Making RFID Affordable

28 February 2005 (Last Updated February 28th, 2005 18:30)

RFID promises many potential benefits to industry, as it facilitates tracking of items, stocktaking and ordering. While there is a strong case for the technology, cost is one factor limiting greater uptake, so we assembled a panel of experts to identify how low-cost RFID might be achieved.

Originally emerging in the 1970s, radio frequency identification (RFID) tagging has only just started to find a foothold among major retailers. It is a technology that has aroused great interest among businesses, because of the efficiencies it potentially offers, and great suspicion among certain sectors of the public.

Though much has been said about its potential, RFID is far from being commonplace and uptake is slow. However, the technology itself continues to evolve rapidly, and the problems of perception, technology and, above all, cost, that hinder its wider use are being addressed.

'We are at the very beginning of RFID becoming a more widely accepted technology,' says Alex Boellaard of tag manufacturer UPM Rafsec. 'Wal-Mart has led the way with its mandate, and there is lots of high-profile activity. However, there is only a small circle of retailers looking at it. Any new technology needs these early innovators.'

Nevertheless, interest is coming from many industry sectors, with many firms looking closely at the trials being conducted by Wal-Mart and others. 'Our RFID solutions are not limited to any specific industry and we are currently engaged in projects in the automotive, pharmaceuticals, logistics, and airline industries, to name a few,' says Vic Barczyk of automatic identification and data capture expert, SATO International. 'However, our major focus is on industries that are currently being driven by mandates such as retail with the CPG/FMCG suppliers as well as the US Department of Defence (DoD) suppliers.'

The number and extent of trials continues to grow, with Marks & Spencer, for instance, rolling out its RFID experiment to 53 stores - around one sixth of its entire network.

'It is important to management that it is viable, that the technology works on specific applications and that there is a return on investment,' says Boellaard. 'You could compare it to the introduction of bar codes. Early innovators paved the way, and now RFID is going the same way.'

Addressing the problems

On many fronts, the technology has some way to go to reach maturity. For instance, standards for numbering mass items - the ultimate goal of RFID proponents - are yet to be finalised. Another issue the developers must address is concern among the general public over the social implications of the technology and the level of intrusion on their privacy that it is perceived to represent.

'We need to be very aware of public concerns,' says Boellaard. 'We must educate people about the technology - tell them what it can and can't do - to move away from the idea that Big Brother is watching you. RFID is not a locating device.'

There are also issues over functionality, with some goods proving difficult to tag effectively. 'Cans embody all the problems with RFID,' says Max Golter of machinery manufacturer Bielomatik Jagenberg. 'Camp-bell's Soup is probably as bad as it gets - a metal can with fluid contents.'

While public perception can be addressed by education and further field trials, and technology developers can refine the technology to perform better in all applications, there is one other issue with RFID that cuts to the heart of every business - cost.

At present, the cost of RFID tags is relatively high, given the materials, components and construction processes involved in using etched metal tags - as much as 50 cents each. The Marks & Spencer trial, for instance, has seen RFID tags put only on high-value, high-margin goods. These products can afford to carry a tag with a relatively high cost for the purposes of testing the technology.

'Tag cost is the key challenge for item-level implementation,' says SATO's Barczyk. 'We are helping in multiple ways to minimise the cost of tags. We are working with the major chip, inlay design and label converting companies to ensure that our products are compatible with the various tags in the market and to help develop second generation products. We also plan to convert our own smart labels, enabling us to offer even lower pricing specifically designed for our products ensuring a high yield.'

'When you look at tag costs, you have to look at all the components of manufacture,' agrees Boellaard. 'The chip, the chip attachment process and the integration of it into the packaging or the label, it all adds up.'

Cost-cutting conductive inks

One area of research that could have major implications for the cost of RFID tags is the development of conductive inks, which allow antennae for tags to be printed directly onto labels and packaging, without the need to assemble them in advance.

Conductive inks have high electrical conductivity, meaning that antennae can be produced without the need for high-quality substrates, stamped metal or etching. They could also be used on virtually any packaging material. RFID tagging could potentially be much more cost-effective without the tag conversion and manufacturing costs.

Furthermore, tagging could be more easily integrated into existing processes as antennae can be printed at the same time as packaging graphics. The hope among developers of the technology is that significantly lower costs will open the door to a broad range of new RFID applications, above all the mass item tagging that Wal-Mart and the US DoD are targeting.

Such inks also streamline the process in other ways, as Bielomatik Jagenberg's Max Golter explains. 'Registration - the need to print and position the transponder in the same place on each label - needs a special process when slicing and laying out the transponders,' he notes. 'With conductive inks, the printer automatically puts it where it needs to be. The costs of etching, registration and the environmental issues over residues are eliminated.'

However, the move towards conductive inks is likely to be steady rather than swift. This is partly because the principle of the technology is still being proven in trials, but it is also due to the fact that inks are not yet universally the best solution.

'Conductive inks are not better for labels,' notes UPM Rafsec's Boellaard. 'With clothing, for instance, when labels are used current antenna technology is better. Conductive inks may be better for mass packaging, but that is not happening yet.'

However, the cost advantages of conductive inks are clear to all. 'Ink is more environmentally sound, simpler for the converter and has fewer components, so the cost per unit comes down,' notes Golter.

The future in flux

With a prevalent technology proving itself, and a new technology entering the market, label converters are facing a conundrum, says Golter. 'When you look to the future, who do you believe?' he asks. 'If you are a converter getting more requests for smart labels and looking to make a capital investment, you might face the technology evolving and rendering your equipment obsolete. At the moment, the performance of conductive inks is debated by ink manufacturers and conductive ink manufacturers. So, many converters want to stay flexible enough to produce tags for the short term and evolve with future designs.'

In the long term, it is true that the industry will want to move towards a situation where every stock keeping unit has a unique tag and electronic product code (EPC), allowing firms to track each one all the way from production to its departure from the retail outlet. This is likely to increase momentum for the move towards the use of inks.

For this to happen, however, some fundamental questions need to be answered, the most important of which once again relates to cost. Availability of resources is a key issue affecting the cost and viability of mass item tagging. Printed antennae still require silver and other materials, for which there may be limited supply. For etched tags, the cost and availability of silicon are also crucial.

'Transponder manufacturers are asking whether there is enough silver to produce tags for mass retail goods,' says Golter. 'It would mean huge consumption. But then, with chips, silicon is expensive, and though smaller chips mean less silicon is used at the per-item level, is there enough silicon to meet demand? There will be a move towards inks, but there is a question over how fast that will be.'

Developers, necessarily, are looking for ways to address these problems and control costs. 'Our reel to reel manufacturing process and silver ink antenna printed on paper are two major features that will decrease prices of smart labels,' says Xavier Bon at ASK SA, a worldwide leader in contactless cards, tickets, RFID tags and readers compliant with ISO and EPC standards. 'ASK has used conductive silver ink for nearly seven years now with over 50 million products in the field in mass transit and other demanding environments. We print the antenna directly on paper, saving raw material and being environmentally friendly at the same time.'

Bon believes that with such techniques, and the gradual maturing of the technology and processes, costs can be brought down. Bon believes that with such techniques and the maturing of the market, costs can be brought down. Costs will be reduced with growth in volume. He says, 'We are working through a learing curve. Three years from now there will be billions of tags at lower prices, but people should not expect them to be the same price as bar codes. It is a technological leap that brings a lot more services than a bar code'.

Some, however, are more cautious. 'One of the key obstacles to item-level tagging is the current price of RFID tags,' concurs SATO's Barczyk. 'However, this can be considered just the tip of the overall item-level iceberg. In order to implement the full solution, a considerable amount of investment is required for each store. Each shelf in the store must be equipped with readers and antennaes strategically (and frequently) positioned to be able to monitor the various products on the shelf. Software needs to be written to manage the movement of goods from the back to the front of the store, and then onto the shelves.

'This software needs to monitor the quantity of each product and should automatically send a restocking order when the minimum level has been reached as well as generate reports identifying misplaced goods. Then of course, there is the checkout counter, each requiring more readers, antennas and software. So where the reoccurring cost of the tag is quite influential to item-level implementation, the costs associated with equipping each store with hardware and software will make it totally unfeasible for the near future.'

The second generation of EPC standards, due in the third quarter of 2005, will no doubt have a major influence on how the RFID market develops. 'The technology that we are seeing now has been available for the last two years,' says Boellaard, 'and it has not reached maturity yet. However, the second generation of electronic product codes has a better specification and there are a number of things that can be done to improve the technology.'

Many believe that RFID could potentially be used in any application that today would use a scanned bar code. How soon that day comes will depend on how well early adopters and developers of the technology can control the cost of tagging.