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RFID Gets Itemized

Most people thought item-level RFID tracking was years away, but many early adopters are launching pilots that could lead to major rollouts this year.
By Mark Roberti
Tags: Apparel
Apr 01, 2006—Not long ago, the conventional wisdom was that companies would begin deploying radio frequency identification technologies by tracking pallets and cases in the open supply chain. As the volume of tags consumed annually by these applications rose, the price of ultrahigh-frequency RFID tags would fall, and when tags got cheap enough—perhaps 5 cents apiece—companies would begin to put them on individual items. Turns out, conventional wisdom wasn't so wise.

Leading early adopters around the world are aggressively exploring the feasibility of tagging individual items today with an eye to rolling out the technology as soon as it's practical. Rollouts of item-level applications have already begun in several industries. In the pharmaceutical sector, U.S. drug manufacturer Purdue Pharma and others are tagging and tracking individual bottles of pills. German health-care provider Saarbrücken Clinic Winterberg is tracking individual bags of blood. U.S. jeans maker Levi Strauss, Japanese retailer Mitsukoshi, U.K. retailer Marks & Spencer and others are tracking apparel and footwear. Swiss watchmaker and jeweler de Grisogono is tracking watches and diamond rings. And Japanese retailer Yodobashi Camera is tracking individual digital cameras.

Leading early adopters around the world are aggressively exploring the feasibility of tagging individual items today with an eye to rolling out the technology as soon as it's practical.

Many more companies are planning item-level tagging pilots. A December 2005 survey of retail managers conducted by AMR Research found that 42 percent of respondents say that item-level tagging will be their organization's most strategically important technology investment over the next 12 to 24 months.

"The interest in item level has risen significantly in the past 12 months and is accelerating," says Elie Simon, CEO of Tagsys, a leading provider of item-level RFID tags.

Robert Locke, CEO of Vue Technology, one of only a handful of RFID vendors focused on item-level tagging, goes even further: "We're seeing an explosion of interest in item-level tagging."

The early thinking about item-level tagging was driven largely by consumer packaged goods companies, which sell low-value, high-volume goods. Item-level tagging was considered to be impractical because the hefty cost of the tags and large numbers of interrogators needed to read them would exceed any potential benefits. CPG companies still say there is no business case for tagging products at the item level, except, perhaps, in special circumstances such as promotions. A 2004 Forrester Research study found that 40 percent of CPG companies surveyed felt they would not begin tagging until at least 2014.

But the apparel, designer goods, pharmaceutical, electronics and entertainment companies, which make high-volume, high-value goods, think otherwise. Early adopters in these industries always knew that the biggest benefits would come from item-level tagging, because that would provide the greatest level of visibility into a company's operations, says Lyle Ginsburg, partner at Accenture. And a number of things have changed in the past eight months or so to make item-level tagging practical and beneficial today.

Companies are more knowledgeable about RFID's capabilities, and early, limited pilots have shown promising results. Tag costs have come down, making the cost of tagging lots of items less prohibitive. The technology is also improving, and RFID hardware and software vendors are introducing new products to help companies tag profitably at the item level (see box below).
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