From ROB magazine...Not sure if this was posted yet, but here's another go...
Do You Read Me?
Radio frequency identification will track goods from the factory to your home—and even let them communicate with your appliances. But who will be listening in?
JOHN LORINC
Report on Business Magazine
It is, by any measure, a staggering sum, a Mount Everest of lost opportunity. Every year, according to an expert cited by the Federal Trade Commission, American merchants lose as much as $300 billion (U.S.) in revenues because they've lost track of goods somewhere on the journey between factory and store shelf.
But it's nothing a little technology can't solve, if you ask advocates of radio frequency identification (RFID) systems. In fact, RFID will inevitably revolutionize not just retailing, but also manufacturing and every step in between—not to mention the consumer experience. Why "inevitably"? Because Wal-Mart wants it.
In an RFID system, electronic readers are deployed along the supply chain. The readers scan a unique digital code on each shipping case's RFID tag—a silicon chip that can be as small as a grain of rice, with a tiny antenna attached—and link that information to a vast database. Voila: You'll always know where your shipment is.
But as with so many exchanges of digital information, RFID cuts two ways.
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On one hand, proponents say its benefits will extend far beyond the supply chain, affecting areas as diverse as food safety, security and health care. They foresee a day when there will be an "internet of things"—meaning virtually all objects will have embedded RFID chips, allowing them to be located in time and space with the ease of a Google search.
For skeptics, RFID is a tiny technological Trojan horse that will obliterate what remains of our privacy. Corporations, governments and police will be able to know you intimately, from what you're reading to where you like to go. And those are just the legitimate uses. By deploying concealed readers, everyone from employers to criminals will be able to covertly scan your bank cards and possessions. In this scenario, your data and even your identity will be free for the taking.
While the technology has been around since the Second World War, the rage for RFID dates to the late 1990s, when MIT, using funds from Procter & Gamble and other corporate sources, set up a research shop to develop a successor to the bar code. One of its earliest commercial applications was at ExxonMobil (in Canada Imperial Oil), allowing consumers to pay for their gas by using an RFID reader on the pump. Now a slew of other applications are in the works.
When Alaine Moss, the operations manager for the Canadian RFID Centre, hauls a trolley loaded with 2% milk past a pair of readers, they send out signals that detect the RFID tags on each case of milk. Suddenly, long strings of digits appear on the monitors located near each reader. (Where a bar code denotes only the manufacturer and category of product, the 256-bit string of data on an RFID chip has enough capacity to uniquely identify each individual object.) The information on the screen reveals the origin of each case of milk, its best-before date and a list of the places it's been. When a case goes past, say, loading dock 13, the computer system creates an electronic date stamp in its database indicating the arrival or departure of that particular case.
It works in reverse, too, says Moss, pushing the trolley into an unrefrigerated storeroom whose doorway is flanked by motion detectors. When these devices twig to the presence of an item whose code indicates that it is perishable, a warning pops up on the terminal, alerting the materials handler that the carton is about to be misplaced. "It all happens in the blink of an eye," says Moss. In most factories and distribution centres, such information is now gathered with hand-held bar code readers. With RFID systems, there's a promise of far greater automation through all the strands of the supply chain—or so it's hoped at the RFID centre, a joint venture between IBM and several food-industry groups. "Think about the labour efficiencies," Moss says.
Wal-Mart did. Since 2004, the trendsetting retailer has pressured dozens of its largest suppliers to apply RFID tags to some or all of their goods, and set up product tracking systems that can communicate with the retailer's own databases. The early results are encouraging: According to a 2005 University of Arkansas study, RFID-tagged products at Wal-Mart boast a 16% reduction in out-of-stock positions and a threefold increase in speed of replenishment. By 2007, Wal-Mart will have 600 of its top suppliers using RFID technology. The company also ordered its Canadian arm to conduct an RFID pilot project, which began this fall in 20 stores and in one Ontario distribution centre.
Not coincidentally, the Canadian Council of Grocery Distributors has been plugging away at its own RFID trial since the summer, involving IBM, the supermarket chains and several consumer product giants, such as General Mills. The suppliers and retailers alike know that Wal-Mart is lumbering into the frozen foods aisle, so it behooves them to be fully prepared. "We don't want to be dragged into RFID," sighs Dan Gabbard, vice-president of Maple Leaf Global Foods, which is participating. Gabbard, like most supply chain experts, admits Maple Leaf has little choice but to go along, the way the auto-parts sector did when the carmakers imposed just-in-time delivery in the early 1990s. "Ten years from now, folks are going to say, 'Of course, it was a no-brainer,'" he says.
The grocery distributors' trial is investigating whether RFID can curb that all-too-familiar consumer complaint that advertised specials are out of stock. As IBM Canada's RFID practice leader, Shai Verma, notes, consumers can't find the exact product they're after about 8% of the time. In fully half of those cases, the retailer ends up losing the sale.
Verma says RFID will provide instant "visibility." If something's not where it should be, it can be located with the click of a mouse. That, in any event, is the promise, and the benefits clearly interest executives like Gabbard: "Do we know today exactly how many stores our products go into for a particular promotion? I'd say we could use better information about that."
There are some bugs to work out, of course. One issue is that RFID readers function differently depending on the materials they're scanning. Metals and liquids, for example, seem to interfere with the radio waves. Then there's the question of distance: Most readers must be within five metres of the RFID tag for it to work effectively. (On so-called active RFID tags, which are equipped with tiny batteries, the antennas transmit signals over considerably longer distances.)
Researchers are trying to expand the range, but that refinement will create other issues. For example, how does the reader know that it's scanning the correct shipment, and not one that happens to be sitting nearby? The most important test is the "read rate"—the proportion of tagged cases or objects that are accurately detected when they pass within range of an RFID reader. If the scanners are missing tags, RFID's purported advantage over bar codes disappears.
In fact, Rob Douglas, an executive with Mississauga reader manufacturer Psion Teklogix, says it's a misconception that RFID will render bar codes obsolete. "Initially, everyone thought that RFID was a replacement." But he predicts that the technology will co-exist with other data-capture methods, including bar code scanners and digital photos. Future hand-held readers, Douglas adds, will operate in all three modes. "We don't see a world where everything is changed over to radio frequency."
This forecast has something to do with cost. After all, suppliers have sunk plenty of money into bar code-based systems. Going to RFID means anteing up new money for networks of readers, a database system and the tags themselves. The tags account for a lion's share of the outlay. (According to one estimate, hardware represents just 3% of the investment in RFID.) Right now, RFID tags cost 20 to 40 cents apiece, but the economic payoff won't click in until economies of scale reduce that price to a few cents.
The clearing of that hurdle is implicit in a 2006 market research study that predicts the RFID industry will grow from $640 million (U.S.) in 2005 to $1 billion (U.S.) by 2011. That respectable 8% annual growth rate will be driven by major purchases by the likes of Wal-Mart, German grocery giant Metro and the Pentagon. Yet the report notes that retail and supply chain uses will account for less than half of those revenues. Safety and security will take up much of the rest. (See "A mighty mite," at right.)
Art Smith, who runs the Canadian arm of EPCglobal, the RFID industry's standards-setting body, says the organization is bankrolling more than 500 research projects worldwide to work out RFID's wrinkles. Meanwhile, sectoral working groups—in auto parts, apparel, health care, defence, etc.—are hammering out technical standards for chip design, software compatibility and certification. As David Wilkes, senior vice-president of the Canadian Council of Grocery Distributors, says, "The potential is limited only by the imagination applied to it."
The boundless potential of RFID is exactly what alarms privacy and civil liberties advocates. To them, Big Brother lurks in every application. In California, some boards of education require students to carry identity cards with RFID chips, which are tied to security systems designed to keep intruders out of schools. That state, Washington and some European countries are looking to make "e-passports" and drivers' licences with built-in RFID chips. The concern for civil libertarians is that the technology is being used to monitor the movements not of products but of people. Covert readers, installed in airports or other public spaces, could be used by law enforcement agencies intent on tracking people whose names are on the agencies' large and often dubious lists of terrorism suspects.
Some companies are also issuing RFID-based ID cards to their employees, or even—in the case of one video surveillance firm—having the chips implanted under employees' skin. It's an application that's being seriously considered for military personnel and police officers in the U.S. "Employee monitoring is likely to be a big issue," says Dalhousie University law professor Teresa Scassa, who has studied RFID. Do employers have a right to record the way employees move through the workplace, where they go on breaks and even on their own time? "You could say that's an Orwellian scenario," says Scassa. "It's not unreasonable to be concerned."
Other RFID watchers are concerned about security breaches that can occur when vital data is transmitted wirelessly between chip and reader. Jonathan Westhues, a 23-year-old security researcher in Cambridge, Massachusetts, discovered it doesn't take much to hack into RFID-equipped identification or security-pass systems. He once cloned a Flexpass—used in public transit and carpooling—and then posted the specs on his website. For a reporter from Wired, he demonstrated how he could use a homemade reader to steal the electronic entry code from an RFID-equipped employee pass card. All it took was for Westhues, who hails from Waterloo, Ontario, to brush past a volunteer who was carrying the card.
Such test hacks are gaining notoriety. The tag on a package of cream cheese was reprogrammed to open the electronic locks on hotel room doors. Using a hand-held reader, a German security expert changed the prices on products at Metro's showcase Future Store. More recently, during a security trade show in Las Vegas, another expert demonstrated how to use easily available software to swipe personal information encoded on the RFID chip embedded in the "e-passports" being developed by the German government. "There haven't been many large-scale attacks," says Westhues, "but that's only because there aren't very many deployments."
The test-hack results are the sort of thing that makes privacy advocates see red and politicians see the wisdom of treading carefully. Lawmakers in California, Texas and Utah have introduced bills to restrict the use of RFID in government ID cards and the like. But the anti-RFID school seems more concerned with the technology's effect on people as consumers, rather than as citizens. Come the day when RFID is used not just on cases of products but on individual items, how will the data be used? In 2003, the giant British retailer Tesco, then in the early phases of RFID tests, attached tags to various Gillette products on so-called smart shelves. It then installed readers and closed-circuit video cameras nearby. When a consumer picked up one of the tagged items, the reader detected the movement and activated the camera, allowing Tesco to see who was buying those goods. When the media reported the test, the negative publicity moved Tesco to ice the project.
A German retailer has been more forthright about its technology experiments. Metro created its Future Store in Rheinberg, to introduce consumers to the RFID-intensive shopping experience of the future. Thousands have trooped through the facility, testing automated self-serve checkouts and using hand-held shopping assistants that bring up detailed product information when waved over an item on the shelf. For Scassa and other RFID experts, the unanswered question is whether the technology will allow large companies to gather information about consumer spending habits by surreptitiously scanning the RFID tags on individuals' clothing, other possessions, bank cards and loyalty cards. RFID chips are so small they could be easily inserted into virtually any product. Theoretically, readers located at the entrance to a store or mall could detect all the RFID chips on every shopper: a font of information on who buys what, where and when.
Rob Douglas of Psion Teklogix feels that such scenarios are implausible. "Technically, it's possible," he says. "Is it executable? I doubt it. The range [of the chips] is a few feet, which suggests you'd need readers every 10 feet." In fact, retailers have gone to great lengths to insist that they have no immediate plans to use RFID tags on individual products.
But here's the wrinkle: If retailers genuinely aren't interested in item-level tags, they shouldn't have reservations about electronic measures that disable RFID chips once they pass the point of sale, in the way that cashiers will detach those anti-shoplifting fobs pinned to clothing. "The problem is that [stores] are not killing the chips once people buy the product," says Lillie Coney, EPCglobal's associate director. Instead, the RFID industry has proposed half-measures, such as an operational guideline that cashiers should offer shoppers the option of disabling RFID tags—an idea that sounds suspiciously like negative-option billing. The anti-RFID movement responded by saying that such a policy makes little sense in busy superstores with long checkout lines and shoppers whose carts are loaded up with merchandise. Responsibility for providing consumer information shouldn't devolve to cashiers, says Teresa Scassa.
Killing the tags, responds EPCglobal's Art Smith, precludes many benefits. In the near term, for instance, retailers could use the tags to link goods to electronic warrantee records, so consumers don't have to worry about keeping track of receipts and other easy-to-misplace paperwork. Further out, RFID proponents envision so-called smart appliances. One item on this wish list: a reader-equipped washer that can automatically select the right setting, depending on the instructions encoded in "smart labels" in articles of clothing. Another: a fridge that can read best-before dates in the chips on containers of yogurt and other perishables. As Smith says, "If we turn the chips off permanently, are we restricting the opportunity of the intelligent home of the future?"
This is one of the many RFID-related riddles that have landed on the desk of Ontario's Information and Privacy Commissioner, Anne Cavoukian. In February, 2004, her office released a hard-hitting survey entitled, "Tag, You're It: Privacy Implications of RFID Technology," which likened the devices to "bar codes on steroids." At the time, Cavoukian noted that RFID chips are easy to hide. "At its most fundamental," she wrote, "widespread use of RFID tags could enable corporations to track every move consumers make." The federal privacy commissioner, Jennifer Stoddart, weighed in not long after with her own tough-talking study.
Almost three years later, however, Cavoukian's views are more measured. "I try to differentiate myself from the privacy extremists, who are against all tagging," she says. The reason for this revision: Wal-Mart and others in the RFID industry, aghast at the technology's increasingly negative profile, beat a path to her door. This past summer, the Information and Privacy Commission of Ontario released guidelines for RFID use, developed in collaboration with industry's own EPCglobal. The guidelines call for merchants and manufacturers to be open about the presence of chips on their products, and to obtain informed consent before using the readers to collect consumer data.
Cavoukian says Canadians have to be "extremely careful" about allowing RFID tags to be encoded with personal data, such as a passport number, social insurance number or health information. But, in her view, as long as there's no linkage between RFID tags and databases that contain personal information about individuals, there's no problem. That means a thumb's-up from her for uses such as RFID tags on medicine bottles to prevent counterfeiting.
One application that recently caught Cavoukian's eye is an emerging technology from IBM that allows a visible RFID tag to be deactivated at the point of sale, but then reactivated later on if, for example, the consumer brings the item back for repairs. That tag is turned back on, and when scanned, reveals that the product is indeed under warrantee. "It's visual proof for consumers that the thing has been disabled," says Cavoukian. "You need to get consumers' confidence and trust, and build customer service into this technology."