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RFID reluctance remains

According to our exclusive survey and industry experts, concerns about RFID costs and complexities continue.

Pw 9126 Rfid Sr Chart1

It wasn't long ago that the RFID world hailed the long-awaited and much anticipated lower cost of tags and readers (see Higher frequency of RFID ahead, www.packworld.com/view-20168, published Dec. 2005). Expectations about the spread of the technology rose. You might say the excitement surrounding RFID had reached a higher frequency.

A new reality check of RFID for packaging indicates that fundamental questions remain about the technology's cost and its value. This view comes from an exclusive Packaging World survey supplemented with observations by end users and consultants. Their mindset seems more along the lines of “show me the value,” which may be a stumbling block to wider application of RFID.

First of all, let's consider some key findings from the online survey conducted in September and October, 2006 that attracted nearly 350 participants (see sidebar p. 42):

 75% of respondents' companies do not use RFID.

 69% of those companies that use RFID do so primarily because of a mandate

 63% purchase tags at a cost of 20 cents or less each. (see chart 4).

 16% have experienced payback for their RFID investment.

 8% use RFID primarily for internal purposes.

For the 70 respondents whose companies have implemented RFID, about 40% named cost as its single biggest challenge, while more than 20% identified complexities as the biggest challenge.
[Ed Note: The accompanying charts are for those who said they used RFID]. For those whose companies didn't use RFID, the most popular response (39%) was “we are not under a mandate.” Individual responses varied all over the board from “No demand at this time” to “It is rather expensive” to “Waiting for better performance and standardization.” Several indicated they were testing the technology or implementing in early 2007.

Cost concerns

Why do you use RFID? The most popular response to that question was because of a mandate, whether that be for Wal-Mart or the Department of Defense. That's the course taken by hundreds of packagers including ConAgra, where Phillip Hubbell was brought in specifically to lead the company's RFID mandate process. Hubbell was one of those who checked off “cost” as the single biggest challenge to RFID.

“Mainly we saw RFID as a cost, and we still see it as a cost,” says Hubbell. “We're so diverse and so large that, in order for us to tag 100 percent of any one product, we would have to take RFID right down to the production floor and track it from there to multiple distribution centers around the country. We would have to keep track of what was tagged and what was not tagged. So, there are a lot of logistics involved if you're only doing part of your products.”

ConAgra gains no internal value from using RFID technology nor sees any ahead, according to Hubbell.

It's not that ConAgra doesn't grasp how to use the data, “but that we're just not using it,” Hubbell says. One of those reasons, he explains, is that they would have to tag a much larger percentage of their cases to provide meaningful data across its diverse product lines. And that means more costs.

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