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Transponder News

A news service reporting on developments regarding the use of radio based tagging transponder systems for commerce and scientific applications. Covering the RFID technologies, EAS technologies and magnetic coupled techniques.


Editorial

Can RFID tags replace barcodes cost-effectively?

Recently two statements have been published suggesting that because the price of a barcode is so low, it is unlikely that RFID would be a viable replacement

In the one case the statement was:

    "I see RFID tags replacing bar codes in [more expensive] garments, for instance. But I don't see it happening in the supermarket. People have talked about replacing U.P.C. code with RFID, but I don't think it will ever happen. Because nothing's cheaper than zero. And it literally costs nothing to put a U.P.C. code on a package. You just integrate a bar code into your artwork and print it; it doesn't cost anything. And they're never going to bring an RFID tag down to a hundredth of a cent, or even less. Anything that it costs is going to cost more than zero."

while the other read::

    "Its highly unlikely that the technology will ultimately replace bar code- even with the inevitable reduction in raw material costs coupled with the economies of scale, the integrated circuit in the RF tag will never be as cheap as a barcode label."

Both of these commentaries seem to be based on the premise that because a barcode label is integrated into the display packaging of the product, it is very cheap.Surely the real issue is what are the productivity benefits by using an RFID tag, versus a barcode, versus a numeric number?

Barcodes have made their presence felt in society almost solely around potential productivity benefits they could offer. Surely at their inception, nobody would every believe that technology was advancing in a cost effective manner by adding some squiggly lines to a package that nobody could interpret without first purchasing some very expensive and then crude scanning equipment, compared to the then product identification methods in place. That barcodes have existed is in the belief that oneday it would be such a widespread system and scanners would be so cheap that by providing machine readable tags productivity benefits over the manual systems would be realised.

Barcodes are now widely accepted, particularly with the order that the UCC and EAN have brought to product labelling, as well as advances in computer systems allowing the data in the barcode label to act as a pointer to the appropriate description and pricing information.

However barcodes do not cost only the cost of the ink on the packaging. The user needs to buy sophisticated scanning equipment, information systems, communication systems and manage databases just to be part of the user group for benefiting from machine readable labels.

Simultaneous with the wide spread recent acceptance of barcode scanning by retailers and manufacturers, has been the growth of the EAS (Electronic Article Surveillance) industry. For some reason, maybe either for kicks or because of the chosen methods of selling goods, first world countries such as the USA and Europe suffer from a shoplifting disease that does not seem to be as widespread in developing countries. This disease has led to the growth of an EAS industry, to combat the shoplifting shrinkage which has been reported as high as 12% of turnover in some industries. The solution to the problemhas been to mark goods with a RF tag (one bit) which triggers an alarm if not deactivated before passing through a sensor's field at the exit to the shop. More than 6 billion such tags are reported as being sold in Europe alone, at prices as high as US$0-06 each. Recent documents from the US indicate that the estimated shoplifting per annum is in excess of $12billion and that the EAS industry in addition supply $10billion worth of equipment.

The RFID tag to replace barcodes is about to arrive from a number of different suppliers who are all working towards this goal. At the end of the day, all the tags offered will comprise of a small integrated circuit and an antenna in some form. With the departure from the 125KHz frequency range by manufacturers targeting this market, the need for expensive 1000 turn coils is gone drastically reducing the delivered price of the new technologies.
While features may vary from supplier to supplier (e.g one claims it can read 1000 items at a time at 4 meter range with 3D orientation) almost all the new generation suppliers have included EAS features as standard, meaning that besides offering fast computer scanning, high accuracy, long range reading distances, and reading signals that penetrate packaging, besides other features, the EAS virtually comes for free. In addition the cost of an RFID scanner is generally very low, as it uses simple well established simple technology in simple packaging.

RFID can also benefit not just the retailer, but all parties from the manufacturer, distributor, logistics operator, retailer and the user. For example, in a recent patent application a washing machine with an inbuilt RF scanner and RFID tags in the clothing, automatically senses the requirements of the clothes being loaded to be washed and adjusts its program accordingly. For productivity from Australia comes a trolley scanning design for a checkout aisle which by combining an RFID scanner, an EAS scanner and credit card processing features, an unmanned self service checkout with full EAS features can be offered.

Of course the arrival of RFID is not going to remove the need for barcode labels on goods, as there are always going to be those users that have existing equipment, or purchase second hand equipment for low levels of machine readable tagging, or just want to operate a generation behind.

The rollout of RFID as a viable replacement is not without its hurdles, particularly the size of the project that will require many players involvement and initially only allow leading/forward-looking retailers to be involved.

The reality of the situation is that RFID is going to win its major position in these applications through real productivity enhancements and benefits for the users, which will completely outweigh that it might cost more than the price of the ink on the barcode label.

In February 2001, three major RFID producers, two from Europe and one from the USA, announced that they were submitting a combined proposal for RFID for retail applications to the EAN/UCC, the global bodies that allocate numbering systems (commonly implimented in barcode form) for manufacturers of products that are sold through retail stores. The EAN/UUCC have been an active driver of this process of integrating RFID into retail having full time staff allocated to the project and having received a number of proposals todate. The standard is to be known as GTAG (or ISO18000) although at present it is just a broad framework without being very specific.

In 2001 Ford Motor company specify that all tyres provided in future vehicles are to contain a UHF transponder to allow speedy identification.

This is a major position change from the opening statements of this editorial, all achieved in only 3 years.

Funded by sponsors such as Proctor Gamble, the Auto ID Centre was formed with a view to developing a low cost RFID tag suitable for retail applications. This event did not realise a single universal design, but focused the interests of many suppliers on the problem.

November 2002 saw the announcement by Gillette that it was not waiting for the development of any standard and would be ordering 500 million UHF transponders in March 2003.

November 2003 saw the disbanding of the Auto ID Center, having created their EPC numbering system and transferred this system to EPC Global, an organisation run by the EAN/UCC who presently manage the barcode numbering system. This code defines the information to be carried on the transponder and passed to the reader. However the RF characteristics of the system, such as operating frequency, protocol etc; are not defined.

November 2003 saw the announcement by Walmart that it requires its top 100 suppliers to have converted to RFID by 2006.

The challenge for RFID in retail, now lies in getting sufficient transponder production to meet the expectations of the users.

With the major initiatives that are in force in 2003, the goal of having a US$0-05 transponder operating at UHF rfrequencies, with integrated EAS features seems practical in the medium term. The bottlenecks are going to be the supply of sufficient quantities of transponders.

Editor
10 November 2003

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