Analysts, suppliers and attendees at IDC's RFID Update
conference in Boston agreed that the combination of RFID tags with
electronic product codes could change the way manufacturers and
retailers manage their supply chains.
For years RFID technology has been used in access cards and
transponders for automated highway toll collection, but what is new
about RFID technology, and what is attracting the interest of
supply managers and privacy advocates, is the ability to track
products across the supply chain more efficiently than barcodes,
said IDC analyst Christopher Boone.
RFID technology will allow supply managers to track products
without a direct line of sight to a particular product, saving
labour and equipment costs, said Lyle Ginsburg, managing partner
for technology innovation with Accenture.
Right now, the retail industry watching a pilot project launched
by Wal-Mart Stores to require merchandise bound for one of its
three Texas distribution centres in the Dallas-Fort Worth area to
carry an RFID tag with an electronic product code. Suppliers need
only to track shipments of pallets or cases of merchandise to meet
Wal-Mart's 2005 requirements, Boone said.
The real growth in the RFID market would not occur until
manufacturers are comfortable with tracking individual items,
around 2008 by IDC predictions, Boone said.
German supermarket company Metro is testing item-level RFID
technology at its Future Store in Rheinberg, but most companies are
nowhere near close to deploying RFID on individual items. For this
to happen on a wider scale, the cost of an RFID tag will need to
fall, Boone said.
Ginsburg said cost is a major hurdle for companies considering
RFID/EPC adoption today. Many of the industries that would benefit
from this technology are high-volume businesses that operate on
very low margins, and even a five-cent price tag can be a tough
sell to chief financial officers at low-margin companies, he
added.
Michelin North America started to investigate RFID technology
after rival tyre company Bridgestone was forced to recall millions
of faulty tyres in 2000, said Pat King, global electronics
strategist for Michelin.
The company has developed a method of placing an RFID tag on a
tyre that can withstand strenuous manufacturing and distribution
processes, but no one has requested the RFID tyres yet because of
the extra cost.
While product recalls on the scale of the Bridgestone incident
are rare, they can be a disaster if not properly managed, Ginsburg
said.
Upper management at Johnson & Johnson needed only be
reminded of the costly Tylenol aspirin recall in the 1980s to
authorise a study of RFID/EPC technology, said Pat Rizzotto, vice
president of global consumer initiatives at Johnson &
Johnson.
RFID/EPC technology can also help reduce product theft and
counterfeiting, Ginsburg said. Retailers of high-end clothing and
pharmaceuticals are two industries where item-level tracking is
expected to provide immediate benefits.
About 2% to 7% of pharmaceuticals are counterfeit, and the
problem is worse in emerging markets, said Jamie Hintlian, a
partner for health and life sciences with Accenture.
Pharmaceutical companies want safe and secure supply chains, and
RFID technology can help assure that by authenticating products at
every step of the supply chain from product development to the
doctor's surgery, he added.
RFID/EPC technology concerns some privacy advocates who feel the
chips will allow retailers to track products once they leave
warehouses and stores and head to homes and businesses.
A group called Consumers Against Supermarket Privacy Invasion
and Numbering (Caspian) has launched a campaign that seeks to limit
the use of RFID tags to pharmaceuticals and pallet tracking. The
group, backed by the American Civil Liberties Union, the Electronic
Frontier Foundation and the Electronic Privacy Information Center,
wants to prohibit item-level tracking of consumer goods.
RFID backers are less worried about the privacy implications
because an RFID tag reader has a maximum range of around six
metres, and even then only if the tag is very powerful. An active
tag, or a tag equipped with a battery, can be read at a longer
distance, but the battery would add so much cost to an RFID tag as
to dissuade anyone from implementing it today, Boone said.
Any company thinking about deploying RFID for item-level
tracking should consider informing the customer right on the store
shelf that the product they are about to purchase contains an RFID
tag, Boone said. "What vendors should not do with RFID is as
important as what they should do."
As with most new technologies, RFID/EPC growth requires a common
set of standards to really take off, said Bernie Hogan, senior vice
president and chief technology officer for EPCglobal, one of the
groups involved in the RFID/EPC standards-setting process. The goal
is to create a "royalty free" standard based on the collaborations
of industry companies.
The second generation of the wireless standards for RFID/EPC
technology will be decided later this year, Boone said.
Tom Krazit writes for IDG News
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