RFID Technology

By Jack Kenny | July 18, 2005

Labels with smart chips are a growing market, but require skill and engineering.

There was a time when we were amazed that we could fasten a little device to our car windshields that allows us to pass easily and without stopping through highway toll gates. Then some gasoline companies picked up the idea and we could pay for our fuel without reaching for the wallet. We are no longer astonished at what radio frequency identification technology — RFID — can do to improve our lives and our businesses.

Putting an electronic circuit into a pressure sensitive label sounds relatively simple, but the process is complex and costly. At least one major converter, whose marketing and engineering executives had been pushing boldly into the segment, recently decided to avoid the niche altogether.

Both converters and the suppliers of the chips, or inlays as they are called in the industry, have noted the sluggish pace of the RFID label segment, but there are indications today that this technology is on the move.

The object of RFID is to carry data in a transponder, and to retrieve that data in a wireless manner by means of machine readers at the right time and place to satisfy the needs of the user. Data within a tag can provide identification for an item in manufacture, goods in transit, a location, the identity of a vehicle, an animal, or an individual. According to educational material published by the Association of the Automatic Identification and Data Capture Industry (AIM), "RFID, its application, standardization, and innovation are constantly changing. Its adoption is still relatively new and hence there are many features of the technology that are not well understood by the general populace. Developments in RFID technology continue to yield larger memory capacities, wider reading ranges, and faster processing.

"It's highly unlikely that the technology will ultimately replace bar code. Even with the inevitable reduction in raw materials coupled with economies of scale, the integrated circuit in an RF tag will never be as cost-effective as a bar code label. However, RFID will continue to grow in its established niches where bar code or other optical technologies aren't effective. If some standards commonality is achieved, whereby RFID equipment from different manufacturers can be used interchangeably, the market will very likely grow exponentially."

Several factors contribute to the pace of the marketplace for RFID labels. One is lack of standards: Producers of the chips and reading systems are working together to agree on appropriate frequencies, and this aspect of the technology has global implications because frequencies differ from continent to continent.

Second is education. End users, and converters as well, simply don't know enough about RFID: what it does, what its potential is, how much it costs, what the price/value ratio can be, what it requires in skill and engineering and marketing.

Moore North America, a division of Moore Corporation, has been converting RFID labels for the past four years at its Grand Island, NY, plant. Nancy Mitchell, the director of coating operations, observes that the slow pace of growth in this market has picked up recently.

"Over the last year we expected the market for RFID labels to take off more quickly than it did," she says. "This could have been, in part, a result of the lack of standards. Now we're seeing a great increase in requests for converted RFID media. We're seeing a better educated customer base, which has a better idea what the technology can do, what its benefits and limitations are. Customers are coming in with more well defined specs." She attributes this education to the efforts of the standards committees, the technology providers, and the systems integrators.

Moore's marketplace, says Mitchell, is typically industrial. The company has seen "an increase in interest among companies involved in logistics, tracking and tracing" of a variety of items.

At Wallace Business Forms, Hillside, IL, Mike Keim says that the company has been dabbling in RFID for more than a decade. "Going back about three or four years, things started to take a more dynamic turn, with the chips getting smaller, the antenna rays different. We started taking a closer look," says Keim, the vice president of engineering research and new market development.

Today, customers using RFID labels tend to be the industrial firms, though there are some consumer packagers stepping into the arena. "There has to be a price differential that drives it," says Keim. "A customer might want a more expensive label, or the product to be labeled is in a more volatile environment — atmospheric, for example, or a condition exists where bar coding or other data reporting doesn't lend itself easily."

"Compared with three years ago, the audience of label converters engaging in RFID technology is huge," says Kevin Sharp, technical editor for Supply Chain Systems magazine, and an engineer who writes often on the subject. "Compared with converter capacity on the planet in general, it's tiny, but it's growing substantially."

Supply chain disciplines and logistics companies are the biggest users of what has come to be called "smart label" technology, Sharp says. "Eventually it's going to work into some of the retail settings. It's not common at this time for a smart label to be put on everything that is shipped — just a carton, for economic and engineering reasons."

Sharp adds that in the retail segment, "smart labels make sense for high-value items, such as consumer electronics. A 50-cent tag on a $100 or $200 item makes sense."

"It's new for us," says Mark Freeman, president of Inspec Tech, Valley Head, AL. "We've waited for the market to get mature. Our equipment on the converting side has changed dramatically in the past eight months." Inspec Tech, which has been in the bar code tracking business for years, has acquired RFID converting equipment from Omega Engineering.

"The people we're after are tracking high quality items with read/write capability. They want to know how many items are in a particular bin without having to rely on a mainframe computer. Many of the people we are catering to are not doing RFID yet," Freeman adds. "They're interested. We've been in this business for 15 years, and we know it's going to happen."


The investment
Converters are learning that the equipment they need to install the inlays — the composite sandwiches of substrates, chips and adhesives — into labels is not already sitting on their shop floors. The industry for specialized converting equipment is growing around them. Omega Engineering and Melzer are but two of the companies that custom-build the converting machinery.

"You're going to have to make an investment in capital equipment and in human capital," says Sharp. "The disciplines involved in making this work, while not rocket science, are substantially different than previous converter disciplines."

Melzer's Smart Label converting machine

"It requires some talent in the understanding that you can't just take a roll and do things to it, because of the sensitivity," says Keim. "Most programmable chips are built on silicone, and like any piece of glass they break. You have to be very cautious about that, and maintain the integrity." Wallace recently installed Melzer Smart Label converting equipment.

"When putting a transponder onto any type of substrate, you have to be careful not to damage it," says Kent Blackwell, marketing vice president for RFID, AFE Industries, Santa Fe Springs, CA. "There's nothing worse than to run a complete order and have it not work. You have to incorporate the ability to have quality assurance prior to the insertion, and then after the insertion have the same process take place to ensure that the final finished product is functioning as it must. You are, in essence, scanning as the end user will scan, making sure that the transponder is functioning."

What this means is that the converting equipment — in most cases off-line, post-print — is equipped with at least one device that reads each chip. All systems have the read capability built into the final inspection of the roll, but some have readers ahead of the inlay application to weed out damaged or corrupt circuitry.

"You have to read the inlays prior to the product being inserted," Blackwell says. "That way you know you're starting out with a product that is functional. Out of five thousand, you might receive two or three that are damaged. The failure rate is relatively low."

With an on-board verifier, says Freeman of Inspec Tech, "you can pretty much say that the accuracy is 99 percent.

He adds, however, that the converting process is not the same as for other products. "The process slows dramatically. I relate it to digital printing — slow and costly."

Because the inlays are delicate, damage is possible at many points along the converting path, especially at the diecutting stations.

RFID labels can be either "read" or "read/write". The "read" chips are locked, so that the information contained therein can be read only and not changed. The "read/write" chips can be programmed.

This technology presents an extra opportunity for converters, who might consider investing in equipment to program the transponders with the code desired by the customer, thereby eliminating a step in the path that the customer might have to take with another supplier.

"In the same way a converter might convert and sell blank labels as well as those printed in four-color, there can be a similar value-added process, an opportunity to sell serialized labels," says Sharp. "The converter can program the insert on press, or as a post-press operation."

Inspec Tech has two field engineers who examine customers' logistical needs and recommend labeling solutions. "We have the technology that does the actual reading and writing," says Freeman. "We're not just a label converter. That what puts us ahead of the pack."

A smart chip from Motorola

Suppliers as educators
Suppliers of RFID inlays are spearheading the effort to educate end users about the potential for the technology. Among these are Texas Instruments, Motorola, Philips, and GemPlus.

"Market adoption has not moved as quickly as expected," says Enu Waktola, RFID Smart Label marketing manager for Texas Instruments. "The marketplace still needs education, users are comparing pricing with bar codes, and they need to understand the value proposition with RFID." Texas Instruments (TI) has set up a program called Team Tag-It, a collection of more than 50 companies whose aim is RFID education and promotion. Label converters are among those on the team, and Waktola adds that converters have visited customers along with TI people to promote the technology.

"When you compare the price of an RFID tag with a bar code, you can be set back by the comparisons," Waktola says. "Without the understanding of the benefits and value that RFID brings, the end user can't see that it is not the same as a bar code, but a supplement to it."

Retail stores that have undertaken trials with RFID tagged items, she adds, have reported sales 5 percent higher than stores that don't use them.

"Chip prices have come down," says Keim of Wallace, "and the inlay prices have come down. It's now a little more economical. That's part of the driving reason that people are looking at RFID now. The return on their investment by going this route overcomes the cost."

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