John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.
If you were caught off guard by the news that some companies are already sticking RFID tags on individual items (as opposed to cases or pallets), you're in good company. Even the tag-makers were taken by surprise.
"If you had asked me six months ago if a move to item-level tracking would be big in 2007, I'd have said that was possible, but in fact it seems to be happening much earlier than that," says Bill Colleran, president and CEO of tag-maker Impinj. "There are a few applications that have a near-term ROI."
Up until recently, the conventional wisdom held that RFID made sense only for the tagging of cases and pallets (and sometimes, not even then). RFID tags, as everybody knew, were nowhere near affordable enough to use to track individual products. But all of a sudden, item-level tagging, as it's known, has emerged as a practice that is not only viable but promises a relatively quick payback. Word is that item-level tagging has seen a surge of interest in the past few months, particularly among certain types of manufacturers.
Contrary to what you might expect, the manufacturers most likely to be tagging their products today are not the makers of extremely high-value merchandise—say, plasma TVs or couture fashions. Right now, you're far more likely to find tags on your CDs and DVDs, your meds or your new pair of jeans.
Most likely to be tagged
In the past, most analysts assumed that outside of tracking, RFID tags' biggest potential lay in deterring theft—and thus, their primary appeal would be to makers of high-value goods. They were partly right. Businesses ranging from jewelers to electronics manufacturers to ski-rental companies are reportedly experimenting with ways to use tags to cut down on theft.
What the analysts missed was the tags' potential for solving other, more industry-specific business problems. But the possibilities did not escape apparel manufacturers, the pharmaceutical industry, or companies in the entertainment sector.
Companies that produce CDs and DVDs, for example, quickly recognized the tags' potential as a means of boosting sales. With DVDs, sales are heaviest in the first seven days after a film's release on DVD. Nearly 70 percent of sales are recorded during that week, which means manufacturers want—indeed, crave—assurances that copies of "Capote" or "Memoirs of a Geisha" are out on the shelves, not lost in a backroom, during that critical period. RFID tags can provide those assurances.
The pharmaceutical sector likewise sees RFID as more than a means to combat theft. Using RFID technology, drug companies can create a virtual "pedigree" for each bottle or package as it moves from the plant to the wholesaler and finally, to the pharmacy. The ability to document a drug's movements through the supply chain helps manufacturers weed out counterfeits and trace stolen shipments. One drug maker, Purdue Pharma, has been shipping RFID-tagged items for 18 months now. It started by shipping tagged bottles of OxyContin to Wal-Mart and drug wholesaler H.D. Smith. Last year, it introduced RFID technology at a second manufacturing plant in order to tag its newest product—another potent painkiller called Palladone.
Clothing manufacturers, by contrast, aren't so much interested in where a garment has been as in how to locate it quickly. Apparel is notoriously difficult to keep track of. Not only does each item come in an array of sizes and colors, but consumers often return items to the wrong rack after trying them on. Clothiers are gambling that sticking a 15- or 20-cent tag on a $95 pair of jeans will cut the risk that they'll lose a sale because a customer can't find an item in a particular size or color.
So far, it appears to be working. AMR Research reports that in pilot projects, RFID tagging improved stock availability by more than 50 percent. And that wasn't the only benefit. AMR also claims that the labor needed to manage inventory and handle replenishment dropped by 15 to 20 percent.
Limited availability
Although the interest in item-level tagging has picked up, universal tagging is still a ways in the future. No one expects the day when every pack of gum and jug of spring water carries a tag to arrive anytime soon.
Even the folks at Metro Group, the German retailer known for its pioneering work with RFID, believe we're still a decade away from that. "When it comes to item-level tagging on a daily basis where all of our products will carry tags, we think it will take another 10 or 15 years to reach that goal," says Albrecht von Truchsess, a spokesman for Metro Group.
Part of the problem is cost. It makes no sense to put a 20-cent tag on, say, a $1.95 greeting card. The other part has to do with technical difficulties that still need to be worked out. "[T]o use this on a daily basis, you need a 100-percent read rate every time, every day," says von Truchsess. "You need to be able to read that one tube of toothpaste that might be wedged between 10 cans of soup. It's a very complex issue to deal with."
Nonetheless, Metro is pressing forward with its RFID experiments. At its Future Store in Rheinberg, Germany, which is best described as a combination RFID test lab/supermarket of tomorrow, it's currently collaborating with Gillette, Procter & Gamble and Kraft to tag and track individual items.
Though all of the pilots involve item-level tagging, each manufacturer is interested in something different. Gillette, for example, wants to see if tags help reduce theft of its razor blades. Kraft is looking to see how well the tags work in tracking expiration dates on packages of cream cheese and monitoring the temperatures to which the packages are exposed.
P&G is tagging items for yet another purpose: marketing. When a customer removes a bottle of shampoo from the Future Store's shelf, its RFID tag—coupled with smart shelf technology—triggers a short movie to begin playing on a small video screen above the shelf. The movie's subject? The shampoo, of course.
For all their novelty, von Truchsess seems less enthusiastic about these futuristic store-level trials than about Metro's experience using RFID in more traditional applications. "Today," he says, "the more interesting aspect is what's going on in the distribution centers before goods arrive at the store."
Whether it's more interesting is debatable, but no one denies that Metro's experience using RFID in its DCs has been a success. About 40 suppliers are now shipping RFID-tagged pallets to Metro's DCs in western Germany, von Truchsess reports, and Metro has already saved more than $10 million (U.S.) as a result. Not only has RFID sent labor costs plummeting, he says, but it has also cut the time required to check in pallets by more than one-third.
Von Truchsess has no doubt that this is only the beginning. "These results are from limited operations," he points out. "You can imagine what will happen when the technology improves and we roll this out at many locations."
what's the frequency?
Which technology performs better in item-level tagging high frequency (HF) or ultra high frequency (UHF)? That's the question facing EPCglobal, the international organization that must decide which technology to adopt as its formal standard.
It won't be an easy decision. Right now, even EPCglobal's own members are divided on the question.
In one corner are those who consider HF technology superior to UHF because of its versatility. They argue that unlike UHF, HF works with any kind of material, including liquids. They also contend that HF is less orientation- sensitive than UHF, and that because it reads in the near field only, it's easier to control.
One of HF's advocates is Bret Kinsella, chief operating officer of ODIN technologies, an RFID consultant that has just completed an independent study of HF vs. UHF technology. He considers HF to be the superior technology because it can stand up to a broad array of demanding applications. "From a technology standpoint," he says, "HF is less material dependent [and] therefore less sensitive than UHF technology."
In the other corner are those who argue that recent technological advances have made UHF the technology of choice. UHF's backers dismiss charges that the technology is unreliable around liquids and metals, claiming that the interference problems have been resolved.
"A lot of claims have been made about the unsuitability of UHF for item-level tagging," says Chris Diorio, founder of Impinj, a company that makes UHF RFID tags and readers. "But the physics of RFID propagation make UHF ideally suited for item-level [applications]." In a video on the Impinj Web site, Diorio claims that UHF technology has proved to be quick, reliable and effective in applications involving liquids, metals and pharmaceuticals. Diorio and others also contend that UHF's ability to leverage the Gen 2 protocol makes it the better choice.
To see how the technologies stood up to various challenges, EPCglobal sponsored a series of demonstrations in late March. Nearly two dozen vendors showed off their technologies' capabilities in a variety of applications, including reading tags attached to garments on a moving metal rack, tags affixed to goods sitting on a shelf, and tags on drug vials and bottles packed in a plastic tote. EPCglobal representatives are now examining the demonstrations' results. The organization could announce its decision as early as the end of the year.
The Boston-based enterprise software vendor Board has acquired the California company Prevedere, a provider of predictive planning technology, saying the move will integrate internal performance metrics with external economic intelligence.
According to Board, the combined technologies will integrate millions of external data points—ranging from macroeconomic indicators to AI-driven predictive models—to help companies build predictive models for critical planning needs, cutting costs by reducing inventory excess and optimizing logistics in response to global trade dynamics.
That is particularly valuable in today’s rapidly changing markets, where companies face evolving customer preferences and economic shifts, the company said. “Our customers spend significant time analyzing internal data but often lack visibility into how external factors might impact their planning,” Jeff Casale, CEO of Board, said in a release. “By integrating Prevedere, we eliminate those blind spots, equipping executives with a complete view of their operating environment. This empowers them to respond dynamically to market changes and make informed decisions that drive competitive advantage.”
Material handling automation provider Vecna Robotics today named Karl Iagnemma as its new CEO and announced $14.5 million in additional funding from existing investors, the Waltham, Massachusetts firm said.
The fresh funding is earmarked to accelerate technology and product enhancements to address the automation needs of operators in automotive, general manufacturing, and high-volume warehousing.
Iagnemma comes to the company after roles as an MIT researcher and inventor, and with leadership titles including co-founder and CEO of autonomous vehicle technology company nuTonomy. The tier 1 supplier Aptiv acquired Aptiv in 2017 for $450 million, and named Iagnemma as founding CEO of Motional, its $4 billion robotaxi joint venture with automaker Hyundai Motor Group.
“Automation in logistics today is similar to the current state of robotaxis, in that there is a massive market opportunity but little market penetration,” Iagnemma said in a release. “I join Vecna Robotics at an inflection point in the material handling market, where operators are poised to adopt automation at scale. Vecna is uniquely positioned to shape the market with state-of-the-art technology and products that are easy to purchase, deploy, and operate reliably across many different workflows.”
Third-party logistics (3PL) providers’ share of large real estate leases across the U.S. rose significantly through the third quarter of 2024 compared to the same time last year, as more retailers and wholesalers have been outsourcing their warehouse and distribution operations to 3PLs, according to a report from real estate firm CBRE.
Specifically, 3PLs’ share of bulk industrial leasing activity—covering leases of 100,000 square feet or more—rose to 34.1% through Q3 of this year from 30.6% through Q3 last year. By raw numbers, 3PLs have accounted for 498 bulk leases so far this year, up by 9% from the 457 at this time last year.
By category, 3PLs’ share of 34.1% ranked above other occupier types such as: general retail and wholesale (26.6), food and beverage (9.0), automobiles, tires, and parts (7.9), manufacturing (6.2), building materials and construction (5.6), e-commerce only (5.6), medical (2.7), and undisclosed (2.3).
On a quarterly basis, bulk leasing by 3PLs has steadily increased this year, reversing the steadily decreasing trend of 2023. CBRE pointed to three main reasons for that resurgence:
Import Flexibility. Labor disruptions, extreme weather patterns, and geopolitical uncertainty have led many companies to diversify their import locations. Using 3PLs allows for more inventory flexibility, a key component to retailer success in times of uncertainty.
Capital Allocation/Preservation. Warehousing and distribution of goods is expensive, draining capital resources for transportation costs, rent, or labor. But outsourcing to 3PLs provides companies with more flexibility to increase or decrease their inventories without any risk of signing their own lease commitments. And using a 3PL also allows companies to switch supply chain costs from capital to operational expenses.
Focus on Core Competency. Outsourcing their logistics operations to 3PLs allows companies to focus on core business competencies that drive revenue, such as product development, sales, and customer service.
Looking into the future, these same trends will continue to drive 3PL warehouse demand, CBRE said. Economic, geopolitical and supply chain uncertainty will remain prevalent in the coming quarters but will not diminish the need to effectively manage inventory levels.
In a push to automate manufacturing processes, businesses around the world have turned to robots—the latest figures from the Germany-based International Federation of Robotics (IFR) indicate that there are now 4,281,585 robot units operating in factories worldwide, a 10% jump over the previous year. And the pace of robotic adoption isn’t slowing: Annual installations in 2023 exceeded half a million units for the third consecutive year, the IFR said in its “World Robotics 2024 Report.”
As for where those robotic adoptions took place, the IFR says 70% of all newly deployed robots in 2023 were installed in Asia (with China alone accounting for over half of all global installations), 17% in Europe, and 10% in the Americas. Here’s a look at the numbers for several countries profiled in the report (along with the percentage change from 2022).
Sean Webb’s background is in finance, not package engineering, but he sees that as a plus—particularly when it comes to explaining the financial benefits of automated packaging to clients. Webb is currently vice president of national accounts at Sparck Technologies, a company that manufactures automated solutions that produce right-sized packaging, where he is responsible for the sales and operational teams. Prior to joining Sparck, he worked in the financial sector for PEAK6, E*Trade, and ATD, including experience as an equity trader.
Webb holds a bachelor’s degree from Michigan State and an MBA in finance from Western Michigan University.
Q: How would you describe the current state of the packaging industry?
A: The packaging and e-commerce industries are rapidly evolving, driven by shifting consumer preferences, technological advancements, and a heightened focus on sustainability. The packaging sector is increasingly prioritizing eco-friendly materials to reduce waste, while integrating smart technologies and customizable solutions to enhance brand engagement.
The e-commerce industry continues to expand, fueled by the convenience of online shopping and accelerated by the pandemic. Advances in artificial intelligence and augmented reality are enhancing the online shopping experience, while consumer expectations for fast delivery and seamless transactions are reshaping logistics and operations.
In addition, with the growth in environmental and sustainability regulatory initiatives—like Extended Producer Responsibility (EPR) laws and a New Jersey bill that would require retailers to use right-sized shipping boxes—right-sized packaging is playing a crucial role in reducing packaging waste and box volume.
Q: You came from the financial and equity markets. How has that been an advantage in your work as an executive at Sparck?
A: My background has allowed me to effectively communicate the incredible ROI [return on investment] and value that right-size automated packaging provides in a way that financial teams understand. Investment in this technology provides significant labor, transportation, and material savings that typically deliver a positive ROI in six to 18 months.
Q: What are the advantages to using automated right-sized packaging equipment?
A: By automating the packaging process to create right-sized boxes, facilities can boost productivity by streamlining operations and reducing manual handling. This leads to greater operational efficiency as automated systems handle tasks with precision and speed, minimizing downtime.
The use of right-sized packaging also results in substantial labor savings, as less labor is required for packaging tasks. In addition, these systems support scalability, allowing facilities to easily adapt to increased order volumes and evolving needs without compromising performance.
Q: How can automation help ease the labor problems associated with time-consuming pack-out operations?
A: Not only has the cost of labor increased dramatically, but finding a consistent labor force to keep up with the constant fluctuations around peak seasons is very challenging. Typically, one manual laborer can pack at a rate of 20 to 35 packages per hour. Our CVP automated packaging solution can pack up to 1,100 orders per hour utilizing a fully integrated system. This system not only creates a right-sized box, but also accurately weighs it, captures its dimensions, and adds the necessary carrier information.
Q: Beyond material savings, are there other advantages for transportation and warehouse functions in using right-sized packaging?
A: Yes. By creating smaller boxes, right-sizing enables more parcels to fit on a truck, leading to significant shipping and transportation savings. This also results in reduced CO2 emissions, as fewer truckloads are required. In addition, parcels with right-sized packaging are less prone to damage, and automation helps minimize errors.
In a warehouse setting, smaller packages are easier to convey and sort. Using a fully integrated system that combines multiple functions into a smaller footprint can also lead to operational space savings.
Q: Can you share any details on the typical ROI and the savings associated with packaging automation?
A: Three-dimensional right-sized packaging automation boosts productivity significantly, leading to increased overall revenue. Labor savings average 88%, and transportation savings accrue with each right-sized box. In addition, material savings from less wasteful use of corrugated packaging enhance the return on investment for companies. Together, these typically deliver returns in under 18 months, with some projects achieving ROI in as little as six months. These savings can total millions of dollars for businesses.
Q: How can facility managers convince corporate executives that automated packaging technology is a good investment for their operation?
A: We like to take a data-driven approach and utilize the actual data from the customer to understand the right fit. Using those results, we utilize our ROI tool to accurately project the savings, ROI, IRR (internal rate of return), and NPV (net present value) that facility managers can then use to [elicit] the support needed to make a good investment for their operation.
Q: Could you talk a little about the enhancements you’ve recently made to your automated solutions?
A: Sparck has introduced a number of enhancements to its packaging solutions, including fluting corrugate that supports packages of various weights and sizes, allowing the production of ultra-slim boxes with a minimum height of 28mm (1.1 inches). This innovation revolutionizes e-commerce packaging by enabling smaller parcels to fit through most European mailboxes, optimizing space in transit and increasing throughput rates for automated orders.
In addition, Sparck’s new real-time data monitoring tools provide detailed machine performance insights through various software solutions, allowing businesses to manage and optimize their packaging operations. These developments offer significant delivery performance improvements and cost savings globally.