Chances are you encounter radio frequency identification (RFID) technology quite often. You’re doing so when you use a proximity card at work or a hotel, track a package, check out library books, or become a scannable human. Within the food industry, RFID tags track food shipments’ progress at the pallet and truck level.
The global packaging company Avery Dennison is now working to bring that technology to supermarket shelves. Avery Dennison recently claimed that RFID tags could minimize retail food waste by 20 percent, which would yield savings of US$22 billion globally. James Stafford, Global Head of RFID Development, answered some questions on a technology that may just become embedded in your life in the near future.
Jonathan Bloom (JB): You’re now testing RFID technology with food retailers. What insights have you gleaned from the real world application of the technology? Any surprises thus far?
James Stafford (JS): Our key insight is that with fast-moving short life foods, there is very little opportunity to check the accuracy of deliveries and consistency of sell-by dates throughout the chain. RFID offers the opportunity to get accurate information at very fast read rates.
JB: Avery Dennison has claimed that RFID tags can reduce food waste by 20 percent. In plain language, how can tags achieve that reduction and what is behind that estimate?
JS: RFID gives retailers the opportunity to check that they have the right products, the right quantities and most importantly, the right dates, at every stage of the chain, at minimum labor costs. This visibility of accurate data will enable better management of the process and avoids products ending up as expensive waste, which can often be as high as 10 percent of the sales value of the turnover at a retail location.
Early stage adopters will likely be retailers managing high volumes of refrigerated, perishable, short shelf life foods. These retailers have the constant challenge of managing availability of fresh products for their customers, while avoiding excessive quantities of products going past their sell-by date and ending up as waste.
This challenge is compounded by multiple deliveries all with different dates that need to be accurately date-rotated in distribution centers and in-store. At the moment, retailers have few tools to help with this process, and have to rely on visual inspection and the workforce. This inevitably means that a compromise has to be made between levels of checking and labor costs in a high-volume area.
We believe that with greater visibility of potential waste situations through RFID scanning, promotional action can be taken to ensure food is sold to consumers rather than ending up as waste. If we couple this with process and control improvements as a result of identifying errors in picking, distribution, stock rotation, and expected shelf life, we consider that about a 20 percent reduction in overall food waste is a realistic target.
JB: At present, food-borne illness recalls prompt vast amounts of healthy food to be discarded. How useful would RFID tracking be when it comes to avoiding unnecessary waste here? And are those potential savings included in the 20 percent or would they be additional?
JS: We have insufficient information to comment on this area, but any potential savings would be in addition to the 20 percent mentioned above.
JB: Cost has long been the main barrier for RFID adoption in the low-margin supermarket industry. What is the per-unit cost now and what price point would you need to reach to realize widespread adoption? Do you have any way to compare the per-unit price to the savings from avoided food waste?
JS: Unfortunately, we do not disclose pricing. We recognize that foods are extremely price sensitive, and understand that RFID deployment decisions will always be made as a result of a strong business case that provides a sound ROI (return on investment). However, food waste has a significant impact on food margins, and its potential reduction through RFID creates an opportunity to offset costs through margin improvement.
JB: Testing thus far has focused on the more expensive items like meats and seafood. Can you imagine a day when RFID tags would be used with all food products or would it ultimately be at pallet or carton level with some food items?
JS: We think the major interest in the near term will be on short-shelf-life foods. More expensive items will justify the cost of item level tagging, but cheaper items such as dairy and produce also need an RFID solution that delivers visibility throughout the chain. Certain retailers in Europe are already tagging returnable transit trays or totes, and we are currently involved in pilots that involve tagging of returnable trays and disposable cartons.
While this does not offer quite the granularity of data provided by item-level tagging, it is a viable intermediate step, which also offers further benefits of enhancing productivity in the distribution chain by speeding up receipt and dispatch processes.
JB: RFID-tagged grocery products will have other benefits, too, right? Could they help consumers trace the origin of food items?
JS: At the moment, consumers don’t have the technology in their phones to read the information on the type of RFID tags used, but of course, this could change in the future. RFID tagging offers the opportunity to trace products from farm to fork. From the individual animal, or fishing boat or fruit orchard right through to the consumer packaging. How much of that information is useful to consumers, or conversely a distraction, remains to be seen, but the potential is there.
JB: If RFID tags are adopted widely, will grocery aisles become radio wave gauntlets?
JS: People’s exposure to radio waves is strictly controlled by government regulations in all parts of the world, and the RFID industry operates safely within these regulations. It is worth pointing out that the RFID tags used on consumer items are completely passive, contain no batteries, and emit no radio waves themselves, until exposed to radio waves from an RFID reader. Only when exposed to such a reader are they able to transmit a small part of the energy received as a weak radio transmission and only for a very short period of time.
JB: Are there previous supermarket advances to which you’d compare RFID tags? And where in the process of adoption are we?
JS: The obvious answer is the barcode, which started in the USA in 1974 and reached the UK in 1978. However, widespread adoption took another 15 years, and there were many people at that time that doubted that the technology would catch on in retail. Reliable equipment had to be developed and coding standards universally agreed.
Today RFID is in a similar position to early barcodes, but with the advantage that the technology is reliable, standards established, and prices for equipment and tags have fallen. The unique information within an RFID tag, which is far more detailed than the data contained in a barcode, will create new opportunities to improve inventory productivity, margins, store operations execution, and the overall customer experience. The old compromise between speed and accuracy disappears. Now retailers can get real-time information on inventory at a speed that was impossible in the past. We believe this will create a paradigm shift in the management of fast-moving consumer goods, such as foods.
JB: When might the first RFID tags hit grocery stores in the US?
JS: Hopefully you won’t have to wait too long! We expect to see some RFID pilots in the U.S. in the first half of 2016. And I would expect this to be happening at least at carton or distribution unit level by 2017.