MORE RETAILERS, VENDORS START EMBRACING RFID

Liz Parks

NEW YORK -- As retailers and produce vendors learn how to use radio frequency identification tracking technology to streamline the supply chain, they're likely to see plenty of payoff. The technology has the potential to get produce from point of origin to the kitchen table faster, and that means fresher fruits and vegetables for everybody.

Two leading retailers, Wal-Mart Stores and Albertsons, are rolling out RFID case- and pallet-tagging programs that include produce and other fresh foods, and Publix Super Markets has just started an RFID produce pilot in partnership with the University of Florida.

The decision to tackle produce early in the evolution of RFID was made because retailers and produce suppliers who are committed to RFID want to learn how to identify the applications and business processes that will let them generate a faster return on their financial investments in RFID, industry sources said.

At least six leading produce companies -- Tanimura & Antle, A Duda & Sons, The Oppenheimer Group, Global Berry Farms, Fresh Express and Ballantine Produce -- are participating in RFID initiatives while the Produce Marketing Association is supporting those initiatives with an active RFID Task Force committee whose members include Wal-Mart and Albertsons.

"When Wal-Mart mandated its top 100 vendors to begin tagging cases and pallets," said Gary Fleming, vice president of industry technology and standards at PMA, Newark, Del., "there were 37 other companies that volunteered to tag their cases and pallets as well. Four of those companies were from the produce industry.

"The reason they volunteered is because they believe in this technology and they want to take a leading role in developing the technology. But they also want to learn along with retailers like Wal-Mart and Albertsons how to make it work."

One of those companies, Salinas, Calif.-based Tanimura & Antle, began working on tagging produce for Wal-Mart in November 2003, said Tom Casas, vice president of Information Technology for T&A.

Last spring, T&A expanded the program to include pallets and cases of lettuce shipped to Wal-Mart's Cleburne, Texas, distribution center. T&A is also tagging cases and pallets of cauliflower being shipped to Albertsons as well as cases and pallets soon to be shipped for the Publix pilot.

Down the line, when RFID technology begins to be used in higher volumes of produce shipments, it will make it possible for produce suppliers and retailers to consistently deliver fresh produce to consumers, plus, Casas said, the technology could also significantly reduce labor costs as RFID tags replace manual bar code scanning.

From a quality perspective, "retailers will be able to see how we handle our product, and we, in turn, will be able to see how they handle our product in their DCs," Casas said. "There will be no hiding inefficiencies, and from that we will all be able to develop more efficient processes."

Wal-Mart currently has 104 stores, 36 Sam's Clubs and three distribution centers receiving RFID-tagged cases and pallets. By the end of the year, the retailer anticipates the number of facilities receiving RFID-tagged product "to more than triple," Wal-Mart spokeswoman Christi Gallagher said.

Wal-Mart has a policy of not speaking publicly about any of its individual suppliers, but Gallagher said they currently have "many suppliers with perishable products involved in our RFID implementation, including produce suppliers."

The entire RFID implementation program, she said, is "right on track. We have over 100 suppliers that have shipped tagged cases and pallets to our distribution centers in Dallas/Fort Worth, and we are currently working with our next top 200 suppliers to be tagging cases and pallets during or before January 2006."

Pete Abell, a senior partner with Boston, Mass.-based ePC Group, a consulting company that specializes in RFID technology, said that RFID ultimately will help reduce spoilage in fresh foods.

The U.S. Food and Drug Administration, he noted, estimates that as much as 20% of fresh foods go bad in the supply chain. "Sometimes it's temperature, sometime it's humidity or bruising or shock," Abell said. "All of these things can be measured with RFID and sensors. And if you can eliminate the waste, you can get a very good ROI tracking produce."

Last year, Albertsons asked its top 100 suppliers to start putting RFID tags on cases and pallets of goods by October 2005. As part of that first rollout, T&A, began shipping tagged goods to Albertsons Dallas/Fort Worth distribution center in April.

Fresh Express began shipping RFID-tagged cases and pallets to Albertsons in the second wave this past summer.

Albertsons is "pleased with the results" seen to date and "eager to expand the technology to new markets," said John Raudabaugh, vice president of systems implementation for Albertsons.

From what Albertsons has experienced so far, Raudabaugh said, management believes that RFID offers "substantial benefits for produce suppliers and we are working collaboratively with our produce suppliers to ensure that our program is delivering the benefits that they are looking for. RFID will enable us to achieve significant efficiencies in our supply chain, enhance customer satisfaction and help drive sales of RFID-tagged products."

Albertsons plans to expand RFID technology to its Acme division, and has already begun to equip its Lancaster, Pa., distribution center to accommodate RFID-tagged deliveries, which will begin this fall.

Lakeland, Fla.-based Publix will participate in an RFID project. In its first use of RFID equipment for tracking product, suppliers, starting this fall, will tag cases and pallets of fresh produce for shipment to Publix's produce distribution center in Lakeland, said Maria Brous, director of media and community relations.

Each pallet, she said, will contain 70 to 100 cases. In Florida, Del Monte Fresh Produce will tag shipments of pineapple while A. Duda & Sons will tag celery. In California, Tanimura & Antle will tag shipments of cauliflower.

The Center for Food Distribution and Retailing at the University of Florida, Gainesville, will use its laboratory "to set the benchmarks for the RFID performance that is expected during the trial, as well as to study any discrepancies that occur between what is shipped and what is read at Publix's DC," Brous said.

"[Publix hopes] to gain knowledge of the technical issues associated with implementing RFID in our warehouses," she said. "But we are most interested in understanding the benefit of shared supply chain visibility between us and our suppliers. Observation events will be posted to a test bed simulation of the EPCglobal network." The EPCGlobal Network is being designed to support real time data about individual items as they move through the supply chain. EPCGlobal is a supplier-driven organization, comprised of industry leaders and RFID solution providers, and focused on developing standards for the EPCGlobal network.

"We are anxious to understand the impact and benefit of such an implementation on our business processes, as well as the processes of our suppliers," Brous said.

While Publix is just in the pilot phase with RFID tracking, Wal-Mart has been studying the technology since 1999 and implementing it since its first mandated launch, which ended last year with 137 suppliers tagging product.

Wal-Mart has already achieved one of the key benefits it sought: enhanced visibility into its supply chain, Gallagher said. Readers are deployed at distribution centers on select dock doors and conveyor systems, she said. They are also deployed at stores on dock doors, strategically throughout the backroom and at the entrance to the sales floor.

"As a tagged case or pallet is read, we are able to provide that information back to our suppliers within 30 minutes through Retail Link [Wal-Mart's Internet-based communications portal,]" Gallagher said.

Gallagher added that the information is being made available to Wal-Mart's suppliers "free of charge. It allows suppliers a detailed view of their business with Wal-Mart and Sam's Club. This information, in turn, allows Wal-Mart and its suppliers to make better decisions about the handling of a case or pallet."

For Wal-Mart's customers, Gallagher said, the No. 1 benefit so far is "better product availability."

"However, down the road, we can see benefits related to returns, recalls, warranties and battling counterfeit products, including pharmaceuticals," she said.

Albertsons' Raudabaugh noted that RFID can help cut "time and costs out of the supply chain, and in the fresh world, one day saved in transit or sitting in inventory is one more day of freshness. This makes it easier for us to help make sure we are offering our customers quality fresh produce every time they shop with us."

"If we can get produce to consumers faster with more shelf life," Fleming said, "it will obviously be a lot fresher, and everyone will sell more. That's a benefit we think we can realize."

Once RFID becomes common, the industry's ability to consistently deliver fresher produce to consumers will be significantly enhanced, Casas said.

"Produce harvested in a field that is 90 minutes away from a cooler is more likely to be exposed to hot sunlight than produce harvested in a field five minutes from the cooler," Casas noted. "If we can see how long it has been since produce has been harvested, once it reaches the cooler, we can prioritize that the produce with the longest time lapsed since harvesting be cooled first. Today, we can't do that efficiently."

When Tanimura & Antle has RFID in the field, Casas added, "I will have the technology to capture a date/time stamp and my trucks will be RFID-enabled, so when a truck drives through a portal, we can see the age of the produce and we can direct our forklift drivers to the older product first."

Casas said RFID technology, as it becomes commonplace, will also allow suppliers to use product sensors to keep track of "hotter product so we can grab it and cool it down before it starts to break down."

The benefits for using RFID to track produce should be "substantial," Abell said. "RFID will tell you what field produce was picked from. Buyers and consumers will know whether the produce was grown in an organic or a non-organic field. The verification of information will be a huge win in produce. And eventually, with additional processes in place, RFID could also make the produce supply chain much safer from a Homeland Security standpoint. If there are sensors and a database in place, an RFID system could tell if a shipment has been sprayed with anthrax, for example."

Reduced shrink in the supply chain, Abell said, will ultimately reduce costs, putting money into the pockets of retailers and suppliers.

There are still some hurdles to surmount, however. Read rates, which are affected by the moisture in produce and, to a certain degree, by the metal closest to the cases that are stacked low on forklifts, are still not where the produce industry wants them to be, but solution providers are making progress, sources said.

Read rates at the individual case level are really high at the 98% level, but one problem is at the pallet level when cases are stacked on top of each other or next to each other, Fleming said. Because of the proximity, moisture is more concentrated and so it is harder for the energy of the reader to travel through the moisture, read the tag and get the information back to the reader.

Read rates for cases within pallets range from percentages in the low 60s to 80%-plus, he said.

"All of us, retailers, produce vendors, the PMA, technology solution providers are all working to try to figure out what the variables are and how we can address the problems," Fleming said. "Battery-assisted tags would be an answer, but right now the cost is too high. If costs were to drop a lot, we would have a solution."

Abell also noted that produce has problems with moisture and water, and he said that because the energy for the UHF frequency used in the current Gen2 standard gets absorbed by liquid, "you can't read produce RFID tags from a far distance. Readers have to be pretty close to the cartons to be effective for produce."

But as retailers and government agencies like the U.S. Department of Defense continue to mandate RFID, costs are expected to come down, and the technology should continue to improve.

Casas estimated it could be a minimum of two years and perhaps as much as four years before produce manufacturers can expect to be handling significant volumes of RFID-tagged products.

Fleming thinks the industry may be about two years away from having a cost-efficient RFID passive tag that costs less than a nickel.

"Because of the initiatives that out there -- Wal-Mart, Target, Albertsons, the Department of Defense, Publix, Tesco, Metro AG -- all of the RFID mandates will be met by the end of 2007," he said. "That means if a vendor does business with any of these buyers, they had better be tagging their cases and pallets, and, as that begins to happen, the costs will come down."

In the United Kingdom, one retailer -- Marks & Spencer -- has equipped its entire fresh food supply chain with RFID tags at the dolly and tray level, Abell said.

"All 230 of their suppliers of baked foods, salads, sandwiches and other prepared foods have been shipping tagged product for at least the past two years," he said.

Beyond the Surface

Radio frequency identification has limitations and benefits that aren't always obvious.

For example, passive RFID tags cost from 15 cents to 75 cents, depending on volume, while battery-assisted tags costs can range from $2 to $20, depending on volume. Passive tags cannot read at long distance. They need to be three to five meters from the tagged case or pallet, which, for the time being, limits the applications that supply chain participants can generate.

"RFID benefits are not just from automating the manual process," said Gary Fleming, vice president of industry technology and standards at the Produce Marketing Association in Newark, Del. "An equal benefit, and just as important as automating the activity, is the information you get from all of these RFID reads.

"That is as powerful as automating a manual process because, regardless of what part of the supply chain a company is in, RFID will help them understand how efficient or inefficient certain business processes are. Those inefficiencies, in the produce industry, lead to a lesser-quality product.

"If we can address the inefficiencies that affect shelf life, we will ultimately get product to the retailer in a faster, more efficient way," he said. "Then that product will have a better chance of selling to the consumer, and that benefits the retailer and the supplier."

In addition to facilitating research and collaboration between retailers, manufacturers and RFID technology solution providers, PMA is also publishing a video that explores different applications of RFID in the produce industry "to help vendors understand that it is possible to generate an ROI from RFID investments that goes beyond just accommodating to retailer mandates."

Fleming and other RFID experts have consistently made the point that if vendors just do a "slap and ship" application of RFID tags -- simply trying to accommodate retailers who mandate RFID tagging -- there isn't going to be much of an ROI for them.

"You need to look further inside your own four walls to find an ROI," he said.

-- LIZ PARKS