A few years ago, most analysts insisted radio frequency identification was too expensive to be used to track individual items. With most passive ultrahigh-frequency tags selling for at least 25 cents each and high-frequency tags for even more, they said it would be impossible to achieve a return on investment from tracking unique items. But as tag costs came down, performance improved and companies learned how to achieve the most value from RFID, it became clear that tracking individual items delivered the most bang for the buck.
The Aberdeen Group finds that 57 percent of retailers using or planning to deploy RFID prefer to employ the technology at the item level, and that many are using the technology to improve inventory accuracy, as well as for other applications. Apparel retailers are aggressively pursuing RFID use at the item level. In July, Wal-Mart announced it had shifted its RFID focus from tagging all pallets and cases to working with suppliers to tag individual jeans and men’s basics, to improve inventory management. The retailer said it planned to expand the program to other categories with complex inventories.
And unlike Wal-Mart’s previous efforts to track consumer packaged goods, this time it has the support of other retailers. Dillard’s, Jones Apparel, Macy’s and JCPenney all have joined an industry initiative—launched by Voluntary Interindustry Commerce Solutions (VICS), and standards groups GS1 Canada and GS1 US—to provide recommendations for EPC RFID tagging at the item level, to be used by retailers and their suppliers.
But the trend toward item-level tracking goes well beyond apparel retail. The Diablo Canyon Power Site, a nuclear power plant owned by West Coast utility Pacific Gas and Electric (PG&E), has attached EPC Gen 2 tags to tens of thousands of reactor parts at its warehouse, to document their locations and maintenance status. The facility has increased inventory accuracy, reduced the time employees spend taking inventory of its warehouse from 2,000 labor hours to 300, and decreased the time workers spend searching for missing items from several days to a few minutes.
Finnish furniture manufacturer Martela is attaching passive EPC Gen 2 RFID tags to desks, chairs and other pieces sold for use in office buildings, schools, hotels and other institutions, to help it better manage those products through their life cycle. As an added service, Martela returns to a client’s site on a regular basis to inventory the furniture, which in some cases is required for compliance with government regulations, or so the company can track its assets for internal purposes.
Solid Comfort, a U.S.-based furniture manufacturer, is also using RFID to track individual items it produces. The system addressed two challenges—locating each piece of furniture in the company’s 100,000-square-foot warehouse in Fargo, N.D., and tracking when and where orders are shipped. The RFID system replaced a manual one that required two full-time workers, and it reduced shipment errors.
Iveco, a truck and bus manufacturer owned by the Fiat Group, is using an RFID system to process the receipt, picking and shipping of replacement parts, and to guarantee the parts’ authenticity. The application has been in operation at Iveco’s distribution center in Turin, Italy, for approximately two years, and was installed at a distribution center in Madrid in early 2010. The system enables Iveco to offer customers a complete catalog of original parts with fast and reliable distribution.
Even the U.S. military, which has been a leader in using active RFID to track containers and passive tags to track pallets and cases, is discovering the benefits of tagging at the item level. The Defense Supply Center Philadelphia has installed an RFID system to ensure Air Force recruits acquire the proper clothing and footwear for their training and active duty, and to track goods though the supply chain from vendors, third-party logistics providers and military warehouses. The main goal was to reduce delays in getting recruits each item they need. By using passive UHF tags on unique items, the U.S. Air Force has reduced the average time a recruit spends collecting and verifying an order from four hours to 45 minutes.
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Hospitals have focused primarily on tracking mobile equipment and assets with long-range active RFID tags. But increasingly, they are discovering the value of tracking individual items with passive tags. For instance, Spectrum Health, a health-care provider in Grand Rapids, Mich., is using an RFID-based cabinet system to track inventory and billing of the thousands of arterial stents it implants in patients each year. The system has raised the accuracy of the hospital’s inventory management from approximately 95 percent to nearly 100 percent. In addition, it has reduced the chance for missed billing of the stents, which average in value up to $2,000 apiece. Based on this success, the hospital may soon install additional cabinets to track other high-value items, such as pacemakers and defibrillators.
The shift to item-level tagging has led to increased demand for passive UHF tags—though more HF tags still are used each year for ticketing and other applications—and a shortage of supply. This resulted in tag prices remaining steady, according to the “RFID Tag Pricing Guide 2010,” released in late September by RFID software and solutions provider ODIN. According to the study, for the first time since 2004, when the company began tracking tag costs, the prices of most tags did not drop compared with preceding-year prices. And in some cases, the report finds, they rose slightly, though discounts typically reduce the final price paid for tags, particularly on volume purchases.
No doubt, vendors will ramp up production as RFID tag consumption rises, and reader prices will fall as volumes increase. RFID is still a long way from becoming as ubiquitous as the bar code, but as item-level applications prove their worth, more companies across a wide variety of industries will adopt the technology, which is why analysts predict steady growth for RFID over the next five years.