Pallet and case tagging may exceed item level for five years

This unheralded and early start to item level tagging involves wide variety from artificial fire logs in the US to drugs in the US and cooked meats in Spain, apparel in the UK and computer printers in Taiwan. Nonetheless, it is important to see it in context. Tagging of pallets and cases, because it is often made compulsory, will probably be responsible for larger sales than item level until 2010 and those RFID smart labels on pallets and cases are bigger, cleverer and more expensive. Only after that may we see serious progress to the dream of replacing up to ten trillion barcodes a year and having the tags in hundreds of other applications such as archiving sheets of paper where there are no barcodes today.

Unwanted costs and lost sales opportunities that item level RFID can impact

Table 2 gives some examples of costs and lost sales in the Consumer Packaged Goods CPG supply chain that item level RFID can tackle, though not eliminate entirely. The consensus view is that item level tagging has the potential to impact far more of this than the current work tagging vehicles, cases and pallets in the supply chain can achieve. Table 2 Some costs and lost sales in the CPG supply chain that item level RFID can impact (* Source IDTechEx)

Feature	Global yearly value	Source
Shrinkage (theft, damage, expiry, loss) Up to 20% of perishables are expired before sale	$60 billion	Efficient Consumer ResponseFood and Drug Administration
Excess stocks	$40 billion	Quoted by IBM
Stockouts at retailers cost 6% of sales. One third of these are in the retailer�fs warehouse	$60 billion (2%)	Procter & Gamble (percentage)
75% of the cost of a retail product is getting it there	$2250 billion for CPG	MIT (percentage)
Most supply chain parameters can be reduced by 90% (time to market, stocks, stockouts, efficiency of recalls, customer returns, warranty management)	$506 billion if applied to one quarter of the above	MIT Auto-ID Center (percentage)

Major investment needed

One of the major barriers to RFID adoption for item-level tracking is that it requires a significant investment from both retailers and manufacturers.

Retailers must deploy readers and an infrastructure to manage and act on the data the readers gather, and manufacturers must adapt production lines to embed or affix RFID tags to every item.