Technology

As I mentioned in my last post, RFID systems are not new and are being evaluated and adopted to enhance visibility within supply chains for a variety of industries including apparel and soft goods. What is the current state of adoption within the textile and apparel sector? What are some of the trends in this technology area? What are the potential benefits with respect to adoption of RFID within the cotton product supply chain? These questions are the focus of my current post.

Technology Application - Trends and Benefits

Looking at technology application from a bird’s eye view, RFID offers the opportunity to locate and track assets as they move through the supply chain to the final destination. Keep in mind that in the context of the cotton supply chain the term “asset” can be applied to a variety of objects including containers, cases, cartons, palettes and individual items. During the recent webinar, “Getting Ready for Item-Level RFID: Making the Business Case for Apparel” (Host: Apparel Magazine), Drew Nathanson of VDC Research emphasized that inventory and supply chain applications have been the initial focus for adoption of RFID. He states that to date, the technology has primarily been used in distribution centers and within the retail environment. In the context of product distribution, Motorola points to RFID tags that can be placed in the floor of the center to identify specific shelving locations. In conjunction with RFID reader enabled forklifts and tagged palettes, cases/cartons or items, it’s possible to direct and record placement of product within the center. Fixed RFID readers can also be stationed at critical points such as dock areas to monitor movement of palettes as they enter and exit the facility. With the aid of software, the recorded information becomes available for fulfillment and inventory monitoring on a real time basis. The same assets can next be recorded as they move from distribution centers into the retail receiving environment.

Move to Item Level Tagging

Numerous sources indicate that one of the primary trends in RFID adoption is a move to item level tagging. At this level, it’s theoretically possible to track an individual product from the point of manufacture through the point at which the item exits the retail selling environment. Technology vendors including Motorola and Tagsys are providing mobile and fixed readers as part of their suite of technology solutions. In addition to tracking product as it enters the retail receiving area, fixed readers can also be positioned at the point at which product moves from the receiving area out on to the selling floor. Once the product is displayed, sales personnel can use mobile reader technology to rapidly record inventory. This strategy enables a highly accurate count of product on a real-time basis with minimal human resource.

Vendor and industry sources indicate significant improvement in inventory accuracy and management among retailers that have adopted RFID at the item level. In fact, both Tagsys and Motorola point to inventory accuracy rates of 98 percent plus at retail. Motorola further notes that retail customers of RFID have reduced out of stocks by 60 to 80 percent and have experienced subsequent sales increases of up to 20 percent. In a white paper issued by Tagsys the company highlights the idea that the use of RFID for inventory tracking also creates an environment in which the sales staff is able to spend more time focusing on customers. This in turn facilitates additional sales.

In another white paper, this time issued by Motorola, the company outlines many key benefits associated with the use of item level RFID including opportunities for managing product entering the distribution center through to delivery of product to the stores. The company states that an item level RFID strategy can be used to “…improve accuracy of inventory counts, order fulfillment, shipping, order delivery and verification of proof of delivery.” For product distribution, order integrity is a highlighted theme and the company states that RFID strategies can be used to avoid disputes over product counts and reduction in costs associated with write-downs for inaccurate orders.

Additional RFID Applications

Other notable trends in RFID include the growing interest in driving the application of solutions further into the supply chain toward the point of product manufacture. As within the distribution and retail environments, RFID can be used to locate and monitor product and materials inventory. Motorola’s white paper also highlights benefits for monitoring work in process (WIP) and for supporting lean manufacturing strategies and accuracy of shipments from points of manufacture. There is also growing interest in the use of item level RFID as a tool for ensuring product integrity (anti-counterfeiting) and traceability in regard to compliance issues.

At the store level, RFID is being used for monitoring and reducing product loss due to theft. Retailers are also examining item level RFID as a tool for gathering business intelligence information within the store and at point of sale.  What products did the consumer try on? How many times did a particular product go into the changing room? What sizes and colors were taken? Which of these products did the consumer actually purchase? These are just a few examples of the kind of business intelligence retailers might be interested in gathering through the use of item level RFID.

Innovative companies are also looking to use RFID to enhance the consumer’s retail experience and facilitate customer and brand loyalty.  A recent article issued by AAFA points to the rise of consumer facing applications and provides a number of examples of how brands are approaching the use of RFID as part of a marketing or product customization strategy. One of the notable examples provided is the use of RFID as a fan loyalty strategy by the Tampa Bay Lightning. In this case, RFID tags were embedded into team jerseys for season ticket holders. The tags triggered a number of loyalty benefits including discounts on some fan products and concession purchases. Follow the link to the article provided to learn more.

RFID - State of Adoption

In terms of the technology itself, numerous sources state that item level solutions are largely based on the EPC Gen2 standard and according to Nathanson, the RFID tags are often attached to the garments as inlays in the hangtag and complimented with a printed bar code. These item level RFID tags are not considered to be hard or durable, but rather are expected to be consumed within a 12 month period. In other words, item level tags are typically disposed of once the garment or product moves beyond the retail setting.

In terms of adoption rates, Nathanson notes that as of 2011 global RFID system revenues for retail are less than a billion dollars and adoption has been largely restricted to a group of Tier I and Tier II retailers. Adoption is growing however and by 2015 VDC Research expects revenues to top 3.2 billion dollars. This growth will be attributed to continued adoption and scaling of item level supply chain and inventory management solutions. Nathanson observes that scaling of RFID is dramatically increasing the tag to tag reader ratio and as read volumes rise, solution providers are being pressed to provide systems that will read more tags, faster. Software and service providers are also being challenged to provide services for customization of solutions and support for integration of RFID into the retail business process. During the recent webinar, “Supplier Return on Investment Use Case Data Collection and Analysis” (AAFA, December 14^th) speakers noted that integration with ERP is critical to a successful RFID implementation and one area of focus for most companies during a typical piloting phase.

Most sources consulted agree that tag prices are expected to drop as volumes increase. During the AAFA sponsored webinar, speakers touched on the sentiment that lowering per unit tag costs is crucial to broad adoption of RFID at the item level. It was also noted that companies implementing RFID strategies should consider tag cost in terms of the broader picture including freight, shipping, commissions/duty and tag application. It was also indicated that to facilitate greater adoption at manufacturing, retailers need to come to a consensus in regard to placement of tags on the product with an eye toward ease of manufacturing. In the manufacturing context the need for durability of tags to garment washing for products such as jeans was also highlighted as an important characteristic of an RFID solution.

What’s in it for Cotton?

Knowledge is power and ultimately supply chains for cotton products will reap the same benefits as others from the use of item level RFID to gather information and track products as they move through the points of manufacture and distribution and into retail. In the context of volatile or uncertain markets the adoption of a “pull” rather than “push” supply chain strategy has obvious benefits. Supply chain visibility is critical for success and is closely linked with management of inventory, materials, resources and overall lean manufacturing and business methods. Here item level RFID serves as an enabling technology solution.

There’s more to learn:

For those companies wishing to learn more about RFID, I would suggest that you investigate the VICS Item Level RFID Initiative. VICS refers to the Voluntary Interindustry Commerce Solutions Association and is a group drawing participation from retailers, technology suppliers, industry associations and academia. According to VICS part of the purpose of the Item Level RFID initiative is “…quantifying the benefits of item level RFID and exploring how it can improve business processes along the retail value chain.” One final note, as part of the research for this post I’ve consulted a selection of resources that I will be providing for the reference area in support of readers that wish to learn more. Look for these resources to be posted early in the New Year. I will also continue to keep my ears to the ground in regard to new applications for RFID and will report back on this topic as the need arises.

What is RFID? For readers unfamiliar with this concept, the acronym stands for radio frequency identification and the technology is described as, “…a system that transmits the identity (in the form of a unique serial number) of an object or person wirelessly, using radio waves” (“What is RFID”, RFID Journal). RFID is not new to the soft goods industry and has been investigated and adopted to varying degrees as a means of addressing supply chain visibility with an eye toward reducing stock outs at retail and addressing inventory issues and tracking through the manufacturing, distribution and retail stages. RFID systems consist of three primary components:

• RFID tags that hold information on a microchip and act as transponders of the data via an antenna,
• Tag readers or interrogators that retrieve the information from the tag,
• and software solutions that manage and address the data being supplied.

Unlike bar codes, the technology does not require manual reading of a label or tag. Rather, RFID provides an automated method for transmitting tag information to a software system. These tags can be applied to containers, palettes, cartons, boxes, packages, and individual items to address various levels of monitoring and tracking within the context of a supply chain.

Active and Passive Tags

RFID tags are designed as active or passive devices. Active RFID tags are equipped with a power source such as a battery and can broadcast to the reader. These tags have reading ranges up to 300 feet (“The Basics of RFID Technology”, RFID Journal) and are often used on larger containers or high value items (e.g. vehicles). Active tags are either designed to respond to a reader upon signal or to act as beacons that send out signals at specific intervals. The beacon variety is typically used for locating and tracking activities, while the responding variety may be used for monitoring at locations such as toll booths.

Passive tags work a little differently in that they do not have their own power source and are powered by the reader instead. These tags are typically lower cost on a per unit basis and many sources estimate the range well below 40 cents per tag. Given the low cost structure, passive tags have been used for manufacturing supply chain applications including soft goods. Passive tags can be mounted on a surface or sandwiched between layers for the creation of printable, “smart” tags.  Additional applications include the ability to embed the transponders into a variety of materials such as plastic cards, containers and key fobs.

Data Storage and Transmission

In terms of data storage and transmission, tags are characterized as read-write and read only. Some tags are also described as having WORM chips, an acronym that refers to “write once, read many” (RFID Basics, Paxar). Additionally, tag technologies have been tuned for transmission of data ranging from low to ultra high frequencies (UHF). The frequency for the system is selected based on the application and cost of available tags. Low to high frequency tags support reliable reading, but over short distances, while the ultra high frequency end of the range enables the longest reading ranges (beyond 10 feet) and is available for modest cost structures.

Passive tag systems designed for ultra high frequency use a method referred to as, “propagation coupling” to facilitate the transmission of data (“The Basics of RFID Technology”, RFID Journal.). The RFID Journal provides a general description of the method for interested readers. One of the important features is that propagation coupling does not require the tag and reader to be in close proximity which enables the noted benefits in terms of reading range. Passive, UHF tag systems are also available as low cost solutions. However, UHF systems are limited in terms of penetration of water and materials. Despite this drawback, this frequency is used for applications such as scanning pallets as they move through loading dock doorways and within warehouse shelving systems. One of the challenges here is the ability to read tags in the interior of palette arrangements.  

EPC Coding

In regard to data storage, tag information normally includes a unique identifier, referred to as an EPC code.  Origins of this coding standard are described in the white paper, “RFID Basics” developed by Paxar and posted on the AAFA website. This coding standard was proposed by the Auto-ID center at MIT and development of the system was supported by the Uniform Code Council and EAN International – organizations that oversee the international bar code standards. The article indicates that “EPC utilizes the basic structure of the Global Trade Item Number (GTIN)” and contains 4 sets of numbers that reference in order the EPC version number, the EPC manager (manufacturer of item being tracked), the object class (typically the SKU), and a unique serial number for the item. This information is vital to the ability to identify the asset being located and tracked and can be combined with additional data based on the goals for the RFID system.

Next Time…

This post is intended to act as a bit of an “easy read” primer in regard to RFID technology systems. As such, I have not addressed trends in technology application for RFID or the benefits that RFID adoption offers for the cotton supply chain. I plan to delve into this area in greater detail for my next post. In the mean time, I would encourage readers to investigate the relevant article links found in this primer and being posted in the reference area. I’ve consulted these resources for the preparation of this post and to enhance my own understanding of RFID. Hopefully these links will be helpful to readers that are new to the topic or that wish to learn more about the technical aspects of RFID systems. For those readers more familiar with RFID, I encourage you to check back to learn about some of the more recent developments in this technology area.