Raising an RFID ruckus

Radio frequency identification tags might make supply chains infinitely more manageable, but the privacy flap needs settling first.

It was a rough summer for radio frequency identification, the heir to the venerable bar code.

In July, privacy advocates crowed when Wal-Mart and Gillette canceled a planned trial of “smart shelves,” which inform the supply chain when (and with what) they need to be restocked. “On June 6, I walked around and wiggled the smart shelf [in a Brockton, Mass., Wal-Mart, where the test was about to launch]. The next day, it was gone,” proudly reports Katherine Albrecht, executive director of one of those groups – Consumers Against Supermarket Privacy Invasion and Numbering (CASPIAN).

A month later, CASPIAN called for a boycott of Gillette, darkly dubbing the RFID transceivers embedded in razor-blade packaging “Gillette spy chips.” A Gillette spokesman dismisses the boycott, saying the company has no intention of tracking individual customers and their purchases.

Gillette also denies that the privacy groups had any influence on the decision to cancel the smart-shelf trial, as does Wal-Mart. They say the companies opted instead to focus their attention farther up the supply chain, at the palette and case levels. Clearly, though, groups such as CASPIAN have had a sobering effect on these companies and other businesses working to improve supply-chain management through RFID. And few industry watchers doubt that privacy-group pressure will force companies to examine the consumer-privacy ramifications of the technology and establish a code of conduct. Public protest also may slow RFID adoption by cautious companies.

However, not all the summer buzz around RFID was negative. While CASPIAN was making headlines with its Gillette boycott, Texas Instruments announced it had developed a tiny (22 mm circumference) RFID chip sturdy enough to survive the dry-cleaning process. And despite the smart-shelf volte-face (whatever its cause), Wal-Mart instructed top supply-chain partners to be RFID-ready at the case and pallet level (as opposed to the individual-item level) by January 2005.

RFID at work

That’s a lot of excitement for a technology that was born during World War II and has been around in pretty much its present form for a decade. RFID transfers data wirelessly between a minuscule transceiver and a transponder, or “tag,” that can be attached to just about anything – an item in a store, a shipping container, even livestock. Without human intervention, the tag and transponder can trigger actions, such as reordering from a supplier. Already, RFID is used in airport luggage-routing systems and highway toll collections.

For years, RFID’s potential for dramatic supply-chain improvements has been clear. Because it rides radio waves, RFID doesn’t require line-of-sight scanning as bar codes do (high-frequency RFID systems boast transmission ranges up to 90 feet). The great promise of RFID is to offer more granular, accurate information on product availability and to automate processes that are performed manually today.

Those radio waves are what concern privacy advocates, who want assurance that when a consumer buys a pack of Certs and slips them in her pocketbook, she won’t be surreptitiously tracked by the government, the store or hackers.

Privacy is a recent concern; for years, cost held back RFID. The consensus is that the price of an RFID tag must sink to a penny before the technology is cost-effective at the grocery-store level (though it’s already attractive for higher-margin items such as clothing).

Nailing down the price of an RFID tag is impossible today. Mark Roberti, editor of the online magazine RFID Journal, says 40 cents to $1 is the going rate in the real world. But Bob Hower, a partner at venture capital firm Advanced Technology Ventures who closely follows RFID, believes Gillette paid as little as six cents apiece for the 500 million tags it purchased from Alien Technology in a heavily subsidized deal meant to build market share in the nascent industry. Transportation company DHL, which plans to track its packages with Philips Semiconductor tags by late 2004, says it won’t pay more than 20 cents each for the 1.5 billion tags it plans to use annually.

In any case, there’s more to RFID than tagging every box of Bisquick. Already, the ROI is attractive at the pallet and carton level – where Wal-Mart is focusing. The Bentonville, Ark., company is committed to using RFID in its distribution centers by 2005 with its top 100 suppliers, the spokesman says, on each pallet and case. A year after that, the program will encompass all Wal-Mart suppliers.

The reason is simple: Already legendary for its logistics processes, Wal-Mart believes that jumping from bar codes to RFID “will be like going from the telegraph to the Internet,” the spokesman says. “We move a lot of product,” he adds (an understatement – Wal-Mart figures show that from January to June 2002, 2.5 billion containers passed through its 108 U.S. distribution centers), “and we think RFID will teach us a lot about the daily ebb and flow.”

He won’t comment on when RFID will make it to Wal-Mart shelves, which is what triggers the objections of privacy groups. CASPIAN’s Albrecht says her bottom line is, “You absolutely cannot put these [tags] in products consumers are going to interact with.”

Privacy first

Roberti says package-level RFID tags are a full decade away. In anticipation of protests such as CASPIAN’s, he has long urged businesses to enact RFID privacy policies – and believes many corporations will do so in 2004. “This industry is immature,” he says. “Nobody had Internet policies in 1994. Today, nobody’s selling anything to consumers with RFID tags, so why would they have an RFID privacy policy?”

As it turns out, pressure from consumer privacy groups might bring about a win-win situation for RFID adopters; while they gradually implement the technology with suppliers, they can form cogent RFID privacy policies.

Ulfelder is a freelance writer in Southborough, Mass. He can be reached at sulfelder@charter.net.