Getting tagged – Are you ready for the RFID challenge?

Novel technologies with transformative potential in the consumer and business-to-business environments don’t always come with built-in applications. Developers and end-users need to find common ground on where the technology can be effective. When the Internet began taking shape around academic and defense-industry activities, few probably imagined that the resulting communications revolution would impact on everything from making airline reservations to shopping for antique fishing lures.

Radio Frequency Identification (RFID) is engendering similar unpredictable end uses. When the basic technology was conceived during the Second World War, using it to identify lost or stolen pets through chips concealed in their ear wasn’t on the short list of applications. Nor was identifying lost children at amusement parks through chips in wristbands or clothing tags. But these are just a few of the uses RFID is taking on as an old technology – radio waves – merges with the new technologies of microchips and Internet-based software.

In evolutionary terms, RFID is in a state of diffusion. By using radio waves and chips that are encoded with information (and in some cases, chips that have two-way communication capability), the technology is expanding into a wide variety of potentially exploitable niches. It will be a disappointment in some, a surprising success in others. How successful RFID ultimately proves to be in these niches depends on the likelihood of significant unit cost reductions, and acceptance of the technology by both businesses and consumers.

wide variety of applications

Its most promising application area is not in the ears of wayward Labrador retrievers, but in the supply chain and the retail environment. RFID takes supply chain management a quantum leap forward from bar codes, which have been around for about twenty years. Unlike bar codes, RFID tags don’t require a line-of-sight reader. Instead, an RFID reader uses radio waves to identify and sort data from individual chips. These chips (or tags) permit the tracking of single items as well as their shipments at the case, pallet and container level.

With the right software, RFID can revolutionize inventory management, increasing efficiencies in just-in-time delivery and shelf restocking. It can help retailers maximize their sales turnover per square meter of shelf or floor space. It can reduce “shrinkage” by combating theft with a more discrete, less cumbersome device than the bulky tags now attached by retailers to garments. “Intelligent” tags can reduce shrinkage by monitoring factors such as temperature and humidity, avoiding spoilage in perishable goods. And reducing shrinkage of course would improve margins and reduce retail prices, which in turn would improve sales.

RFID also promises enhanced security at several levels. International ports can better manage terrorist threats by employing tracking technology that accounts for the movement of every container in motion in the world.

At the consumer product level, RFID’s supply-chain intelligence promises major advances in identifying the source of defective or compromised products. This is because RFID tags are envisioned being deployed simultaneously at the individual product, case and pallet level. While each tag might carry only its unique electronic product code (EPC), Internet-based software, managed by computers and servers, is able to use these codes to track the individual package back through the supply chain to its point of origin. Theoretically, a manufacturer can determine the source of a defective product, down to a particular factory and, based on its shipping information, time of production.

This technology could prove invaluable to the food industry, where crises with tainted products could be far more efficiently managed, to the benefit of both manufacturers and public safety, by allowing companies to quickly identify the precise source of a problem food and launch a pinpoint recall accordingly. The U.S. Food and Drug Administration is also interested in RFID as a tool to improve drug security and combat counterfeiting.

uneven adoption

Yet, for all the hype, global interest in RFID has been wildly uneven. Deloitte’s recently released poll1 of senior ranking executives within the top thirty retail and consumer product companies in Canada found that 14% of respondents’ organizations had already implemented RFID, while 47% of respondents expected their organizations to adopt RFID technology within the next 2 years.

In the United States, the U.S. Department of Defense and retail giant WalMart, both of which have required suppliers to adopt RFID by 2005, have provided momentum. Internationally, the United Kingdom has been at the forefront of deployment, its government having earmarked nine million Euros back in May 2000 for field trials in support of an official “Chipping of Goods” initiative. The U.K may well be ahead of the rest of Europe in deploying RFID, and both are probably ahead of North America.

One reason for the head start of European Union countries is that companies have already been primed for RFID deployment by their adoption of Electronic Data Interchange (EDI) technology, which provides for data sharing and integration between companies. Despite well-publicized RFID initiatives in the U.K. by Safeway stores and Nestl

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