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Happy Returns?: While RFID Technology Steadily Matures, ROI Questions Persist


Sure, hybrid-powered cars, light trucks and SUVs will save us money at the pump. Yet we pay a premium price for a hybrid vehicle. That’s what we call a “conundrum.”

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Though we save a few bucks on the family budget, we must pay for that privilege. And that extra dough we’re saving may not be enough to justify the purchase of a hybrid Lexus.

While it’s true that the Toyota Prius and other such hybrids are on back order, most would-be buyers are still delaying the purchase of “green” vehicles because they’re confused. Will they really see a return on their investment?

Good question. Truck fleets ask the same thing when it comes to inserting radio frequency identification (RFID) chips inside commercial truck tires. The technology works, says Michelin North America (MNA), for one, and most agree. But here’s the quandary: Is RFID worth the cash outlay?

If you’re thinking long term, the answer is yes. This is not about simply tracking a few tires; the long-term objective is creating an RFID business model that works for both tiremakers and fleets.

Slow But Steady

Some 10 years after the major tiremakers tripped over each other in the rush to be the first with a practical RFID tag for commercial tires, only Michelin is in the market. Neither Bridgestone/Firestone nor Goodyear have issued working systems, though Yokohama Rubber Co. has a system it applies to buses in Japan.


Oddly, the group that stood to gain the most of this seemingly easy technology issue – the truck fleets – have been the most quiet. Still, the initial promise of an embedded chip or tag that would deliver tire inflation pressure and running temperature data – real-time or on-call – holds as much promise for end users as it did a decade ago.

The road to a working system is less about technology and more about understanding, and, as always, lessons are learned through trial and error.

For example, although it was first to roll out e-tire technology commercially – and make it work – MNA now says that some of its early suppositions were off the mark. Michelin’s e-tire product not only provided cradle-to-grave identification of a tire, it also delivered inflation pressure and temperature data.

“Originally, we thought it was good for a fleet to know where their tires were at all times,” says Nate Leehman, business manager for tire electronics at MNA.

Turns out fleets are more interested in getting the most out of their tire purchases. Trying to estimate the ROI on the purchase of millions of tires and the ROI on RFID technology is a very big spoonful indeed.


“We also thought it was a good idea to put a ‘chip’ reader at the gate of a fleet yard, but we believe now that the cost of this type of unit outweighs the benefit,” Leehman adds. “These pieces of our initial thinking have been put aside for now, while we refine that portion of our strategy which was and is correct.”

Leehman is talking about the electronic signature implanted in a commercial truck tire. “Because we can write to the chip and read the chip, RFID technology has infinite possibilities. So, the science is solid, but the business model needs work,” he says.

Right now, Michelin is focused on ironing out the relationship between its BibTrack software program and RFID technology. “We know fleets need to isolate their costs, both hard and soft. They want to know what kind of a life span they can expect from their tires, and that takes time – up to a year – to track,” Leehman explains.

The Plus Side

“It’s our job to help fleets turn tires into assets, something we can do with BibTrack and RFID technology,” he continues. “From the outset, the insertion of a chip into a freshly built tire means that tire now has an electronic signature, or identity, throughout its lifetime. Anyone reading this casing at any point in its lifetime will know the tire’s brand, size and wheel position history. That is what we call ‘asset tracking.’”


Using a hand-held reader, a tire dealer can track mileage, tread depth, tire wear, inflation pressure, tire temperature, inventory and specific tires on specific wheel positions. The end result is an accurate cost-per-mile number for each tire – from original tread through each retreading – plus the cost-per-32nd of tread depth. Further, a dealer will know what tire tread design and what tread depth works best at each wheel position.

Another benefit of asset tracking has to do with accountability. “Sometimes a portion of a tire dealer’s billing to a fleet is incorrect,” explains Leehman. “The dealer bills for 18 tires, and the fleet says it only received 17. With RFID, this kind of thing will soon be history because every tire will have its own electronic signature. A quick check can clear up the matter, freeing the fleet to go about its business, while the tire dealer gets back to the business of selling tires.”

Slow to Market

So why the big delay in getting fleets to buy into the program? In a word: money.

“We know that electronics in tires means faster, accurate collection of data. But that comes at a higher cost,” Leehman says. “At the same time, there is a cost in all of this for Michelin. “At 50 cents to $1 per chip, times millions of tires, that’s a large capital expense in the name of technology.”


In other words, it isn’t just the fleets that are being asked to shell out dollars for longer lasting tires. The tiremakers are adding expense to the equation, too. So, the ROI had better be worth it.

So, the question remains: Are fleets willing to pay the $3 to $4 per tire it takes to employ RFID technology? That’s unclear; right now, fleets are buried in higher fuel and insurance costs and are in the process of transitioning to new federally mandated, supposedly less polluting engines.

“Anytime you bring new technology into the tire business, it’s not always affordable, and it’s accompanied by teething pains,” says Guy Walenga, commercial products engineering manager for Bridgestone/Firestone North American Tire (BFNAT). “With RFID, we’re looking at an electronic version of what tire dealers have learned through the years. It’s faster, but at what cost, and at what ROI?

“The easy part is to put the chip into the new tire. The hard part is to make it work in a hostile environment every day, not to mention the retread process,” says Walenga. “In our opinion, RFID is not everything it’s cracked up to be. We are now looking at a chip, or sensor, that is proactive, something that has the power to transmit, one that can be easily read and gives us information we can use quickly and efficiently. We know we are not alone in the quest.”


“These little tags don’t represent super-duper technology,” says Walenga. “They tell us the tire’s temperature, from which we can derive the tire’s inflation pressure and where the tag is attached. But cutting to the heart of it, RFID is expensive and time consuming. I don’t believe anyone really believes RFID is paying off. At least not yet.”

Walenga asks rhetorically: “What about fleet customers with two or three tire suppliers? Do those fleet customers need two or three types of technology to read those chips? Wouldn’t it be better to have standardized RFID tags, at a reasonable cost that everyone can use?”

Still, Walenga looks at RFID as nothing more than a technical challenge. “We were told we couldn’t read our sensors, our chips, through steel cords, but we did. It was a technical challenge that was overcome, that’s all. Our next challenge is to produce an inexpensive, standardized chip with a payback promise that fleets will buy. I see this as nothing more than another technological challenge.”


The last big question is when? When will we see widespread use of RFID chips in commercial tires? MNA is working on that right now, and so is BFNAT, among others. Walenga’s guess is that it will be another two or three years. We’ll be watching.

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