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SNAGS
ABOUT TAGS Article on Security Tagging by Hugh Morison, Director General of The Scotch Whisky Association |
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| Some of today’s larger retailers, in an effort to reduce pilfering, are asking product manufacturers to fit security tags to products during the production process. Simple though this sounds, I believe it is time to set out some of the difficulties producers face - particularly the lack of tag standardisation and potential costs to producers. | ||
| Background Electronic Article Surveillance (EAS - or, more commonly, security tagging) is increasingly used to protect store merchandise from theft. The tags will trigger alarms at the store’s exit. In his recent report, Fighting Retail Crime, Dr Joshua Bamfield estimated that in the UK alone, theft is costing retailers more than £1.2bn annually, about a third of it from shoplifting, with the other two thirds involving staff, often in collusion with customers. Small wonder therefore that retailers are keen to adopt EAS -- said in some cases to pay for itself in a matter of months -- to cut their losses. Tagging was initially confined to only a few sectors. But the development of miniature, cheaper and more reliable tags has led to its use growing and some supermarkets in Europe are already tagging the more expensive spirits and champagnes, products which are amongst the items most susceptible to theft. Indeed, one leading British multiple store is believed to suffer annual drinks losses of £2-3m. |
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| The move towards source tagging Tagging started with retailers doing it to their merchandise themselves in store. The latest disposable tags, however, have led them to the proposition that manufacturers could do it for them instead at the point of manufacture -- known as source tagging. This has the obvious attraction of cutting their costs and transferring them to the producer. One advantage from the retailer’s point of view is that, this way, tags can be hidden in or behind current packaging. So, there is increasing interest in source tagging. Retail security directors, unsurprisingly, have high hopes about the benefits -- for them. Under the auspices of the British Retail Consortium (BRC), working groups are examining how to take source tagging forward. Its US counterpart, the National Association of Chain Drug Stores (NACDS), has identified a variety of product lines which are both prone to theft and most suited to source tagging. The major manufacturers of these include several ‘household names’ who have agreed to tag at source, and the NACDS has committed itself to:
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| Activity so far by the spirits
industry In the UK, distillers of spirits have been closely monitoring the development of security tagging since 1993, and have also set up two working groups, one on technical affairs and the other on general commercial matters. The spirits industry has also been represented at meetings of the ‘EAS Partnership’, a forum co-ordinated by the BRC to discuss security and source tagging. At present, there is no production-scale source tagging of spirits for either the UK or US markets, although there is on a very limited basis a certain amount for one or two European retailers. Now it seems that wider demand for it is about to break and source tagging at the behest of retailers seems closer. So the spirits industry has since 1993 been working with tag manufacturers to seek to iron out difficulties surrounding the application of tags at source, work which has revealed several fundamental concerns which should not be overlooked. |
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| Lack of standardisation in the
technology The biggest concern is the lack of technical standardisation. There has been disappointingly little progress in recent years towards a standard technology for EAS tags and in-store systems. Three main technologies exist- radio-frequency(RF), electro-magnetic(EM), and acousto-magnetic(AM). Each technology is incompatible with the other and with EM, there is even incompatibility between different tag manufacturers. The adoption by different retailers of different systems threatens to bring chaos for producers such as spirit manufacturers who supply their products to retailers all over the world. In the USA, the major stores seem evenly split between RF and AM, while in continental Europe EM is being strongly promoted also. In the UK, RF and AM dominate, although some major chains remain undecided. Retailers of books/ music clearly prefer AM, but DIY outlets have chosen RF. Multiple UK grocers have undertaken extensive trials examining the different systems, yet no consensus as to which is best has emerged. Sainsbury is introducing RF systems in some stores, whilst other multiples favour AM. For product manufacturers, this lack of standardisation presents a potential logistical nightmare. Before the advent of tagging, efforts were concentrated on minimising the number of production runs, stock-keeping units (SKUs) and packaging components (eg labels) required for each market. Efficiency was increased and production and inventory costs kept to a minimum. Tagging at source reverses these achievements. Different French retailers might request products tagged EM, RF, AM or even untagged. Manufacturers will be required to produce at least four different types of SKU for the French market in place of one at present. The problem is multiplied for an industry such as Scotch Whisky which sells its product all over the world. Not only will it potentially have to supply different retailers with different tags, it will have to do so for each of the brands it has in each market. |
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| Difficulties of applying tags
on bottling lines While higher stock runs and resultant costs are of grave concern, spirits producers face a more fundamental problem, how to apply security tags at source on high-speed bottling lines. For manufacturers of some products, this technical problem can be solved relatively simply by alterations to the packaging and/or the production process. However, despite what some tag manufacturers may have led retailers to believe, the spirits industry faces particular problems in applying tags at source which have not yet been solved. Much misinformation on this subject has been circulating and needs to be put in context. For example, an article in the May edition of Automatic ID News contained the statement, ‘Most tags can now be applied using high-speed bottling or packaging lines, without any slow down’. This is simply untrue. Another article in the Financial Times on 13th June referred matter-of-factly to the source tagging of ‘bottles of Scotch’ as if there were no associated technical difficulties whatsoever. A bottle poses particular difficulties when it comes to applying a tag. Spirits producers are well used to adapting production to meet customer and market requirements, yet after four years of work, the spirits industry has been unable to discover a way of applying tags covertly at the bottling speeds now common in the industry - 300 bottles per minute (bpm). Modern production lines are designed to maximise speed, efficiency and quality. Tagging once more threatens to reverse progress. The lack of tag standardisation means not only different tag technologies, but also different sizes and shapes requiring different application methods. EM tags can be concealed on bottles which have sufficiently large labels, but current AM tags are too thick (c.1.3mm) for this to succeed. In any case, some modern screen-printed bottle designs have no labels at all. This raises the likelihood of needing different machines to apply different tags to different parts of the bottle at different points on the line. This assumes that such machines could be developed in the first place, without having any negative impact on line efficiencies and without the tags impairing the ‘aesthetics’ of the bottle. All machines trialled for the application of RF and EM tags supplied on reels have run into major problems at speeds of significantly below 300 bpm. Keeping the production process economic and competitive is threatened by these reduced efficiencies. The thickness of AM tags and their need to be kept flat pose particular difficulties. The industry is exploring with the sole supplier of AM tags application options which might be feasible; but quick progress is unlikely. An additional problem is that covert integration into some types of packaging used for high-value bottles of spirits can affect tag performance. Metallised cartons and tubes, for example, will interfere with the signal from RF tags and can cause them to fail. |
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| Costs The international alcoholic drinks market is extremely competitive, and while, if the technical problems can be overcome, security tagging should result in better display options for spirits, assuming the technological problems are overcome, the costs to producer and consumer are as yet unknown. The costs of the tags themselves, application costs (capital expenditure, running costs, reduced efficiencies), and added stockholding, distribution and administration costs will seriously impact on producers. With no tag standardisation and no progress in the ability to apply tags at high speed, then costs will leap. One current estimate is that the additional costs of source tagging could be around £1.00 for a typical 12-bottle case. The price sensitivity of spirits make this a very significant figure. Who will pay these costs? It cannot be right that suppliers carry all the costs of source tagging, when it is the retailer which will profit by reducing loss through theft? No doubt the costs will ultimately be borne by the consumer. |
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| Environmental and other
concerns In the rush to reduce theft, there is a danger that tag manufacturers and retailers will forget the implications of new environmental legislation. The British Retail Consortium and spirits producers are concerned that the introduction of tags will make it more difficult to recycle packaging waste and glass bottles with metal-containing tags. The health and safety implications of tag activation, de-activation and detection systems for staff and customers, and the implications of releasing active tags beyond the point of sale still need to be fully explored. |
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| Conclusion The drive towards source tagging is acquiring such momentum, and retailers have such purchasing power, that no one product manufacturing sector such as the spirits industry can resolve the issues. The spirits industry is ready to talk to its retail customers about its concerns, but for all parties to work together there needs to be an open debate, with as much exchange of information as possible. Those at the highest levels need to be engaged, and there needs to be an international perspective because this is an international issue. Unless all parties recognise and work to reach an acceptable technological, economic and efficient solution consumers will suffer from higher prices and possibly less consumer choice. |
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