Label-Printing and RFID
A snapshot of the technology today and how a converter and end-user collaborated to create an item-level tagging solution
by Jennifer Dochstader
Trade publications, technical seminars and industry market research reports have been touting the opportunities in security printing to label converters for more than a decade. Smart label technologies are amongst the highest forecasted growth areas in the North American label-printing marketplace as applications utilizing elements such as 2-D barcodes, microtaggants and thermochromic inks become increasingly sophisticated, producible, and optimized within the retail environment. No smart label technology however has received media attention to the extent RFID has, and along with it an unprecedented amount of expectations, doubts and widespread shoulder-shrugging amongst the North American label-printing community.
Some early adopter consumer packaged goods (CPG) companies of RFID label integration have had varying motives: to secure highly counterfeited or highly diverted products; to meet retailer-mandated requirements at chains like Wal-Mart and Albertsons; and to track environmental conditions for perishable products. As much as adoption drivers vary amongst the CPG universe, so do philosophical attitudes about the current and future advantages the technology will deliver.
The GMA (Grocery Manufacturers Association) recently commissioned a detailed survey of CPGs to ascertain how these companies view existing, and prospective, RFID integration into their supply chain practices. Survey participants in the GMA study included 32 end-users most of whom are either participating in RFID pilot models, or have carried out large roll-out programs. Survey participants included companies like Campbell Soup, Clorox, Kraft, L'Oreal, Nestle, Pfizer, Procter & Gamble, Tyson Foods and Unilever.
Some of the most revealing results from the GMA survey are those assumptions surrounding RFID's short-term value proposition. While nearly all CPGs who participated in the survey feel RFID has a long term tangible value for their respective industries, 48 percent claim they see little or no short-term value in the technology.
Ours is a trickle-down industry. Retailer mandates, or the marketplace's darker realities like theft, counterfeiting and diversion, drive CPG tagging technology exploration and integration. This integration in turn impacts the way label converting companies attempt to differentiate themselves - by positioning their companies as ahead-of-the-pack solution providers beyond laying ink on paper. While RFID inlays webbed through printing presses isn't a mainstream phenomenon yet, it's critical to examine present-day market success stories in an attempt to more effectively predict the technology's inevitable widespread penetration into the label-converting marketplace.
A Label Printer's Journey into RFID
George Schmitt & Company, a fourth generation label-converting operation in the northeastern United States, has been a pioneer in RFID integration. The company's process range includes rotogravure, sheet and web offset, letterpress and flexographic printing capabilities.
Three years ago one of George Schmitt's pharmaceutical customer's, Purdue Pharma, was exploring RFID integration. An engineering oriented company, George Schmitt sought to provide a unique solution to Purdue - the ability to provide tested, one hundred percent-readable RFID labels for Purdue's established OxyContin® brand of prescription medications. Andrew Grace, director, RFID business unit for George Schmitt, comments, "Because we're such an engineering oriented company, when we decide to get into something like RFID we pull the resources together to do it right. George Schmitt pulled a team together, not just printing people, but RFID experts, machine-control software experts, and then came up with some patent pending systems to attack the problem. We knew from day one that these labels weren't going to be very effective if the tags weren't a hundred percent readable to Purdue. This was our initial objective right from the beginning." George Schmitt currently prints more than one million RFID labels on a weekly basis.
Purdue Pharma recognized the multiple benefits of RFID early on and was the first manufacturer in the world to do item level tagging of prescription medicines. Currently, OxyContin has four SKUs and every bottle that is delivered to retailer Wal-Mart and wholesaler HD Smith is tagged. Aaron Graham, vice president and chief security officer at Purdue explains some of the drivers that led the company toward RFID exploration and adoption. "We were looking at other technologies but RFID allows us to be much more efficient. RFID doesn't require line of sight so instead of scanning one bottle at a time we have a process in place where we can read 48 bottles in 3-5 seconds as they move through the process. That's pretty efficient from a manufacturing perspective, and of course transfers to the wholesalers-distributors' efficiencies for inventory, shipping and track-and-trace."
While Purdue hasn't seen a great threat from counterfeited products to date, the company has experienced diversion in the form of pharmacy robberies. With counterfeiting on the rise with products like Viagra®, Lipitor® and Xanax®, Purdue decided to be proactive before Oxycontin was attacked and created some deterrents in an attempt to create obstacles to force counterfeiters to go after other company's brand that might prove to be a softer target.
"We were very progressive, and we did it with support, direction and encouragement from Wal-Mart to be the first," Graham continues. "Some think slap-and-ship tagging is the answer but you don't know if the tag really works. You don't know anything else other than there's a tag on it, but you're not sure where it went. We were the first ones to be able to integrate the process; so by the time the tag is placed on the bottle in the manufacturing line, throughout the entire shipping process we know where that tag is. This is critical because now we can validate and authenticate back to our own vault."
When Purdue began exploring integrating RFID, George Schmitt & Co wasn't an RFID label printer. One of Purdue's initial objectives was to find an integrator - an entity that could incorporate the inlays into the label and validate readability. As any company currently in the pilot, or full roll-out stages of RFID integration can attest to, a primary barrier to entry for some CPGs is the high non-readability rates of the tags once delivered. George Schmitt saw this as an opportunity and created a full service integrated model via which the company purchases and vets the tags, and handles all returns and credits. This stepped up George Schmitt's value proposition as an RFID label supplier tremendously, and to date Purdue has had approximately just 15 tag failures out of more than 230,000 bottles shipped.
Readability surfaced as a central concern to those CPGs participating in the GMA survey. While 62 percent of survey participants indicated that readability rates have improved within their own operations, it's still a major concern as these companies move from pilot testing to full-scale roll-outs. Andrew Grace further stresses the importance of diligent testing from a converter perspective. "Companies assume that RFID readers are the same, and they're not. We have found that readers from the same manufacturer are not consistent and have to be calibrated. The average end-user isn't aware of that."
When asked what advice they would give to label converters just beginning to grasp the inevitable widespread implementation of RFID, experts concur it's crucial that converters begin educating themselves now. Both Andrew Grace and Aaron Graham will be speaking at Smart Label Summit Americas to be held June 27-28 in Miami. Companies like Wal-Mart, J. Crew and Beaver Street Fisheries will present a range of topics including how to achieve a viable return on investment strategy with RFID implementation, current vendor-CPG case studies surrounding RFID, and the long-term business benefits of using the technology.
It's estimated that fewer than 20 label houses are currently converting item-level RFID applications in North America. However the differentiation opportunity RFID offers converters is clear. As Aaron Graham believes, "In your own mind if you just print a solution on paper you're never going to break outside that mold to be one of the innovative, progressive vendors who will become a full service partner. You'll always be a vendor, and the market already has a lot of vendors. When you look at being a partner and collaborating with your customer, you raise your profile and your value, exponentially."
About the Author
Jennifer Dochstader is managing director of LPC Inc., of Lambertville, NJ, USA. LPC provides market research and consulting services to companies in the printing and packaging industries, working with companies at every level of the packaging supply chain; consumer packaged goods companies, printers, and equipment and consumables suppliers.