Retailers, Others Push Smart Tags; Printronix Sees Big Market
By SHERRI CRUZ
“We knew it was coming,” said Andy Chapman, chief technology officer of Printronix Inc. in Irvine.
And come it has.
Last year Wal-Mart Stores Inc. put its top suppliers on notice that it wanted radio-frequency identification tags on shipping crates and pallets by this January.
The move by the world’s largest retailer has spurred interest in the technology, which uses labels embedded with tiny chips to store identification data.
Rival Target Corp. has followed suit, setting its own deadline for suppliers to adopt the so-called smart tags. Also joining in are Albertsons Inc., McDonald’s Corp., Boeing Co. and even the Defense Department
“This is the modern version of the UPC code,” said Christi Gallagher, a Wal-Mart spokeswoman.
The RFID market is projected to hit $4.6 billion in sales by 2007, up from around $1 billion at the start of this year, according to market researcher Venture Development and brokerage house Robert W. Baird.
That has technology executives eyeing growth from RFID tags.
“We perceive this to be a major growth area for the company,” Printronix’s Chapman said.
Printronix makes industrial printers and recently started making RFID models.
Printronix began developing a printer last summer, Chapman said. A smart label developer’s kit, designed to help suppliers meet RFID mandates from Wal-Mart and the Defense Department, started shipping in fall.
For now, RFID is a small but growing part of Printronix’s business. The company counted sales of $138.2 million for the 12 months ended March 26.
“We’ll see a boost every year,” Chapman said.
The company’s biggest rival in RFID tags is Zebra Technologies Corp. of Illinois.
Data from chips in RFID tags can be scanned and linked to computer networks, allowing for instant shipment tracking. Here’s how the tags work for retailers: A producer tags cases of products with smart labels, then ships them to the retailer’s distribution center.
When the cases arrive, a reader installed at the warehouse door scans the tags, which look like Universal Product Code labels. The data is stored for inventory tracking.
As it is now, cases need to be broken down from a pallet and scanned one at a time.
The promise: reduced labor costs, tighter inventory and better knowledge of what is selling.
Security also is seen as a big area for RFID tags. Irvine’s HID Corp., part of Sweden’s Assa Abloy AB, makes smart tags for tracking computers, vehicles and people.
There are skeptics. The technology is too expensive now, critics say. Consumer groups are worried about the tracking of buying habits.
And while Wal-Mart may benefit, that doesn’t mean everyone else will, said Paula Rosenblum, director of retail research for Boston-based Aberdeen Group.
“If they can eliminate 50 dock workers, they can really change their bottom line,” she said. “But for most retailers that aren’t in the tonnage business, it has no value.”
RFID’s potential inside stores is big. The technology has the potential to speed up returns, checkout and the processing of warranties, according to Wal-Mart.
Potentially, tag readers could be placed everywhere, even in your refrigerator, checking your milk supply.
That has some wary. Sen. Debra Bowen, a Democrat from Redondo Beach, has drafted legislation that would set RFID tag standards.
The industry is working on its own standards. EPCGlobal Inc., a trade group based in Lawrenceville, N.J., is drawing up global RFID standards for smart tags, also known as electronic product codes, or EPCs. EPCGlobal board members include Wal-Mart, Gillette Co. and Procter & Gamble Co.
There still are practical bugs to work out, according to Aberdeen’s Rosenblum. Picture a Rubik’s Cube with each square being a case of goods. Some tag readers have trouble reading the middle boxes if the cases in the front have liquids or metal in them, she said.
Manufacturers likely will be doubling up on tags, using both UPC labels and smart tags for at least the next five years, according to David Hogan, chief information officer at the Washington, D.C.-based National Retail Federation.
Even so, smart tags are “a good thing for the industry,” Hogan said.
“But people need to temper their enthusiasm about this,” he said. “There has to be a business rationale for any expenditure.”
Smart tags are estimated to cost 50 cents to $1, according to the Massachusetts Institute of Technology. Readers are $1,000 or more. Experts in the field say widespread use is not likely until the cost of tags is 2 cents or less.
Wal-Mart’s Gallagher said the costs already have decreased since it started testing.
That’s driven by competition among RFID providers. Printronix’s Chapman said there’s a lot more competition than when the company first got in the game last year.
Printronix and its partners are providing systems to some of Wal-Mart’s suppliers. Printronix allied with New York-based Manhattan Associates to market “RFID in a Box.” Printronix also works with Serviant Corp., a Newport Beach-based integrator.
Last week Printronix unveiled its second-generation product featuring an automated labeling system. The lack of a way to automatically put smart labels on cases is seen as one of the drawbacks of the current technology.
