Every year the UK's brewing industry manages to lose 300,000 empty beer kegs. Some are pilfered, others are illegally resold, and the rest are probably lying in forgotten corners of pub basements. These lost kegs cost breweries about £12m to £15m a year. Any technology that could cut these losses by even a fraction has to be worth investigating.
That's why this summer, Scottish Courage began a multi-million project to fit electronic radio tags to more than two million barrels.
The tags are a beer equivalent of the electronic tags used by the prison service to monitor offenders placed under curfew orders in their own homes.
They will allow the brewery to accurately monitor the whereabouts of each barrel for the first time, to record its maintenance history, and just as importantly, to identify which customers are hanging on to the kegs, and which are returning them as they should. The project should pay for itself in two years.
Scottish Courage is the first large-scale implementation of a technology know as intelligent Radio Frequency Identification (RFID), an electronic version of the bar-code. Like the barcode, tags have the potential to transform the way manufacturers and retailers deliver their products from the factory floor to the customer. But their advantages are an order of magnitude greater than the black and white stripes that adorn baked beans and cornflake packets in every supermarket.
Scottish Courage had some experience of using barcodes but had found the technology wanting. Brewery logistics director Graham Miller explains, "We had a read rate of 95% to 98%. We deliver 16 million beer kegs a year. Multiply that by a 3% error and that's half a million transactions we could not account for.
"We realised that while tags were relatively expensive, they could be read 100% of the time, they could be read very quickly and we realised there was a lot of other information we could put on the tag that would assist us with the running of the brewery."
The brewery teamed up with South African equipment supplier Saco to develop radio frequency tags and a hand-held device to read and write data to and from the tags. The tags, essentially a computer chip attached to a radio transponder, had to be readable in close proximity to the metal kegs - a difficult engineering challenge. The readers were designed to read both the electronic tags and the barcodes that are still used by rival breweries.
A small-scale trial at the group's Tadcaster brewery in 1996, showed that the potential savings of the project far outweighed the costs. It was followed by a pilot programme in Scotland which proved the business case for a full roll-out across the UK.
Brewery workers use the hand-held readers to record key information about each barrel and its contents before they leave the brewery. This might include a unique keg number, details about its contents, its country of origin, the name of the brewery, and the date and time it is dispatched.
Once at the pub, the draymen use the reader to record which kegs have been delivered. It is simply a matter of pointing the reader at the kegs, pressing a button and printing out a receipt for the customer. Back at base, the drayman can feed the data directly into Scottish Courage's enterprise resource planning system.
The benefits of the system are immense, said Miller. "We know where every single keg is going. We can identify customers who have a record of not returning the containers and chase them up."
Scottish Courage can also use this information to help publicans who are ordering too much stock to streamline their processes. "We can help them manage their stock better, so that they can get fresh deliveries every week, rather than serving beer that has passed its sell-by date."
There are other benefits too. Scottish Courage is using the system to crack down on wholesalers and publicans who are breaking their trade agreements by re-selling the beer.
"The system automatically prints out a list of kegs that are sent to one customer and returned by another," said Miller. "We can identify customers who appear to be big buyers and get big discounts but only use a small amount themselves."
The scheme will be watched closely by the UK's retailers and grocery suppliers. Retailers are already keeping a careful eye on the technology. Sainsbury's, which has probably done more work than any other UK retailer on the technology, has been undertaking extensive trials for the past three years. Woolworths is also evaluating intelligent tags in the clothing supply chain. It is expected to unveil its findings at a conference next month.
Yet there is still a long way to go before intelligent radio frequency tags will find their way into more general use. Scottish Courage's RFID system uses specially-designed proprietary technology. But RFID is unlikely to take-off significantly until equipment manufacturers are able to supply off-the-shelf, standardised systems.
Mike Schuck, assistant director at the British Retail Consortium, said, "We are waiting for it to reach the stage where it is commercially available, reliable and cost-effective. But we have not arrived there yet."
Although, like every other microchip-based technology, the cost of tags is falling every year, tagging systems still represent a significant cost for manufacturers and retailers.
Mike Keith, managing director for retail solutions at Intermec, which supplies intelligent tags, admitted that cost can be a problem. "It needs a compelling return on investment if a retailer is going to sacrifice opening new stores to buy it," he said.
Retailers will initially use tags only on higher value items, like television sets, or refrigerators. As Keith pointed out, no retailer is ever going to put a 50p tag on a 30p tin of beans. The best solution for most retailers will be a combination of intelligent tags and barcodes.
One hurdle remains: the need for internationally agreed standards both for the technology and the tag radio frequencies. "It's a bit like the Betamax/VHS argument made more complicated," said Martin Swerdlow, consultant at logistics specialist IPI. "People are not willing to make large investments in the absence of open standards."
Work is progressing on several fronts. The UK standards body E-Centre and its overseas equivalents have formed a dedicated group to press for governments to free up UHF frequencies for intelligent tags.
But reaching a consensus is a painstakingly slow process, said Philip Jerred, project and standards manager. "To get global agreement requires diplomacy and discussion over a long period," he said. Even then, the frequencies will still have to be agreed and implemented by national governments.
In the meantime, equipment manufacturers are developing intelligent tag readers that can identify a variety of different tags and different frequencies. If they can produce a technology that is cheap enough for general use in the supply chain, intelligent tags could begin to make an appearance while the standards bodies are still trying to reach an consensus.
Benefits of intelligent radio tags
Source: Institute of Grocery Distribution
This was first published in October 2000