yet we have no firm date. Tesco is conducting trials through its internal supply chain, but neither they, nor Sainsbury’s, Waitrose or Marks & Spencer are doing anything (yet) on BWS.”

However, Marks & Spencer has been at the forefront of trialling item-level “intelligent labels” on some clothing items to improve stock-holding, speed of stock count, and on-shelf availability. In terms of grocery, James Stafford, head of clothing RFID at M&S says, “In the food area we are using RFID tags on returnable trays, which cycle between the manufacturers and stores, going round the loop a couple of times a week. When you use the technology on a returnable item, you use it time and time again. For example, the plastic trays last seven years, and they’re used twice a week. It is not difficult to get a payback at this level.” This closed loop environment, where the tags are re-used rather than being involved in a one-way transport direction, offers much earlier benefits and return on investment.

Big Brother
What concerns some is RFID tagging at the consumer, or item level. In its clothing trials, M&S reassure customers that, “Intelligent labels will not be scanned at the checkout and, therefore, no link will be made between the garment information held by the tag and the customer’s details.”

Certainly a potential application of RFID, where it is being used at the item level, is to monitor consumers’ buying patterns and habits, which offers great benefits to suppliers, but no identifiable benefit or service to consumers. If tags are embedded into a pair of jeans, for example, consumers may not even know they’re there, but you could be “read” and your data downloaded every time you pass a reader, and once standardisation has been achieved, your global movements could be monitored.

The practical, technical and security hurdles still need to be overcome before this technology can make a place for itself in improving supply chain efficiencies. Can data on the tag be stolen and used? Is it susceptible to the activities of technology saboteurs? The benefits of using this technology are readily acknowledged. But while existing traceability and tracking systems are already in place, RFID will have to show demonstrable savings in cost and inventory before it can carve out a niche in the drinks industries.

© db August 2006