Microsoft, IBM and Phillips test RFID technology

Microsoft, IBM and Philips Electronics have announced projects for developing and promoting RFID as a cost-saving tool for...

Microsoft, IBM and Philips Electronics have announced projects for developing and promoting RFID as a cost-saving tool for retailers.

IBM and Philips will team up on RFID for supply chain management, retail and asset management, as well as smart card technology for finance, e-government, transportation and event ticketing.

As part of the joint effort, IBM Global Services will build an RFID system for use in for Philips's semiconductors facilities for manufacturing and distribution in Taiwan and Hong Kong.

Philips began tagging its wafer cases and carton packages produced in its Kao Hsiung manufacturing site in Taiwan and the division's distribution centre in Hong Kong in November.

The programme is expected to be fully implemented by the middle of this year, according to Christoph Duverne, vice-president of marketing and sales at Philips Semiconductors' Identification group.

"RFID is an emerging application that we've been working on for a number of years, but RFID is becoming mainstream now. With a retailer the size of Wal-Mart really pushing RFID, it puts a lot of pressure on people to use the technology," Duverne said.

Wal-Mart now requires its top 100 suppliers to use RFID tags on shipping pallets and cases of merchandise by January 2005, with the rest of its suppliers facing a deadline of 2006.

Evelien Vredeveld, IBM's worldwide RFID leader said, "2004 is going to be a real crazy year for RFID."

Last year there was concern about privacy issues with RFID but this year, he said, consumers will begin to learn the many benefits of the technology. For example, if a product with the RFID tag breaks and needs to be returned to the store, the consumer would not need a receipt as all of that information will be part of the tag's data.

Vredeveld expected to see such disparate industries as the automotive, electronics, pharmaceutical and travel industries to quickly jump on the RFID tagging bandwagon quickly because of due in large part to the technology's ability to drive down operating costs.

According to estimates from research company IDC, within four years retail demand for RFID tags will be $1.3bn.

Philips is partnering with IBM to provide a "one stop shop experience" that customers are already beginning to demand, Duverne said.

"It is an ideal match with IBM, combining their expertise with ours and putting two very well known brands together. This project will also drive a number of separate projects."

"With Philips we can bring the technology to market quickly," Vredeveld added.

Duverne expected joint IBM-Philips RFID pilot projects to reach the US by the second half of this year. 

Microsoft has implemented its RFID project with Scandinavian snack company, Kims Danmark to help develop its system for automating a company's supply chain, which includes a pilot programme for using RFID tags.

The project was launched in September and went live on 15 December. It will run for six months, said Bjarne Schon, Microsoft's director of supply chain.

Kims has been using Microsoft's Axapta Warehouse Management system since June and using the RFID tags in its main warehouse to monitor pallets of finished goods as they move out of production and into third-party warehouses.

So far the pilot programme is running smoothly. "I can actually sit in my office and follow where all of the pallets are going," said according to Kims chief executive officer Jorn Tolstrup Rohde.

However, because of the cost of the tags, €0.40 to €0.50 per tag, Tolstrup Rohde said it is not possible at this stage to do a full roll-out of the RFID programme.

The costs need to go down to "a few Euro cents" per tag, before Kims could consider using the tags on goods, Tolstrup Rohde said.

The next step of the Microsoft-financed RFID pilot programme with Kims will be to trail the tags in consumer products. "We believe that RFID really is the way of the future and this programme is a great opportunity for us to use and understand the technology," he said.

Laura Rohde writes for IDG News Service

Read more on Business applications