RFID future benefits so near yet so far
IRRESPECTIVE, RFID technology has the potential to not only help food and beverage manufacturers and retailers comply with evolving government regulations regarding food safety, but also create a strategic opportunity to enhance and assure brand value as well as other key benefits.
Before RFID can be fully deployed by the F&B industry, however, several factors need to be overcome:
· Standards – EPCglobal is leading the development of industry-driven standards for the Electronic Product Code™ (EPC) to support the use of RFID globally - currently this standard has not been ratified in Australia
· Legislation regarding power ratings - the Australian Communication Authority is reviewing
· Proprietary technology - Some key technology such as RF tags are proprietary and are therefore not cost effective for F&B organisations that are pressed by low margins. With the ratification of the GEN 2 standard the technology – whether tags or hardware infrastructure associated with tags will become non proprietary in the near future.
· Collaborative trading networks – All partners in a supply chain must be fully enabled with the electronic communications for RFID to work effectively. If one partner has invested and not the others, vital information cannot be passed on through the supply chain (such as the parent/child relationship of a pallet to a carton). Today, companies still have issues with barcode technology and serial shipment container codes, which is essentially equivalent to RFID, because they do not have such infrastructure in place. Moreover, trading partners must not only invest in RFID they must share the cost so that suppliers do not solely carry the cost.
· In the end it’s not a technology issue but one of business relationships.
· Data synchronisation - All parties must agree to a common data format. This enables anyone in the supply chain to be able to identify a unique ID so that it can be read and associated to that original supplier. Once standards are ratified Global Tracking Identification Numbers for both the product and the supplier come into play.
· Supply Chain Integration – to maximise the effectiveness RFID technology is best deployed as part of integrated Supply Chain Management (SCM). Trading partners that have already done integrated Barcode type technology with their SCM are in a good position to rapidly uptake RFID.
· Conductivity – metal and water can negatively impact on the readibility of RF tags, however, in the near future this will be overcome as design of the tags is corrected (relates to the antennae on passive tags).
· Cost – Much of the F&B industry is high volume, low margin so any additional will be resisted.
· Other issues such as Occupational Health and Safety and Privacy issues can be dealt with through greater education of the public and government instrumentalities. In other countries these issues have been worked through and are no longer a hindrance for the uptake of RFID.
· That’s the bad news. The good news is that the potential for the F&B industry in Australia are considerable.
Benefits for the F&B industry
RFID can mean every item has an individual identity and an onboard history, providing a detailed and unique perspective on your supply chain.
It can deliver granular control over each item in a supply network.
By harvesting reliable information a F&B organisation has an accurate handle on information from the primary producer to the consumer’s home, thereby moving toward the much sought after “field to fork” control of the food chain.
Armed with more accurate information companies can make better decisions about a range of F&B issues from ingredients to food safety.
Greater supply chain visibility in real time can bring about better quality control, better supplier collaboration and performance management.
Food Safety
RFID has been linked to food safety for two primary reasons – mad cow disease and the growing terrorist threat.
If tainted material is found in the food value chain, all companies must be able to accurately and quickly locate, quarantine, recall and destroy all affected materials.
The US has strengthened legislation for bio-terrorism in the wake of 9/11 and similar legislation is expected in Australia which will poses compliance challenges for the F&B sector here.
Cost savings
Recalls are a fact of life for the food industry, and RFID traceability can help minimise their impact.
Recalls happen every week with the grocery chain causing huge disruptions.
Whole-chain traceability can narrow the scope of recalls and minimise the associated costs.
Further by effectively communicating to the general public how quickly a recall has been instigated to isolate the cause protects the brand of a product.
Costs can be further reduced by the reduction waste and improved inventory management that RFID can deliver.
In addition, as traceability is improved buffer stocks, spoilage and stockouts can be minimised.
Moreover, labour costs can be reduced as RFID allows for lot codes, serial numbers and other information to be captured automatically with no human intervention required to align or scan items.
Readers can process multiple items simultaneously without double counting, which enables every tagged item on a pallet to be recorded in a single pass.
Ultimately, better efficiencies may also lead to lower insurance costs for F&B organisations.
Product differentiation
In the future, RFID could potentially trace the origin and location of any food item in the supply chain. This potential will open up vast opportunities for F&B to differentiate their product.
Today in Japan we are already seeing the ‘super consumer’ who is very conscious of the origin of the beef they consume. Japanese retailers have responded with detailed information about the origin of the meat including location, breed and date.
This is currently handled through bar coding and inventory management.
Once RFID becomes more widespread, this type of consumer information may well become standard across all F&B sectors.
Indeed this degree of discernment amongst consumers is around the corner for Australia where and example is the growing influence of the organic food revolution and resistance of genetically modified produce.
Once RFID technology becomes more cost effective through the ratification of standards it is conceivable that many F&B retailers will deploy the collected data as a product differentiator, particularly in the premium end of the market.
Therefore RFID represents an opportunity to assure and enhance brand value by recording evidence of how, when and under what conditions the food item was processed and transformed.
If a manufacturer can ‘certify’ to a consumer that its product is superior, e.g. where/how it was farmed or raised, it can anticipate greater market share and consumer loyalty.
One thing is for certain retailers are always trying to find differentiators for their products. This will provide impetus for RFID to be pushed down the food chain regardless of any resistance by primary producers.
At the end of the day RFID can be viewed as an enabler of supply chain management. Indeed the success of RFID globally is in part due to the growing number of systems integrators and software companies, such as SSA Global, who serve these industries have began to form relationships with RFID vendors.
*Trevor Barrows, is Regional Solutions Manager, Pacific for SSA Global (Pacific) Pty Ltd
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12-May-2005