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No quick ROI from RFID, say manufacturers

Major consumer packaged goods manufacturers in the US do not foresee any quick return from adding radio frequency identification technology to their packaging and distribution systems.

Mark Engle, director of IT at Campbell Soup, said his company views the incorporation of the technology as "tactical in nature" to meet the requirements of major customers such as Wal-Mart.

"You're not going to get ROI immediately" from using the tags to help track products in the distribution chain, he said. 

Mike O'Shea, director of corporate AutoID/RFID strategies and technology at Kimberly-Clark, agreed. He said his company views RFID as an investment needed in order to meet supplier requirements.

Tom Torre, associate director of business-to-business supply chain innovation at Procter & Gamble, said his company is still trying to figure out the "value proposition" of RFID. 

He said P&G would eventually like to capture tag data from its suppliers to quickly evaluate store sales data, which could provide it with quick feedback on the sales of new products. 

Torre noted that high costs of the microchip-based RFID tags are a problem facing all major Wal-Mart suppliers, and that they are nowhere near the five cents per tag price Wal-Mart has set as a target.

An executive from Matrics said that tag costs in volume now "could be in the range of 18 to 35 cents each". 

However, he said, those costs depend on the type of product the tag is applied to and the kind of adhesive used to secure it to a package.

Antenna types also affect RFID costs. A typical RFID tag consists of a microchip and antenna embedded in substrate material, such as paper labels, he said.

P&G discovered in pilot tests that some products are easier to track than others, further compounding the ROI picture, Torre said.

The company has since divided products into "RF-friendly" and "RF-unfriendly" categories.

The products easiest to track are items such as powdered detergents, while liquid detergents are more difficult because liquids absorb the radio frequency signals transmitted by tag readers. Foil-wrapped packages of dishwashing detergent present an even tougher challenge, he said, since the metal foil repels RF signals. 

According to O'Shea, Kimberly-Clark found the use of RFID tags on cases and pallets of baby wipes daunting, with the wipes having the characteristics of "a wet brick". 

Manufacturers have also discovered that although RFID can track pallets - and cases on the outside of those pallets - the technology comes up short when identifying cases inside the pallets, according to Engle. 

Chief warrant officer Stephen Moody, RFID programme co-ordinator for the US Army, said he encountered similar problems in a test last month that used RFID to track cases and pallets of combat ready-to-eat meals.

Readers could not get a signal from the interior cases on a pallet, but the Army solved that problem by attaching a master tag to each pallet of meals that identified all the cases on that pallet. Moody said the foil wrapping of the meals in each case interfered with tag reading. 

Officials at the consumer packaged goods companies have asked customers to try to co-ordinate their varying mandates.

Since Wal-Mart is rolling out its RFID use first, Engle urged other big retailers to follow that company's lead rather than conduct their own tests in other geographic areas. 

Bob Brewin writes for Computerworld


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