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Last June, Wal-Mart Chief Information Officer Linda Dillman announced the company wanted its top 100 suppliers to start using radio frequency identification (RFID) on pallets and cases by 2005 and all suppliers to use the technology by 2006. Wal-Mart will use RFID tags based on Electronic Product Code (EPC) protocol.

The Wal-Mart mandates mean one thing for converters: Get ready now. The process of integrating RFID tag application into your services requires research. Converters who take time now to learn about the technology will win market share later, experts predict, as the technology grows in demand.

The U.S. Department of Defense, Target, Albertson's, and Sears, among others, have followed suit in asking their suppliers for EPC-based tagging. Wal-Mart's mandate has single-handedly sped up the implementation of RFID and EPC, bringing the technology from the back burner in to the open in swift fashion. Wal-Mart is actually lagging behind some of its international competitors. UK-based Tesco, Britain's largest retailer, plans to implement the technology next month, and German Metro AG will begin using it in November.

The use of RFID is not new. The 15-year-old technology has been used in car anti-theft devices, toll collection, building security, and library systems. Even marathon runners carry RFID chips on their shoes for accurate finish times.

Wal-Mart will take a phased approach to rolling out RFID technology. The company's top 100 suppliers had to present implementation plans by February. Wal-Mart's first implementations will be at three distribution centers and 150 stores in Texas this month. The company plans to add another 100 distribution centers and 3,000 stores by the end of 2005. According to a Venture Development Corp. report, 4,500 pallets and cases have been successfully read in the current Texas pilot.

At first, Wal-Mart will require tags at the case and pallet level only, but in the future, tags will be required for each individual consumer product item. Wal-Mart will not proceed with item-level trials until 2007 or later.

EPC has the potential to be used on many everyday consumer products as they move through the supply chain--from factories through distribution centers and into retail stores. As EPC evolves, it promises to offer significant benefits to consumers and companies. The improved information in the supply chain will help speed products to the shelf and ensure they are available when consumers want and in the quantities they need. Removal of expired products will be easier, and prompt removal of any recalled product will be facilitated.

The Barcode of The 21st Century

RFID uses a radio wave to automatically identify items. One method of identifying products branded with RFID is through a serial number or identification code, otherwise known as the Electronic Product Code (EPC). The EPC is the next generation of product identification. Like the Universal Product Code (UPC) or barcode, the EPC is divided into numbers that identify the manufacturer, product, version, and serial number. But, the EPC uses an extra set of digits to identify unique items.

RFID tags can be active or passive. Active tags contain a battery to power the electronic circuitry. They can be used within a range of 25 feet or more. Passive tags extract enough electricity from the RFID reader's transmitted signal to power its electronic circuits. Passive tags have a real-world range of a meter or so.

RFID tags can be embedded in a variety of materials for affixing to packages, and one advantage is that readers can scan tags through packaging--line-of-sight is not required, as with barcodes. The tag and its components are silicon-based. They are available from most suppliers raw, as thin, flexible inlays in strips or squares, or finished into "smart labels." In these user-friendly smart label formats, inlays are incorporated into laminated paper or flexible plastic to create adhesive labels or cards. Inlays can also be integrated into uncoated paper and injection molding.

The EPC Network uses radio frequency to communicate between readers and tags. These EPC tags will be applied during the manufacturing process. In turn, using radio waves, the tags will "communicate" their EPCs to readers, which will then pass the information along to a computer or local application system.

When fully implemented, how will this work in the packaging environment? The Association of Independent Corrugated Converters (AICC) is preparing a white paper on the implications of RFID and EPC for the corrugated industry. The paper says each consumer product will have an RFID tag either on the product itself or on its packaging. The products are then packaged into corrugated containers that also have their own RFID tags and then onto pallets with their own tags. As pallets leave the consumer product company, contract packager or corrugated box manufacturer, an RFID reader positioned above the loading dock door hits the RFID tags with radio waves, giving them power.

Throughout distribution, the product location is continually monitored. When the product arrives at the retail distributor and at the retail store, it goes through RFID readers in the unloading area. There is no need to open the boxes to check the shipment for ID purposes. Stores will have their own readers at their docks and even on their shelves to monitor inventory levels. Eventually, the consumer will leave the store without having to stop at a cashier. The readers at the store's exit would recognize all the items and the customer will swipe his credit or debit card.

As a joint venture between EAN International and the Uniform Code Council (UCC), EPCglobal is a not-for-profit global body that leads the development of industry-driven standards for the EPC Network. The two organizations originally aligned 30 years ago to jointly oversee the implementation and use of barcodes.

The EPC[TM] Network was developed by the Auto-ID Center, a not-for-profit global research project headquartered at the Massachusetts Institute of Technology (MIT). The organization is a member-driven group comprised of leading firms and industries, including tag end users and technology providers. Some major members include Wal-Mart, Procter & Gamble, Gillette, Hewlett-Packard, and Johnson & Johnson.

Jack Grasso, director of public relations for UCC and the North American EPCglobal, says the organization specifies guidelines covering how the technology should be used. For example, EPCglobal will regulate which types of tags that will be on items and the distance in which they should be read. Because the technology is rapidly evolving, standards are not yet finalized. But with Tesco, The Metro Group and Wal-Mart's impending mandates, Grasso says they will be completed by mid-year. EPCglobal subscribers will jointly finalize the standards.

Because the transition from current practices to the EPC-enabled future will be challenging, 2004 and 2005 will be a time of extended trials as the technology matures.

EPCglobal warns that EPC implementation will evolve over time with applications driven by market and consumer demand. "We will be living in a world where barcodes and EPC tags co-exist for quite some time to come," Grasso says.

Initially, Wal-Mart will accept any 96-bit EPC tags using the UHF frequency, but it wants to standardize on the EPC Class 1, Version 2 tag, which has read/write capabilities. Companies that currently communicate with Wal-Mart using electronic data interchange (EDI) will be expected to add the EPC code to their advance ship notices.

"To make a long story short, each tag will have a version number indicating what type of EPC code you have," says Matt Ream, senior manager of RFID systems at Zebra Technologies, an EPC/RFID technology provider and EPCglobal member. "Then it will have a manufacturer's code. Where it's different is that each tag has a unique serial number. That's how the item will be tracked. For example, you have 20 cases of toilet paper. Each case has the same manufacturer's code, the same product code, but a unique serial number."

EPCglobal also is working with RFID vendors to establish an intellectual property policy, which has been a highly-charged topic within the industry. The group also is developing a compliance and certification program for hardware and software products, and it's now looking for a third-party testing partner to run the program.

What Can Converters Do?

So while hard-and-fast rules regarding RFID compliance are still not set in stone, converters should start investigating the technology, RFID experts advise, for several reasons: As the idea catches on, more large companies will require it, and when that happens, the converter who has the process figured out will get the edge.