When logistics managers dream, their reveries offer a sparkling world of total supply chain transparency where goods are easily and seamlessly tracked from production, through shipping to end user. In the dream, they gather real time data on shipments down to the carton level and use that information to wring out efficiencies never thought possible.

But when they awake to the real world, logistics execs see gaps in the supply chain big enough to drive a truck through. Like many business dreams, the answer lies in technology — affordable technology — that is coming on-line, but not fast enough for many.

For the past 30 years or so, much of our supply chain data has been gathered through bar codes, those ubiquitous tags that have been slapped on everything from cereal boxes to computers to cars. While bar codes make it possible to track individual products and pallets using scanners, they have severe limitations that have become evident in recent years as logistics managers demand more and faster information about product movements.

“Bar codes are virtually free of cost to produce, but they don't tell you a lot about the product,” says Steve Halliday, president of High Tech Aid, a Gibsonia, PA, consulting company specializing in automatic identification and data collection (AIDC). Halliday has been involved in the industry for more than 20 years. “We're always a little bit away from tracking at the SKU (stock keeping unit or individual product) level, but RFID may present the best opportunity for the future.”

Sometimes dubbed “smart tags” because they can carry a relatively large amount of data, RFID, or radio frequency identification tags, are known to most of us as those small squares placed on consumer products that set off alarms when an item is taken from a store without being paid for. They're also used in things like Mobil's Speedpass, which allows customers to pay for gas and convenience foods by waving a key-shaped device past a reader.

Unlike bar codes, RFID tags don't need to be visually seen by a scanner, and some can be read by sensors as far as a hundred feet away. In addition, readers or sensors can handle many RFIDs at a time so individual groceries in a shopping cart or individual boxes on a pallet can be read in milliseconds as it passes by. “A big advantage of RFID is that you can read everything on a pallet without unpacking it,” says Halliday.

RFIDs come in several varieties. The simplest and cheapest (under 50 cents) is a passive tag, containing a chip and an antenna but no power system of its own. Power is derived from the sensor when it's in close proximity — within about 10 ft. In addition to the limited-range disadvantage, the passive tag carries only minimal data about the product. These tags sometimes come in a form called a smart label, which is a very thin version placed inside retail items like hardcover books and cosmetics to deter shoplifting and aid in inventory control.

The second type is a battery-assisted tag that is similar to a passive tag but contains a battery to provide power to the chip inside. The advantage over a passive tag is that it works at greater distances from the reader. Of course, it's a little bulkier and more expensive.

The third major type is an active tag, which has a battery and a transmitter. It can also operate at much longer ranges, sometimes hundreds of feet, and can carry more data.

In all three types, additional information can be added to the tag during its travels by a sensor — another major advantage over bar codes.

One of the most dramatic examples of active tag applications is Associated Food Stores (AFS), a Salt Lake City-based wholesale distributor that provides warehouse and carrier services for 600 grocers in an eight-state area. AFS uses the Real-Time Locating System (RTLS), which is a device “the size of a pager,” according to the supplier, WhereNet, Santa Clara, CA.

About two years ago, AFS installed RTLS technology on some of the trailers, tractors and dollies at its Farr West, UT, facility. Tim Van de Werwe, internal logistics manager, says they were able to reduce their fleet of tractors from 92 to 62 and their trailers from 252 to 160 because of efficiencies brought about by the new technology. “We saw reductions across the board of 15-20% due to RTLS,” he says.

For example, the system has allowed AFS to eliminate the need for a check-in guard at the gate and to do away with data entry personnel. The system gives 100% real-time, accurate data of where every tractor, trailer and dolly is inside the 1-million-sq.-ft. facility to within 10 ft. Drivers, for instance, don't have to log in where they left a trailer; they just drop and go. The RTLS alerts the main office where the trailer is located. When a driver needs to hook up a trailer, he doesn't have to drive around looking for it; he knows exactly where to find it.

“We save $1-million annually in freight costs (on $2-billion annual revenues) just because we know where everything is in the facility. It has freed up so many resources that we made back our money in less than five months,” says Van de Werwe. He adds that the facility has even decreased its routes from 506 to 320 because they can turn equipment around quicker.

The system also permits real-time data from refrigerated trucks — temperature, fuel levels and door closed or ajar — cutting back spoilage and theft.

Another big user of RFID is CHEP, the London-based pallet and container leasing company. The company has more than 180-million pallets worldwide, which they lease to companies such as Procter & Gamble and Unilever. CHEP is in the throes of a pilot program in the U.S. to imbed passive RFID tags into about 250,000 pallets. Sensors located at warehouse doors “read” the tags and send the data to a central location.

Because CHEP — not the shipper or carrier — is responsible for retrieving the pallets, it's in the company's best interest to locate the pallets so pickups can be scheduled expeditiously. “The RFID tells us how long a pallet has been idle,” says Andy Robson, business development manager in Weybridge, England. “It's not our intention to penalize customers who keep our pallets too long; it's more about increasing the efficiency of our supply chain. We want the pallets back as fast as possible.”

Retrieving pallets fast is so important that although a pallet costs about $10, CHEP is willing to spend about a dollar per tag. Robson adds that about 50% of pallets break during the normal course of business; locating these quickly is crucial considering that each pallet is recycled about five times a year. CHEP is also experimenting with placing tags on small container boxes, about 3 ft. × 3 ft., used for bulk loads.

While shippers know when a tagged trailer, tractor, pallet or individual carton enters and leaves a warehouse or yard facility, the weakest link in the supply chain is the truck itself. Shippers and carriers would like to verify where a load is located, but this is impossible because RFID devices have limited range.

An initiative by Qualcomm and Savi Technology, however, may help fill in this gap. The idea is to place a reader in the tractor that would sense all the RFIDs in the trailer and then send the data by satellite. The technology is doable but the economics are not there yet, according to Marc Sands, vice president and division counsel at Qualcomm. “There was interest from the military on integrating our truck tracking system and software technology from Savi,” he says. “We're working on a prototype now. There's nothing technologically holding us back (for commercial use), but it must be cost effective. More development needs to be done.”

The military is interested in tracking individual ammunition caches through its supply chain because of security concerns, but the same technology could be applied to the private sector if the price point was acceptable. Sands notes that a special combination RFID tag and trailer door lock — which would send an alarm long distances — is of great interest to military consumers and could be of value to the private sector as well.

Other challenges facing RFID implementation include industry-wide standards for data transmission and radio frequencies used by the devices. Also up for discussion is a universal numbering system that can handle small items without outgrowing it, similar to what manufacturers have produced for bar codes.

In the end, all of these technological hurdles will be overcome, but price will always remain the major issue, says Halliday. Tags now cost between 50 cents and $5.00, and sensor readers run $400 to $1,000. The cost to put tags on individual low-cost items or at the carton level will take some time.

“It's a Catch-22, because customers say they won't install the tags until they reach the magical 5 cents a tag price, but we can never get there until we have a high volume.” He says that companies contemplating smart tags should start small and make their mistakes early in the game. “Don't wait; do it now.”

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