The United States Army reportedly is conducting tests using bees with RFID chips attached to help find land mines. After returning from a jaunt in the field, the chip-equipped insects land on specially engineered mats. The mats can detect TNT on individual bees and by tracking the bee's course, the approximate position of land mines can be determined.
The list of weird and not-so-weird applications continues to grow. RFID can now be found inside car keys as a security measure. It can be put on pharmaceuticals to prevent counterfeited goods from entering legitimate supply chains. It can speed admission into trains, concerts or amusement parks. It can be used as a quick way to pay for tolls, gasoline or other goods. It can even keep tabs on library books, luggage, prisoners, cattle and the family pets.
As converter Fred Elhami, president of AFE Industries in Santa Fe Springs, CA, put it, "The applications are actually limitless. It depends on the imagination."
Before even mentioning Wal-Mart's mandate and supply chain management (which is the area currently receiving the most attention in the media), it's fair to say that RFID is popping up in a lot of places these days. Consequently, most label converters have probably heard of RFID. But not everyone knows what RFID technology has to do with the narrow web industry.
To put it simply, a great deal.
This past June, Wal-Mart announced it is requiring its top 100 suppliers to begin using RFID at the case and pallet level by January 2005.
"We are going to roll it out incrementally beginning in 2005. We'll start with three distribution centers in Texas and as the year goes on we'll keep rolling it out. We have 108 distribution centers nationally, plus we have 3,000 stores," says Tom Williams, spokesperson for Wal-Mart, headquartered in Bentonville, AR.
"By the end of the year, it will be all categories and all distribution centers and all stores. Then in 2006, we roll it out with all of our suppliers."
|A Matrics-designed RFID antenna, printed with Precisia conductive inks.|
Asked in November about label converters' involvement, Williams stated, "I imagine that there would be some involvement, but that is hard to speculate on right now."
Other industry experts, however, say that the label converters' involvement will be large as the 2005 date looms closer.
"Wal-Mart has just asked its top 100 suppliers to put RFID on pallets and cases, and at least initially the form will be labels. So, Wal-Mart estimates that the top 100 suppliers ship Wal-Mart about one billion pallets and cases annually. When Wal-Mart extends that to the rest of its supply base, it will consume about five billion tags annually. We're going to need a lot of RFID labels," says Mark Roberti, editor of RFID Journal in Hauppauge, NY.
"The top 100 suppliers to Wal-Mart will be putting RFID labels on their pallets and cases," says Max Golter, regional sales manager for laminating equipment supplier Bielomatik in Windsor, CT. "This is very accurate information."
The volume of labels created for Wal-Mart suppliers will drive down the price. As other organizations, such as the US Department of Defense (DoD), jump on the RFID logistics bandwagon, volumes will continue to grow and prices will decrease.
"The DoD, Wal-Mart and Metro, the world's fifth largest retail chain, have recently issued mandates requiring the use of RFID from their top vendors starting in 2005. The requirement is for case and pallet load, initially, and item level tagging to follow," says Michael Paul, product manager, thermal technologies, RFID, for substrate supplier FLEXcon in Spencer, MA.
The logistics industry is leading the charge, but as prices decrease, more uses for RFID will appear. While not all RFID products can be manufactured on a narrow web press, there is still a good deal of RFID business on its way to this industry.
The basics of RFID
RFID terminology has not yet been standardized. The biggest point of contention seems to be the phrase "RFID tag". Some use the word narrowly, differentiating among an RFID tag, an RFID label, an RFID key fob, and so on. Some use it as another term for inlay. Still others use it as a catch-all phrase to describe any construction that includes an inlay. This article will use the term in its third definition.
The central ingredient in an RFID tag is an inlay. Inlays, also referred to as inlets and transponders, are composed of two pieces: a silicon chip and an antenna.
Each component plays a vital role. "The chip receives and transmits data, such as a product identification number, using the antenna," says Dan Lawrence, director of technology and commercialization for conductive ink supplier Precisia LLC located in Ann Arbor, MI.
|A glimpse at Bielomatik's transponder and label attaching machine.|
RFID tags are also categorized as active, semi-active, and passive. Passive tags "obtain power from the radio frequency field of the reader, and therefore do not require an integrated power source. This makes them the most inexpensive form," says Lawrence. "Semi-active and active tags utilize an on-board power source to achieve either greater range or the ability to record data from some sort of sensor."
Finally, RFID tags are available in a number of different frequencies. Performance requirements, such as read range, determine the frequency needed. "Each frequency has its associated cost and end use niche," says Paul.
The RFID tag itself is only one component of an RFID system. "The reader antenna emits the radio energy and collects the data and sends it back to the reader. Then the reader is connected to a computer system or a network; it takes that information, just like a bar code scanner would, and then passes it on to a network," says Robert Ryckman, director of marketing and product development for CCL Label in Hightstown, NJ.
"The software at that point picks up information from the reader and determines what to do with it. Print out an invoice? Send it electronically to another warehouse? And so on," he adds.
Barriers to widespread use of RFID
Anyone who has attended a conference or researched RFID has come across the issue of standards. This is a complicated hurdle the RFID world needs to overcome.
It isn't that there is a lack of standards. There are, in fact, quite a few standards that an RFID system can utilize. The problem is that there is no one universally accepted standard.
One might say Wal-Mart has brought clarity by deciding to go with an Electronic Product Code standard called Class One, Generation Two, or C1, G2. The problem with this standard? It doesn't officially exist yet.
"That standard hasn't been signed off on. So what Wal-Mart requires isn't exactly official. It's written, but it's written in pencil. There are many standards out there and [Wal-Mart] isn't even using one that's ratified yet," says Jeff Coseo, account manager for Texas Instruments, in Rochester, NY.
Because Wal-Mart can have its pick of existing standards — such as EPC Class Zero, which is used by Matrics, and EPC Class One, used by Alien Technologies — it seems odd that it would choose one that isn't on the market yet. But C1, G2 has added benefits that other EPC standards cannot offer. "Class One, Generation Two, which everyone is striving for over the next year, is a full read/write technology," says Coseo.
It is important to note that not everyone is concerned by the lack of a universally accepted standard. "There are already many, many standards in the industry. Access control, for example is much more progressed than inventory management and so those standards are pretty much set," says Ryckman of CCL Label. "A lot of people think that if you just have one standard it's like this magic bullet that will fix everything. I don't think there will ever be just one standard that everyone will use."
The standard debate aside, there are still many other hurdles the RFID industry needs to overcome. The cost of implementation remains an issue.
|Courtesy of Texas Instruments|
The confusion arises in part because of the casual use of the word tag. More specifically, "The chip might be 5 cents. The strap [that connects the chip to the antenna] may be 10 cents. The inlay may be 15 cents. But the label will be more than that, somewhere in the realm of 30 cents would be my guess," says Coseo.
The cost of an RFID label and its components fluctuates depending upon the type of technology employed (A read-only label is less expensive than a label that can be written to, for instance), profit margins, construction, and volume. Regardless of the fluctuating numbers, it is safe to say the industry is not close to creating a 1-cent label.
Some believe the 1-cent dream will remain just that: a dream. "I don't believe that's possible. I think there has to be another technology," says Randy Stigall, vice president of asset tracking for inlay-creating company Rafsec, in Hebron, KY. "It's not taking the tag today and grinding it out harder, faster, more. I think you can see a single order of magnitude change in price from doing that, but you can't get beyond a tenth of today's cost, I don't believe, with this technology."
If the 1-cent cost is never realized, it could affect RFID at the individual item level, but it doesn't mean that the RFID industry will fizzle into oblivion. Even so, the cost of RFID implementation remains a hurdle throughout the industry, and especially when it comes to supply chain management.
Individual tags aren't the only thing that companies need to purchase. Companies implementing RFID also need to be concerned with hardware and software.
According to Meeting the Retail RFID Mandate, a report by management consulting firm A.T. Kearney, "The cost of EPC and RFID adoption to retailers is estimated at $400,000 per distribution center and $100,000 per store, with an additional $35 to $40 million needed for systems integration across the entire organization."
The report further states, "Manufacturers will incur the same one-time charges for RFID readers and systems integration as retailers. But they also get hit with the recurring charge of placing RFID tags on their pallets and cases."
That's a pretty expensive technology. And this is only at the pallet and case level.
A final major hurdle is consumer privacy issues. Will the acceptance of RFID signal the birth of a Big Brother era? Industry experts are quick to say no, but consumer privacy concerns still need to be assuaged.
Consumers Against Supermarket Privacy Invasion and Numbering (CASPIAN), along with the American Civil Liberties Union and several other organizations, have recently issued a Position Statement on the Use of RFID on Consumer Products about their views on RFID.
The paper does not call for an all-out ban on RFID, but it does call for limits. The 9-page document lists examples of acceptable uses of RFID, including tracking pharmaceuticals "from the point of manufacture to the point of dispensing," and tracking manufactured goods "from the point of manufacturing to the location where they will be shelved for sale."
But it also asks "manufacturers and retailers to agree to a voluntary moratorium on the item-level RFID tagging of consumer items until a formal technology assessment process involving all stakeholders, including consumers, can take place."
RFID experts have discussed ways to ease consumer fears, such as including a "kill command" on tags that would destroy the tag's effectiveness at the point of sale, but privacy advocates are not convinced.
Despite the concern among some consumers, those involved with the industry see RFID technology as a positive advance. "I always encourage people to embrace the technology and if there's something negative they hear, to research that before they adopt it as hearsay," says Ryckman. "A lot of people will hear some negative thing, like they are being tracked. That's not even possible with the technology today."
Label converters and the big pond
In some ways, the RFID industry is a completely different creature from the label industry. The RFID industry deals with electronics, software and scanners; the label industry has dealt generally with paper, adhesives and ink. But together they form a symbiotic relationship. Label converters, in one way or another, can become partners in the RFID supply chain, aiding in the growth of this industry.
|Using regular substrates in the creation of smart labels can cause uneven printing over the chip. Illustration courtesy of Appleton.|
Because it is an emerging technology, the label converters' role has yet to be defined. Label converters currently involved with the RFID industry are all carving their own niches.
Graphic Solutions in Burr Ridge, IL has chosen to get involved in the technical side of RFID. "We're creating antennas for RFID smart labels, and then our customers have chips mounted and have them turned into finished RFID labels," says Bob Zaccone, vice president.
Antennas are typically etched or stamped out of metal, but printed antennas have become an area of focus because they are a less expensive alternative. Evolving technology is also enabling printed antennas to come closer to achieving the read ranges of traditionally-created antennas. Consequently, this is an area that some narrow web converters have honed in on.
Label converters "have a lot of equipment. They have a lot of know-how based on their experience in graphic arts," says Lawrence. "It's not a completely seamless transition, but from what we've learned over the last couple of years, it's one we're confident that a label converter can make pretty easily."
Other converters, such as AFE Industries, in Santa Fe Springs, CA; X-ident USA in Huntington Valley, PA; and CCL Label in Upland, CA, have taken a different route. They purchase the inlay already made and then create a final product, whether that be labels, tickets, wristbands or other products.
Golter from Bielomatik explains how the process works for RFID labels. "A label converter would purchase the laminating machine, and then he would take cover material, laminate it together with a transponder, and then finish it off by using a pressure sensitive adhesive, and then the final silicone release liner," he says. Bielomatik, whose headquarters is in Germany, manufactures RFID converting equipment.
And still other converters are aiming to become a one stop shop, handling all aspects of the RFID supply chain by outsourcing the components that they don't manufacture. "Some label companies are trying to develop a systems integration approach, where they go in and offer all the hardware and software and technical support," says Ryckman.
No matter what route they choose to go, converters must also have the know-how and the equipment to implement quality control programs (something that will be discussed later on in the article).
Deciding what role to fill is not the only thing converters must figure out. Determining who the customer is can also prove to be a challenge.
"It's a very crazy market," says Elhami of AFE Industries. "We get calls from integrators, we get calls from end users. We get calls from people who are writing programs and so forth. And we still haven't found out who's going to buy it."
It is important to remember that label converters are only one link in the RFID supply chain. There are a lot of other links.
And then there are some companies who manage the whole chain. "We are a total solutions provider. We provide tags, we provide readers that read the tags. We provide enabling software applications," says Girish Rishi, vice president of marketing for Matrics in Columbia, MD. "We don't provide the end user applications, but we do provide application development tools so that an integrator or an end user's IT department can take our hardware, use our application development tools and incorporate it in their enterprise systems."
Matrics is one of a few big boys in the RFID industry, joining the ranks of companies such as Texas Instruments (TI), Alien Technologies, and Philips Semiconductors. The dust continues to settle, but it appears that label converters often partner with these type of companies. That does not mean, however, that all the business comes from these sources.
"It's a mix and match," says Pete Kuzma, president of X-ident USA LLC in Huntington Valley, PA. "When end users want to do an initial pilot, they tend to go right to the technology company, whether it be a TI, a Philips, an Alien or a Matrics. They do a small pilot directly with them.
"After they've gone through this pilot roll-out, and they are convinced that the technology works, then they do more of a discreet purchasing plan in which they move to buy the labels directly from a converter. Some larger end users even contemplate buying the inlays and making the finished packages themselves."
Label converters: Where are they now?
The market is emerging and future prospects are exciting. Some narrow web converters have chosen to forge ahead despite the risks, in the hope of huge pay-outs and higher visibility later on. But what are the majority of narrow web converters doing about this technology?
|RFID chips in a vial of storage liquid. Each chip is smaller than the head of a pin. Photo courtesy of Precisia.|
"The label industry is starting to catch on, but I think that until something like the Wal-Mart announcement happens, businesses tend to think that a technology is not real.
"This is a huge opportunity for them, and the companies that can produce the most labels at the lowest cost are going to do very well. It's somewhat amazing that they are not more focused on this, because it is a huge opportunity for the industry," says Roberti.
"What they are going to need to do is have equipment that takes inlets and turns them into finished labels. There are some people outside the narrow web market who are already doing this. Those folks are going to start to eat market share away from narrow web converters if narrow web converters don't step up to the bat," says Zaccone of Graphic Solutions.
"For the most part, the smaller guys, the narrow web converters, are adopting a wait-and-see attitude. Instead of investing anywhere from $200,000 to $2 million in a smart label converter, they have been waiting to see whether or not the market is going to take off, because it is an emerging market, and that's just the way it is," says Vincent Reese, business development manager for Appleton based in Appleton, WI.
To be fair, there are plenty of reasons for reluctance among narrow web converters. There are numerous challenges awaiting converters as they partner with the RFID industry.
Challenges for the label converter
Retailers and manufacturers are not the only companies that must consider the cost of RFID implementation. Cost is also a challenge for narrow web converters.
First, there is the cost of machinery. "The cost to get into it has them reluctant. A label maker is faced with — probably in just equipment alone — a starting price of about a half million dollars to have the ability in-house," says Golter of Bielomatik.
"It's a similar cost to a high-end narrow web press. It's just that it's a whole other slew of capital investments in addition to the ones we already have on our plate," says Zaccone of Graphic Solutions.
In addition to machinery costs, there are other costs that will be incurred. Staff might need to be hired. There will also be costs for training, software, research and development, and quality control. It would be one thing if the market were mature enough to keep the presses running at all times. At this point, that is not likely.
"The return on investment is not there at present," says Elhami of AFE Industries. "The volume isn't there to justify that kind of investment."
There is also risk involved after an investment is made. Standards are not set in stone yet. The technology is still evolving and machinery might become obsolete more quickly than expected.
This uncertainty has led some narrow web converters who are involved in the RFID industry to hold off investing in certain capabilities. "Even today, there are other things we can do. We could run off and get chip mounting equipment, but that's a big investment dollar wise, and currently there's so much work to increase the speed of chip mounting, that the technology that's out there today may not be here tomorrow," says Zaccone.
Besides cost of investment and the risk of equipment becoming obsolete, the developing infrastructure can pose a challenge for label converters when Wal-Mart's mandate takes effect. There is some concern that, initially, there will not be enough inlays available for Wal-Mart suppliers. No inlays means no RFID labels.
"One of the concerns we have is that people will dibble and dabble around in the first half of '04, run a pilot in the third quarter, and then expect to buy a million RFID tags. Our industry, which makes the transponders, will not have gone out and bought the capital because we didn't get the orders," says Stigall of Rafsec.
"All of a sudden, we've got a huge demand and a bottleneck of the machines that make them. That's the dilemma, and the best we can tell is that there is a four to six month lead time on building a new RFID inlet line."
Finally, there are also technical challenges associated with producing finished RFID products. Sometimes, when a roll of inlays comes into the converter, there are a good number that are damaged or not working properly. Kuzma estimated that in his experience, loss can be anywhere from 2 through 15 percent, depending upon the batch.
Ron Keating, vice president of operations for Matrics, says that yields at Matrics can reach up to 99.5 percent functional, but "If we're challenged by any sort of yield issues, it's usually on the start-up of a new design and it's a manufacturing start-up process, and sometimes you'll see fall-out at that level.
The converting process itself can damage inlays as well. "Sometimes there are problems in the manufacturing of the labels themselves, where there's actually damage done to the chips," says Keating.
Special substrates that cushion the chip can help prevent damage at the converting level. However, quality control, both before and after converting, is still vital.
"Converters must establish a quality control program which ensures that the smart labels they produce are functional. Ideally, a converter should establish which inlays are bad prior to insertion, and then develop a conversion process that prevents bad inlays from being inserted into the label stock. Once the conversion is complete, a second verification should be done to establish that the conversion process did not damage the inlay," says Daniel Mullen, president of AIM — The Association for Automatic Identification and Mobility, in Warrendale, PA.
Batten down the hatches
There has been a lot of hype surrounding the RFID industry. Let's take a realistic look at where it is, the best predictions of where it's going, and whether or not this is an opportunity for all narrow web converters.
Although the market is growing, the demand for RFID labels and other narrow web products is currently not that large. "We haven't reached billions yet, as far as tickets and labels that have been produced in RFID," says Golter.
As far as labels specifically, "Volumes for 2002 were estimated at 10 million RFID labels," says Bailin from The Freedonia Group.
These numbers hardly seem to justify the rallying cry by many today. But what about tomorrow? No one disagrees that this is an important opportunity for converters. But how big an opportunity will this be?
Some do not think it will revolutionize the narrow web industry unless item level tracking becomes a reality. "It's a nice market, but it's not going to create a whole new wave of industry, I don't think, in converting," says Kuzma from X-ident USA. "That's with the Wal-Mart and the DoD scenario of putting labels on pallets and boxes. Now, if they ever get down to marking items, then that makes it a huge, huge market."
Others disagree. "RFID is not a dream that might one day become a reality. It is here, it will stay, and it will expand," says Golter. "If they want to remain competitive in the future, if they want to survive in the future, they will eventually need to have the ability to create RFID tags and/or labels."
"The time for RFID has arrived. There are real applications out there. It's a very viable and lucrative market for label converters and they should be paying attention to this market," says Rishi of Matrics.
Whether approaching RFID with a cautious optimism or with a full speed ahead attitude, the truth is that the future impact of RFID on the narrow web community is still unclear. And even if all signs pointed to RFID revolutionizing narrow web, given the challenges, there is doubt that small companies can afford to get involved at this point.
Some say smaller companies might have to wait until standards are set for their industry. "Most small companies can't afford to have assets on the floor that are not producing, and I think that's probably a drawback now. But maybe a couple of years down the road, that won't be the case," says Ryckman.
Others admit it's a challenge, but say that small converters are able to participate now. "I certainly think it's something that small converters can afford to do," says Zaccone. "It's expensive, but it's not unattainable."
Ultimately, it's a business decision only the management of small companies can make. But if small converters can muster the capital to invest in equipment, training and staff, there is a place for them in the supply chain.
Coseo of Texas Instruments sees the emergence of a market with two types of RFID usage. The first includes high volume consumer products that are sold in the billions. "And then there is the product that has strange requirements. We are going to see that Wal-Mart has products like Christmas trees that are going to need to be tagged. They are not the norm. We are going to need smaller players who are more flexible, more agile, to take our products and make a unique solution for the end customer."
Narrow web applications
To date, smart labels and other RFID narrow web products have not claimed a huge market share. But future prospects look hopeful. RFID labels for logistics is obviously a big opportunity for label converters, but there are other growing applications that would involve the narrow web community. In its study Smart Labels, published in December 2003, The Freedonia Group states: "In the near term, the best opportunities will exist in the labeling of mail and packages, crates and pallets, airline baggage, library books and military assets."
Other experts weigh in with similar predictions. After pallet and carton labeling, "Airline baggage tags could well be the next major application for smart labels. Delta Airlines has completed a successful test, and several airports are beginning to implement airport-wide RFID baggage tracking to both improve baggage handling and to improve security," says Mullen.
"The Food and Drug Administration is also looking at this technology to put on prescription drugs. It's not mandating that at this point, but there is a lot of interest within the pharmaceutical industry to use this to prevent counterfeiting," says Roberti of RFID Journal.
RFID labels are only one type of product that can be created by the narrow web community. Transportation is already a major application for narrow web ticket and contactless card manufacturers. This market promises to continue. "Transportation is huge, and it's not just limited to subways, but it includes buses and all means of transportation," says Golter.
Preparing for the day
Fast forward three to five years. The optimists have won and the RFID industry is booming. Standards have been set. The infrastructure is in place, and people are buying lots and lots of RFID tickets, cards and labels.
Label Company A has been waiting to jump in and now it's time. They purchase a laminating machine. The orders come rolling in. The only thing they have time to do besides run that machine is to count their fist fulls of money.
And then the alarm clock rings. Sorry folks, it isn't going to work like that for label converters. "You can't sit on the sidelines and expect to hop into the game at the last minute. What's going on is that you have some label converters doing just that. They are not in the game. They don't understand RFID. They don't understand the RF world. They haven't built the partnerships that would facilitate an information flow, which would get them up to speed," says Reese.
Before purchasing machinery, there are other steps in the preparation process. Building partnerships with key members in the RFID supply chain is one of them. RFID training is another necessary element. And at this point, converters can be trained by many of the suppliers or the big technology companies. Education is a role they are willing to perform, at least for now.
"We work with them. We educate them. We have formal training sessions that we can arrange to get them started," says Rishi of Matrics.
In addition to obtaining general RFID knowledge, companies will also need staff members who understand the specific nuances of the electronic world. When inlays are involved in the equation, an understanding of electronics is imperative because environments that do not affect the performance of regular labels can have a detrimental affect on RFID products. "As a converter, it is important to learn the proper handling of inlays and understand how the label design and material selection can impact the overall performance of the product.
"It is also important to remember that RFID inlays are electronic devices and should not be stored or applied where there is a significant amount of electromagnetic or static energy," says Mullen from AIM.
Crossing into electronics poses another challenge, this time involving the staff. "They're probably going to need some expertise that they don't have on their current staff concerning quality control equipment," says Kuzma. "It's more of an electrical engineering thing, and that's not a typical position in a lot of converting companies, so they have to think of the staffing impact of RFID on their process."
There's obviously a lot to consider before entering into the RFID market. Add to the mix a nagging sense of urgency as the market continues to forge ahead.
"It takes six to eight months of being immersed in the market to fully understand it. And then you have to decide how much to invest, how to invest, and what your products are going to be, and the whole time the market is moving along without you," says Reese of Appleton.
For those willing to plunge in, the reward may be great. Then again, it may not be. Travelers willing to embark on the journey must know that the road is long and the course uncharted. Education, good relationships, and proper equipment are vital. But even with all the right components, the journey forward is still unknown.