Can RFID tags replace bar codes cost effectively?

June '99 Asset Management, EAS, RFID

Can RFID tags replace barcodes cost-effectively?

Recently two statements have been published suggesting that because the price of a barcode is so low, it is unlikely that RFID would be a viable replacement. In the one case the statement was:

"I see RFID tags replacing bar codes in [more expensive] garments, for instance. But I don't see it happening in the supermarket. People have talked about replacing U.P.C. code with RFID, but I don't think it will ever happen. Because nothing's cheaper than zero. And it literally costs nothing to put a U.P.C. code on a package. You just integrate a bar code into your artwork and print it; it doesn't cost anything. And they're never going to bring an RFID tag down to a hundredth of a cent, or even less. Anything that it costs is going to cost more than zero."

while the other read:

"Its highly unlikely that the technology will ultimately replace bar code- even with the inevitable reduction in raw material costs coupled with the economies of scale, the integrated circuit in the RF tag will never be as cheap as a barcode label."

Both of these commentaries seem to be based on the premise that because a barcode label is integrated into the display packaging of the product, it is very cheap. Surely the real issue is what are the productivity benefits by using an RFID tag, versus a barcode, versus a numeric number?

Barcodes have made their presence felt in society almost solely around potential productivity benefits they could offer. Surely at their inception, nobody would every believe that technology was advancing in a cost effective manner by adding some squiggly lines to a package that nobody could interpret without first purchasing some very expensive and then crude scanning equipment, compared to the then product identification methods in place. That barcodes have existed is in the belief that one day it would be such a widespread system and scanners would be so cheap that by providing machine readable tags productivity benefits over the manual systems would be realised.

Barcodes are now widely accepted, particularly with the order that the UCC and EAN have brought to product labelling, as well as advances in computer systems allowing the data in the barcode label to act as a pointer to the appropriate description and pricing information.

However barcodes do not cost only the cost of the ink on the packaging. The user needs to buy sophisticated scanning equipment, information systems, communication systems and manage databases just to be part of the user group for benefiting from machine readable labels.

Simultaneous with the wide spread recent acceptance of barcode scanning by retailers and manufacturers, has been the growth of the EAS (Electronic Article Surveillance) industry. For some reason, maybe either for kicks or because of the chosen methods of selling goods, first world countries such as the USA and Europe suffer from a shoplifting disease that does not seem to be as widespread in developing countries. This disease has led to the growth of an EAS industry, to combat the shoplifting shrinkage which has been reported as high as 12% of turnover in some industries. The solution to the problem has been to mark goods with a RF tag (one bit) which triggers an alarm if not deactivated before passing through a sensor's field at the exit to the shop. More than 6 billion such tags are reported as being sold in Europe alone, at prices as high as US$0-06 each.

The RFID tag to replace barcodes is about to arrive from a number of different suppliers who are all working towards this goal. At the end of the day, all the tags offered will comprise of a small integrated circuit and an antenna in some form. With the departure from the 125KHz frequency range by manufacturers targeting this market, the need for expensive 1000 turn coils is gone drastically reducing the delivered price of the new technologies.

While features may vary from supplier to supplier (Trolleyponder can read 1,000 items at a time at 4 meter range with 3D orientation) almost all the new generation suppliers have included EAS features as standard, meaning that besides offering fast computer scanning, high accuracy, long range reading distances, and reading signals that penetrate packaging, besides other features, the EAS virtually comes for free. In addition the cost of an RFID scanner is generally very low, as it uses simple well established simple technology in simple packaging.

RFID can also benefit not just the retailer, but all parties from the manufacturer, distributor, logistics operator, retailer and the user. For example, in a recent patent application a washing machine with an in-built RF scanner and RFID tags in the clothing, automatically senses the requirements of the clothes being loaded to be washed and adjusts its program accordingly. For productivity from Australia comes a trolley scanning design for a checkout aisle which by combining an RFID scanner, an EAS scanner and credit card processing features, an unmanned self service checkout with full EAS features can be offered.

Of course the arrival of RFID is not going to remove the need for barcode labels on goods, as there are always going to be those users that have existing equipment, or purchase second hand equipment for low levels of machine readable tagging, or just want to operate a generation behind.

The rollout of RFID as a viable replacement is not without its hurdles, particularly the size of the project that will require many players involvement and initially only allow leading/forward-looking retailers to be involved.

The reality of the situation is that RFID is going to win its major position in these applications through real productivity enhancements and benefits for the users, which will completely outweigh that it might cost more than the price of the ink on the barcode label.

For details contact Mike Marsh of Trolley Scan on tel: (011) 648 2087, fax: (011) 648 2085, or visit

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