For anyone that missed last week’s issue, here is our lead story on item-level tagging.

07/05/10 | John R. Johnson | email john@rfid24-7.com

As the benefits of RFID technology continue to expand, users of RFID have become more excited about the technology than RFID vendors themselves. That speaks volumes for the technology as it gains traction not only for single projects, but also for enterprise-wide applications.

Nowhere is the growth or potential bigger than at the retail sector, where the use of RFID is exploding, especially at the item level. The apparel sector has been the big mover, adopting item-level tagging throughout the entire supply chain to improve visibility, increase revenues and provide a more dynamic customer experience.

“There are a lot of neat things going on in cold chain and agriculture, but apparel item-level tagging is driving the industry,” says Bill Hardgrave, founder and director of the RFID Research Center at the University of Arkansas. “There is just tremendous movement there and we’ll see substantial quantities by year end.”

Drew Nathanson, senior RFID analyst and director of research operations at VDC Research Group, Inc., says more than 400 million tags will be consumed by retail in 2010, a number that jumps to 800 million in 2011.

Nathanson says the total market for RFID transponders in 2010 will total 3.5 billion, an increase of more than 33 percent over 2009. He projects that number will exceed 10.5 billion units by 2014, or which 3.4 billion will be used in retail, including item-level tags, as well as tags used for smart courtesy cards and access control.

According to VDC, passive HF and EPC UHF solutions in the retail, CPG, government and transportation sectors will account for more than 80 percent of tag usage by 2014. Supply chain management, inventory control and asset tracking will be the primary applications for EPC UHF tags.

“Projects are scaling, conversion times from pilot/evaluation to deployment are decreasing and adoption among new accounts is increasing,” says Nathanson. “Budgets are way up, significant purchase orders for delivery throughout 2011 are being placed, and RFID is becoming more deeply integrated. Simply stated, the end user is more committed to RFID than ever before.

“The demand for RFID transponders, transponder ICs and inlays is so high that it might exceed near-term capacity and create significant backlogs. For the first time since we’ve been covering the RFID industry, the end user is more optimistic than the supplier.”

Retail applications in the apparel sector are gaining the most exposure, led by the highly-publicized rollout of RFID throughout the entire supply chain at Swiss-based apparel retailer Charles Vögele. The retailer, which operates 851 stores and has revenues of $1.3 billion, has implemented a source-to-store solution across its entire supply chain, from point of manufacture to point of sale, using standard EPC Gen 2 labels. It is the first standards-based solution to RFID-enable a retailer’s entire supply chain.

The solution, provided by Checkpoint Systems, enables retailers to streamline their supply chains by applying smart tags to apparel merchandise at the point of manufacture, and reading the tags throughout the logistics operations and into the store. Once at the store, retailers can improve operations and increase shelf availability by tracking item-level merchandise throughout the facility into the back room, on the selling floor, in fitting rooms, and at point of sale. This visibility enables retailers to optimize their inventory replenishment, reducing out-of-stocks and on-hand inventory, while improving sales.

That’s crucial for Charles Vögele, which sources more than 70 million garments annually from more than 400 suppliers, numbers that represent a logistical challenge for the retailer.

“Our adoption of RFID has transformed and improved our operations from source to store. We have begun streamlining our operations and supporting our sales in ways that simply were not possible before; in many ways this marks the beginning of a retail revolution,” Thomas Beckmann, VP of supply chain, Charles Vögele Group, said in a release.

Hardgrave says retailers like Wal-Mart, Charles Vögele, and JC Penney are just the tip of the iceberg. “We’ll see big numbers by the end of year,” he says. “It seems like almost every week that we’re talking to another retailer moving down that path, and those numbers are starting to add up. We’ve moved past those phase one pilots and really now into the next phase, which is rolling out chain-wide or a store at a time and the numbers are increasing. On the passive UHF side, we’ll see numbers by the end of the year that we’ve never seen before.”

Other developments are occurring quickly in the apparel sector. RFID suppliers, for example, report that retailers are inquiring about single tags that would take the place of a price tag, the EAS security tag, and the garment size/information label attached to the product. The major stumbling block to moving to a single tag is the fact that consumers are so accustomed to seeing a price tag hanging from each individual garment.

However, that obstacle could be less of a problem as consumers grow more used to wireless apps on their cell phones. In the future, pricing information from a single all-encompassing tag could be relayed to a cell phone, instead of being displayed on a label. The customer could also do comparison shopping on the spot.

In addition, vendors continue down the path to integrating the security feature of EAS and the larger benefits of RFID into a single tag. Nathanson predicts that a universal tag that will include additional functionality and elements that are core to the retail floor is still three to five years away.