Beyond the Bar Code

Bar codes put tree fruit wholesaler Ballantine Produce at a disadvantage when its shipments were found to have been invaded with insects. "In the bar code world, we couldn't tell which shipment had made it to the store shelf from the distribution center," says Scott Albertson, Ballantine's vice president of business development. As a result, the wholesaler would have to recall an entire shipment to contend with the pesky problem.

Today, the 50-year-old company from Sanger, Calif., uses radio frequency identification, or RFID, to avoid this type of situation. With RFID, Ballantine pinpoints which fruits were shipped together and from where. Knowing what was specifically packed and its origin helps the company determine the particular container that may have been contaminated. It then only has to pull fruit from that container off the retailer's shelf. "Now, when retailers are stacking our fruit on shelves, we know exactly when it was picked and packaged, and how long it sat in a distribution center before arriving at the store."

Wholesalers such as Ballantine are just one of the many types of businesses that are reaping the benefits of RFID. From computer makers to footwear retailers, RFID is improving the way businesses process transactions, manage shipments and control inventory levels. Analysts say RFID is likely to replace bar codes in coming years. The switch would enable product suppliers to control the movement of their goods through retail supply chains, and enable sellers to get products onto store shelves and in front of customers before existing stocks run out.

Briefly, an RFID system collects information that is transmitted via radio waves from an RFID tag within an object or container. Its most established use today is for inventory management. Suppliers, for example, place RFID tags on bulk containers and shipping platforms. These tags store product descriptions, and record the place of origin, time of purchase, and cost. Sensors and antennas positioned at the entrance to retailers' distribution centers read information from the tags. Typical RFID systems immediately store this information in a database, eliminating the time and human errors involved in counting and recording inventory details by hand. The same process is replicated when products leave the distribution center en route to store shelves.

Making RFID work, however, requires all or most members of a supply chain to become RFID "compliant" by installing RFID systems in warehouses, distribution centers and in stores. Once these systems are in place, companies can derive real-time information to help them better manage decisions, such as the timing of your next shipment to a retailer, or in Ballantine's case, determining what specifically needs to be pulled from a retailer's shelves. A system can be up and running in about a month, and once all parties have RFID infrastructure in place, the benefits materialize quickly.

According to Greg Gilbert, division manager for RFID hardware manufacturer Manhattan Associates, RFID has cut the time required for processing inventory information by over 60% among his clients. Manhattan Associates has helped a range of clients become RFID compliant. "Our solutions run in seven of the largest warehouses in the world, but are also used in warehouses with only five or six employees" said Gilbert. Among these smaller companies, Gilbert has observed that pressure from large retailers has motivated the decision to become RFID compliant.

This pressure from larger retailers is one reason why RFID has been garnering bar code converts from small and privately owned companies. In 2004, Ballantine saw that large retailers like Albertsons and Wal-Mart were planning to require large suppliers to use RFID. Albertson and David Silva, director of information systems, decided it was a matter of time before these retailers asked smaller suppliers like Ballantine to become RFID compliant.

In February 2005, Ballantine formed a 10-person team to test and customize an RFID system. The type of warehouse management solution they chose can cost between $150,000 and $300,000. This system connects with inventory and accounting systems to store, track and analyze data. Ultimately, Ballantine's intends to use "active RFID tags" that will collect environmental data such as storage temperature to ensure that fruit preserves its freshness while in transit.

And if the price of RFID tags falls far enough below the current costs of 40 cents each, Ballantine will use them in place of bar codes on individual items such as small packages of fruit that consumers purchase. "Getting RFID down to the item that customers buy is the ultimate goal for tracking our produce," said Silva.