With the help of smart labels, each case of, say, bubble gum becomes intelligent. The case can indicate if it's on a pallet or on a truck. It can indicate if it's the last case taken from a customer's stock shelf, and as it gets consumed, a replenishment order is automatically generated. That's because the printer is programming data onto a chip that lives on the label that lives on the case.
The chip is bonded to an antenna, making the label a transponder. Radio frequency identification, or RFID, has been around for years, mostly used in manufacturing environments to track work-in-progress. But with today's advanced chip technology, RFID technology is making in-roads in product distribution, thanks to a big push from MIT's Auto ID Center. It's also getting big encouragement from Wal-Mart, which is telling its suppliers to get with the RFID program by 2005.
Wal-Mart claims that stock-outs represent up to 4% in lost sales, a significant number for a company with a trillion dollars in sales.
Retailers don't have stock-outs if they have perfect visibility into their inventory, and RFID technology gets retailers as close to perfect as possible. And now, product manufacturers can slap RFID tags onto your inventory with simple little labels filled with silicon and antennas.
"You start with a chip with three pieces of functionality," explains Clive Hohberger, VP at Zebra Technologies (www.zebra.com), a company that sells printers that program labels as they print. He explains that, "The label has memory, a silicon chip that stores data, and a small radio transmitter and receiver that takes commands from a receiver or the printer."
The smart label even comes with its own power converter. "It has a little power supply module that converts the radio waves from the reader into dc power to operate the chip, so no battery is involved," notes Hohberger. "It's a passive transponder, so there is two-way communication." The chips, which are bonded to the antenna for a transponder inlay, are inserted inside the label. The printer then simultaneously programs data into the chip and prints the label format. The new label format that results can also include a barcode.
So far, RFID is being used at the case and pallet level. But Gillette, for one, is experimenting with putting tags on packages at the consumer level. The jury is out on the success of so-called "broken case" smart products. "The real question is how far it will go into consumer products," says Hohberger. "You can't put a 5-cent transponder on a dollar pack of gum, but you can certainly put a transponder on a case of 100 packs of gum even if it costs 20 or 30 cents. For a pallet, it's a no-brainer."