RFID: Coming to a Store Near You

In June 2003, Wal-Mart announced that its 100 largest suppliers would be required to put radio frequency identification (RFID) tags on all pallets and cases, including pre-stocked P-O-P displays, shipped to its distribution centers and stores by January 2005. Even though the company has now acknowledged that this deadline cannot realistically be met (a new deadline of January 2006 has been set), its initial announcement focused a spotlight on RFID technology, the use of which many have likened to the early days of bar coding.Unfortunately, like many new technologies, especially ones that could potentially affect people's privacy, RFID has generated a lot of misunderstanding among both potential users and the general public. Privacy advocates initially feared that even inexpensive products could be tracked all the way to a consumer's home. While most people now realize that this probably could not happen, there is still a lot of misunderstanding about the technology.Where the Chips FallEach RFID chip broadcasts an Electronic Product Code (EPC), a unique number that identifies the specific item. Once it is read and entered into a computer, the number can identify where the item originated, the date of its production and other variables, including its expiration date (if it is perishable).The current cost of RFID chips suggests they will initially be used primarily on pallets and cases rather than on individual products."A typical chip costs about 50 cents. Obviously, you're not going to put it on a 49-cent can of peas," says Jon Schepps, director, communications systems and networks at Sarnoff Corp., a technology-development company based in Princeton, N.J. that was instrumental in the development of the technology.The chips are also limited by performance considerations. Their signals can be obstructed, for example, by metal or by liquids. Thus, a case of soda in the outside row of a display could be easily tracked via RFID, while an identical case on the inside row could not."We may someday get to the point where RFID is practical for individual items, but it would take a miracle," says Schepps. "At this point, no one has any idea how to overcome either the cost or the performance limitations of the chips."Perhaps even more important," says Schepps, "we don't know how to overcome the fear of consumers that they may not be properly deactivated before leaving the store, enabling items to be traced to individual homes." Schepps explains that this could never happen because individual chips would have a transmission range of something less than an inch, but consumers would nonetheless need to be educated to accept that fact.Standards Still EvolvingAs in the early days of bar coding, there are as yet no well-defined standards guaranteeing that every RFID transmitter can be read by every retailer's system. To make sure that such standards exist, an organization called EPCglobal has been formed as a joint venture between EAN International and the Uniform Code Council (UCC) of Lawrenceville, N.J.EPCglobal is a nonprofit organization entrusted by industry to establish and support the EPC network as the global standard for immediate, automatic and accurate identification of any item in the supply chain of any company, in any industry, anywhere in the world. Its objective is to drive global adoption of the EPCglobal Network, which was developed by the Auto-ID Center, an academic research project headquartered at the Massachusetts Institute of Technology (MIT) with laboratories at five leading research universities around the globe."I think the analogy with the early days of bar coding is a good one," says Sue Hutchinson, product manager for EPCglobal. "Back then, we saw the same hesitation on the part of the consumer and the same need for standards to prevent a proliferation of incompatible systems. Of course, consumers today are more accustomed to technology, and unlike bar coding, many of the applications of RFID will be transparent to them, so it may be easier to overcome any misgivings they may have, but the similarities are striking."Will RFID ever replace bar coding? Probably not for a long time, if ever, according to Hutchinson. "EPC is an exciting technology that represents a potential new standard in identifying products," she says, "but its implementation will evolve over time with applications driven by market and consumer demand. We will be living in a world where bar codes and EPC tags will co-exist for quite some time to come."In the meantime, retailers are enthusiastically supporting the efforts of EPCglobal. "Retailers are very aware of the benefits that RFID can bring to them in terms of increasing the efficiency of their supply chain, and they have been very cooperative in terms of coordinating their efforts with us and with each other," notes Hutchinson.Wal-Mart, for example, which helped to initiate the current flurry of activity, has now revised the January 2005 deadline to affix RFID tags to all pallets and cases, in order to allow more time to implement the technology. Instead, the company is limiting its initial test to its Dallas district with hopes of achieving full compliance nationwide by January 2006.Target Stores and Albertsons also have announced plans to implement RFID tagging."In the months ahead, we will be deeply involved with EPCglobal as we introduce RFID and help drive the direction of this exciting new technology," says Bob Dunst, Albertsons executive vice president and chief technology officer. "As a founding member of EPCglobal, Albertsons will provide support for adoption of the EPC Network and in the creation of industry standards for EPC technology." As part of its efforts, Albertsons has pledged to assist companies in implementing RFID technology.Cost Still Top BarrierMost experts agree that RFID will someday be as ubiquitous as present-day bar coding, but that it will require considerably more work and a couple of technological breakthroughs to get there.Both Schepps of Sarnoff and Hutchinson of EPCglobal agree that the biggest barrier to expanded use is cost. "Once the 5-cent RFID chip becomes available, we'll see expanded use of the technology. Until then, however, its use is pretty much limited to backroom applications."Despite the hardware limitations, software suppliers are racing to meet the anticipated demand for the additional data that RFID will generate. Both SAP and PeopleSoft, for example, are working to develop "middleware" that will integrate RFID into their supply chain databases. Oracle recently rolled out Sensor-Based Services, a set of software and services that deliver RFID capability to Oracle databases and servers. Microsoft recently launched the Microsoft RFID Council, which includes a number of consulting firm and other software vendor members, and announced the Council's membership in EPCglobal.A number of brand marketers, including Gillette, Procter & Gamble and Unilever, have also announced that they will be ready to meet retailer's demands for RFID capability in time to meet anticipated deadlines.Despite this, many P-O-P producers remain cautious. "We are certainly studying the technology," says Mitchell Edelman, vice president and general manager of Englewood, N.J.-based Henschel-Steinau, "but, for now at least, we're holding back on making any major investments until we see exactly where it's going. We definitely plan to be ready when our clients require the capability, but we don't want to get caught up in a 'first in, first burned' scenario."Other P-O-P producers agree. "We are continuing to explore how we can play a role in this technology, but we are not yet ready to announce anything for public consumption," says Lisa Boyd, director of marketing for Graphic Converting Inc., Niles, Ill. Bob Johnson of Harbor Industries, Grand Haven, Mich. says "We are certainly aware that it is coming and will continue taking a serious look at it during 2004."The federal government, meanwhile, is fast becoming aware of RFID technology beyond its potential use by the Department of Defense. At a conference on surveillance technologies at Georgetown University in Washington, D.C., Senator Patrick Leahy (D -- VT) said that Congress may need to hold hearings on RFID. According to a transcript of his speech, Leahy said that it's time to begin a national dialogue on RFID before "a potentially good approach is hampered because of lack of communication with Congress, the public, and lack of adequate consideration for privacy and civil liberties."

RFID: Coming to a Store Near You

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