RFID Labels Converting (For) The Masses

It's been more than two years since Wal-Mart and the DoD originally announced their RFID initiatives for their supply chains. Suppliers to these entities immediately balked at the high cost of the RFID labels needed to comply with these mandates. However, price per label was an easy mark. Reports of a nickel tag in the future were far outweighed by the forty to fifty cents end user suppliers were currently paying for an RFID label.

Price, as it turned out, was somewhat of a red herring when it came to RFID labels. The real cause for concern was the quality of the labels themselves. In the June 2004 issue of Integrated Solutions, for example, we quoted technology vendors that were seeing yield rates as low as 70% per roll of media. When 30% of RFID labels are voided at the end user site, that's a much more significant problem than the overall cost per label. It's an indication, quite simply, that the technology may not actually be viable.

Through the hard work and investments of some technology vendors, most of the doubts surrounding the viability of RFID have been removed. Yield rates have improved to the point where some label converters are promising 100% yield rates on labels that leave their facilities. That's a far cry from what converters promised 12 months ago and what end users could expect in terms of product quality. Of course, a dramatic improvement in label quality and yield rates wasn't an inevitability. Instead, these advancements were the byproduct of partnerships, alliances, certification programs, capital investment, and a lot of heavy lifting by technology companies on the front line.

RFID YIELD RATES INCREASE DRAMATICALLY
End user suppliers should expect to receive high-quality, high-yield RFID labels. Of course, this expectation needs to be met by the label converters themselves. (Oversimplified primer: RFID tag manufacturers supply inlays to label converters. These tags are then "converted" to RFID labels, which are sold directly to end user companies or through another distribution channel.) To meet this goal, top converters have reengineered business processes and invested heavily in technology and employees. "A lot of effort goes into achieving high yield rates," comments Rick Shea, national accounts manager at label converter The Kennedy Group. "For instance, 10% to 20% of the transponder inlays we receive from tag manufacturers aren't up to standard. We have to isolate those particular tags and discard them. The good tags eventually end up as finished product where every label is tested again before it can be sold." The final test of the labels does not result in a straightforward pass/fail result. Engineers at The Kennedy Group are testing for signal strength against accepted standards.

Another label converter, Nashua Corporation, has similar quality processes in place to ensure that 100% of all RFID labels leaving its facility are functioning properly. In the field, both converters are comfortable quoting a 98% to 99% yield rate – a dramatic improvement from 18 months ago, and one that takes serious commitment from converters. "You can't just purchase converting equipment and start producing saleable RFID labels," adds Bob Pernice, director of RFID at Nashua. "A serious RFID label converter will have a dedicated manufacturing facility that includes systems for ESD [electrostatic discharge] management and handling special materials. Also, the converter must invest in training workers to learn processes and adopt practices which, while common in electronic assembly, are foreign to the traditional label converting world." Evaluating a converter's certifications can also indicate the quality of product being produced. For example, RFID tag manufacturers test and certify those converters that can properly execute the process. For its part, Nashua is qualified to produce labels containing tags from most major suppliers and is the only company that can manufacture Printronix Certified RFID Media, the printer company's line of RFID labels.

There's no question that commitment from label converters has improved yield rates. But one of the most significant culprits of low yields had nothing to do with the quality of the RFID tags themselves. Many of the "failed" tags from previous deployments ended up back at the research centers of RFID tag manufacturers. A postmortem of the tags revealed that most were functioning within the range of accepted standards. Why, then, were they rejected and voided by the RFID encoders/printers on the DC (distribution center) floor? "When end user companies starting printing RFID labels, there was a lot of confusion over the printer specs," explains Keith McDonald, senior vice president of sales and marketing at RFID tag and reader manufacturer Alien Technology. "We worked with the printer manufacturers to establish some consistency. Once the printer specs were stabilized, we saw yield rates improve significantly."

RFID PRICES DROP, BUT VALUE INCREASES
For the most part, RFID labels are being used by end user suppliers to minimally comply with mandates or initiatives set forth by their larger partners. Volumes of labels being purchased and applied, however, will increase exponentially as compliance becomes simply a side effect of an overall strategic deployment of RFID technology. At that point, the pressure will be on RFID tag manufacturers and converters to significantly ramp up production. According to Jan Svoboda, business development director in the United States for RFID tag manufacturer UPM Rafsec, this issue has been largely overlooked. "Minimum compliance will end, and companies will have a regular demand for millions and millions of RFID tags," states Svoboda. "There's a perspective right now that volume will not be a problem. But, in fairness, manufacturers aren't being asked to produce RFID tags in high volume at this point. When volume increases significantly, end user suppliers are going to have to make sure they are partnering with RFID tag manufacturers and converters that can produce high-quality, high-yield tags and also meet supply demands."

Of course, consistent high-volume orders of RFID tags and labels will further drive down the overall price end users can expect to pay for the media. This doesn't change the fact that end users will still have to perform a price-versus-performance calculation. "Suppliers shouldn't necessarily be looking for the best RFID tag or label at any price. They should be shooting for the highest performing tag at the lowest price," says Alien's McDonald. Those performance tests and subsequent results will have a lot to do with distance and speed. For distance, end users will want to know the average distance between tag and antenna where accepted read rates are achievable. Speed is really a function of achieving those accepted read rates while passing by an antenna at a desired speed.

As prices of RFID tags continue to drop (in 2005 alone, RFID tag prices fell by 50%), label converters will continue to stress the unique value they bring to the production of high-quality, high-yield RFID labels. Adds Nashua's Pernice, "A good converter will add two to three times the value of the original tag." This doesn't translate into a two- or three-time price increase, but an end user awareness issue of the role of label converters and associated costs.