ID chips

Lexington Herald-Leader (KY)

September 16, 2003

ID CHIPS TO UPGRADE CRATE-TRACKING CAPABILITIES
CRITICS SAY TECHNOLOGY THREATENS PRIVACY

Author: Justin Pope
Associated Press

Edition: Final
Section: BUSINESS
Page: C2

Estimated printed pages: 3

Article Text:

Backers of new radio-tagged product codes, a kind of souped-up wireless bar code, are heralding this as the week the technology finally moves off the drawing board and into the physical world.

Unlike traditional bar codes, "Radio Frequency Identification" tags don't need to pass under a laser reader. They're already commonly used by drivers with "speed passes" at toll booths, U.S. military quartermasters and ranchers tracking livestock from "farm to fork."

But the MIT lab developing the technology and sponsors including Wal-Mart, Gillette and Procter & Gamble are calling a symposium this week in Chicago the beginning of the next step: embedding the chips in shipping crates to help big companies save billions by tracking their products from factory to warehouse to storeroom.

For now, the focus is on logistics: making sure there's enough product to fill the shelves but not so much as to clog up supply lines or waste away in warehouses. Using RFID to track individual products all the way to the checkout line is considered farther down the road, until costs come down.

"The symposium is intended to be a bit like a starting pistol for this new technology," said Kevin Ashton, executive director of MIT's AutoID Center. "It's where we cross the line from research to reality."

For some, however, RFID is moving a little too quickly.

The technology got a push -- some say a kick in the rear -- this summer when Wal-Mart Stores told its top 100 suppliers to deliver RFID-tagged products by Jan. 1, 2005. With nearly $700 million in sales per day in 2002, Wal-Mart had the clout to give orders, and the announcement sent suppliers scrambling to respond.

Some, like Procter & Gamble, were already enthusiastically pursuing RFID on their own. But a new research report suggests others are feeling rushed to implement it.

They're also worried that if a common set of RFID standards fails to emerge they'll have to build a new system for every customer. And if standards do emerge, they worry they'll be forced to share information with competitors just to plug into the systems of customers they share.

"With every supplier, there are two camps," said Kara Romanow, an analyst with AMR Research, whose report estimated companies would spend $2 billion trying to meet the Wal-Mart deadline. "There's the camp that believes the end vision and has really bought into the hype. Then there are the people that are charged with implementing it that are scared."

Some privacy advocates, who contend the technology will soon be used to track people and their personal information, are also worried that RFID is moving too fast. Katherine Albrecht, of the privacy group Caspian, said citizen and consumer advocates should have been invited to the Chicago symposium to discuss their concerns. Instead, her group now plans to protest.

"It's such a one-sided conversation about the needs of businesses, with so little input from the citizens and consumers who are the major stakeholders in society," she said.

Ashton, of the AutoID center, said privacy advocates should be part of the debate but said, as the technology develops, rules will apply: Any customers who end up with RFID technology in their hands will be notified, given the option of turning it off, and given control over how any information is used.

The 1,000 attendees at the Electronic Product Code symposium will likely have questions about privacy, as well as standards and the rush by the "Wal-Mart 100" to comply with the company's mandate.

Bentonville, Ark.-based Wal-Mart has a long tradition of setting tough rules for its suppliers, but experts say this is the toughest directive yet, given the tight deadline and the novelty of the technology.

The order, and the presumption that other big retailers will follow suit, has sparked a new industry of RFID consulting; IBM, for instance, planned to formally announce a comprehensive RFID service for clients in Chicago.

Experts say some companies are doing the minimum to comply, but others are investing heavily, figuring the technology will eventually cut their costs too. When Wal-Mart adopted bar codes in the 1980s and helped make the technology an everyday product, suppliers also eventually made good use of it.

"Although Wal-Mart makes self-serving recommendations and mandates, ultimately if you look at the track record starting with the bar code and them really pushing it, you find these have really taken costs out of the supply chain," said Tom Roberts, a vice president at WebMethods, a Fairfax, Va., firm advising clients including Black & Decker on Wal-Mart compliance.

Wal-Mart spokesman Tom Williams said suppliers want to know what will be asked of them, but aren't complaining. The company will bring suppliers together this fall to discuss the mandate.

Some estimates put logistical costs at 5 cents on every dollar of goods sold, and analysts have predicted the technology could save Wal-Mart more than $1 billion per year. For a company that depends on selling at discount prices, and which moves 5 billion boxes annually through its distribution centers, the technology is impossible to ignore.

"We do track inventory, and we do track it fairly well. But here with RFID, it'd be almost like moving from the telegraph age to the age of the Internet," Williams said.