And... Radio Frequency ID Tags.
June 12, 2003
This week, wefre talking about radio frequency ID tags, a new technology that could change the way consumer packaged goods are stocked and sold. Welcome to the program. Heads turned earlier this year, when Gillette ordered 500 million electronic tags for tracking its shipments of razors and shaving cream cans. In the relentless drive to manage inventory accurately and in real-time, manufacturers have turned to radio frequency IDs, a new technology for identifying packaged goods on the shelf. Though still in the pilot stage, for retailers, the tags promise to address the shortcomings of todayfs bar code scanners. But if privacy advocates have their way, the new tags will not bring retailers any closer to their consumers.
Today, producers of consumer packaged goods use bar code scanners to follow their products through the supply chain. Why are some companies looking to replace this technology?
Back in the mid 1970s, bar codes were a breakthrough technology that accelerated supply chain processes. But according to the Auto-ID Center, a nonprofit group that is overseeing development of RFID standards, bar codes have one key limitation: which is that they are a line-of-sight technology. This means that the codes must be scanned manually and that they can only be read one at a time.
RFIDs overcome this limitation by sending out a signal that does not require line of sight communication with a scanner. In this way, RFIDs allow a user to automatically read the tags for a whole group of items inside a container, without the extra manual step of opening it up. Furthermore, in the retail environment, proponents of RFIDs say that a shelf would be able to act as a reader, which means the shelf could track its own inventory in real-time, to increase accuracy and speed up the restocking process.
So far, Walmart has become one of the strongest supporters of RFIDs. Why is the technology such a good fit there?
Walmart is a big proponent of RFIDs—in fact, therefs an industry conference in progress this week in Chicago, called Retail Systems 2003, and during this event, Walmart has reportedly been encouraging its top suppliers to adopt the technology. Clearly, Walmart has decided that the long term cost savings from an RFID program would outweigh the sizable cost of implementation.
If every item on the shelves in Wal-Mart is tagged with an RFID, how will consumer privacy be affected?
Critics of RFIDs have raised the issue of privacy in recent months. When the clothing manufacturer Benetton announced its interest in using the technology, a national consumer activist group threatened to boycott the company. But the Auto ID Center explains that electronic product codes will protect privacy on three levels: first, the chips on packaged goods cannot be read at ranges of more than three feet, ensuring a measure of physical protection. Second, the center says that data stored on the chips is only a unique code number that refers to information held remotely on a secured network system. And third, unlike so-called affinity cards that shoppers use today in grocery stores, RFIDs will identify only products, not people. Therefore, the system would not be able to associate a product with the person who bought it.
That said, those developing RFID technology are taking further steps to address privacy concerns. In May, Auto ID announced that the next round of pilot chips will incorporate something called a kill switch. This feature will deactivate the tag when it leaves the store, preventing it from being reactivated at a later date.
We know that Gillette and Wal-Mart are pushing the technology. Who else is involved?
Philips Semiconductor, Alien Technology, and Matrics are manufacturing chips for RFID pilots. And a group of 31 companies are participating in the Auto ID Center consortium. In the retail industry, Proctor and Gamble, CVS, Target, Lowefs, and Home Depot have all expressed interest in the new technology. And just a few days ago, we heard news that Microsoft plans to work with the Auto ID Center in defining RFID standards. Its a fairly extensive list of participants at this point.
Despite the widespread enthusiasm of early adopters, analysts predict a slow adoption curve for RFIDs. Whatfs the hold-up?
Its true that people donft expect RFIDs to be widely adopted before 2005. This technology was initially deployed in back office environments like warehouses of manufacturing companies. In order for it to make a splash in major retail storefronts, analysts say the cost per tag must come down significantly from around 50 cents per tag today to around 5 cents. At the right price point, experts say, RFIDs will become a viable replacement for now outdated bar code scanners.
Cussy, the Windsurfer:)