Privacy concerns dog initial RFID plans

Philips Electronics made a splash last month when it announced clothing retailer Benetton would outfit its garments and shipping containers with wireless-enabled labels containing microchip transmitters that Philips developed.

But the splash turned into a tidal wave of negative publicity as privacy groups raised fears that the transmitter would let the retailer identify and track customers.

One consumer advocacy group called for a boycott of Benetton, saying sensors hidden in the retailer's clothing could be used to create a global surveillance network. Another privacy advocacy firm started a campaign aimed at stopping retailers from selling consumer goods containing live tracking devices.

The backlash was enough to cause Benetton to retreat from its commitment to the technology in question: radio frequency identification (RFID).

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Philips Electronics made a splash last month when it announced clothing retailer Benetton would outfit its garments and shipping containers with wireless-enabled labels containing microchip transmitters that Philips developed.

But the splash turned into a tidal wave of negative publicity as privacy groups raised fears that the transmitter would let the retailer identify and track customers.

One consumer advocacy group called for a boycott of Benetton, saying sensors hidden in the retailer's clothing could be used to create a global surveillance network. Another privacy advocacy firm started a campaign aimed at stopping retailers from selling consumer goods containing live tracking devices.

The backlash was enough to cause Benetton to retreat from its commitment to the technology in question: radio frequency identification (RFID).

With RFID, the signals that transmitters emit are picked up by strategically located sensors, which extract item-identification information stored on the chips. The decades-old technology - it was used to track aircraft during World War II - powers ExxonMobil's Speedpass payment system, for example. It's also commonly used for luggage tagging systems at airports and highway toll collection systems.

The retail and consumer goods industry has been abuzz for the past couple of years about RFID's potential to improve supply-chain processes, and momentum is growing. At an AMR Research retail and consumer-goods conference this month, 63% of 250 attending executives said they are evaluating electronic product codes enabled by RFID technology.

For retailers and manufacturers, RFID provides an alternative to traditional bar codes; garment tags embedded with tiny chips and antennas store information relating to an item's style, size, color and intended destination, for example.

But whereas bar codes must be read one at a time by devices within line of sight, RFID tags can be read when they're sitting in closed boxes. In addition, RFID readers can scan multiple items at once. Instead of unpacking and counting every item in a shipment by hand, a warehouse employee could scan the entire contents of a sealed box in one pass.

The allure of using RFID in the supply chain is greater visibility. With RFID-outfitted merchandise - and a means to extract data from RFID systems and feed it to enterprise sales, inventory and warehouse management systems - retailers and manufacturers could track products from distribution centers to store shelves in order to reduce out-of-stock conditions and trim warehouse operating costs. Ideally, sales and supply-chain information would be available in real time to retailers and manufacturers responsible for estimating merchandise demand.

Companies including CVS, Gap, Procter & Gamble and Wal-Mart have announced RFID pilots over the past several months. However, large-scale RFID deployments by retailers and their suppliers are virtually nonexistent. When it was announced in March, the Philips-Benetton deal was big for the industry.

"By purchasing 15 million RFID-chipped tags from Philips, Benetton becomes the first retailer to push item-level RFID out of pilot and into its 5,000 stores," Forrester Research said.