RFID opportunities and pitfalls

Radio frequency identification (RFID), like barcoding, is a technology for tracking and tracing items in the supply chain. An RFID label, known as a "tag", incorporates a microchip and an antenna that enables information on the chip to be read at a distance - usually a few metres. RFID readers work by transmitting a signal that requests nearby tags to respond.

RFID tags overcome many of the limitations of barcodes: they can carry large quantities of information, they can be updated with new information at any time, it`s possible to read hundreds at a time, they are more robust - an RFID tag is very difficult to tear - and they don`t need line of sight to be read accurately.

In theory, a supermarket trolley full of RFID-tagged items need only be wheeled past the checkout for their total cost to be tallied and presented to the consumer - and at the same time inventory records can be updated and suppliers notified.

In practice, of course, things are more complicated. RFID technology is not new - it`s been around for several decades - but until very recently the high cost of tags prevented large-scale use. Over the past few years, costs have decreased dramatically - and several other things have happened at the same time to make widespread RFID implementation over the next few years almost inevitable. First, global standards and protocols have been developed that allow information from RFID tags to be more easily shared. The Electronic Product Code (EPC) is similar to the familiar Universal Product Code (UPC) used on barcode labels - except that every single item has its own unique EPC, enabling previously undreamed-of control from manufacturing all the way through to final sale. More recently, existing standards bodies have come together to form the global GS1 Forum to create a single worldwide standard for RFID and barcodes. Earlier this year GS1 announced its Gen 2 Air Interface Protocol, a revision of a prototype standard on which the early RFID pilots were based.

Second, both the Internet and IT infrastructure belonging to individual companies have developed massively over the past decade or so. RFID produces vast amounts of data that need to be moved, stored and analysed; many retailers now have the massive back-end systems and databases that are required.

The final push has come as some of the world`s largest retailers begin to implement RFID in their own organisations. Wal-Mart has been the leader, demanding that all its top suppliers implement RFID at the case and pallet level by January this year. Other retailers have followed suit, including Tesco, Metro and Marks & Spencer, some of which are piloting RFID at the item level. The resulting increased demand has helped to lower the price of RFID technology even further.

Some problems remain, however. Moisture, metal and electronic noise can all distort, interfere with or even block radio transmissions, so that accurate reading of RFID tags could be difficult in some environmental conditions.

Second, if all the tags within range respond when an RFID reader is near them, it can be difficult to identify and read a specific tag. For example, when attempting to read a tag identifying a pallet, the reader may also read the tags on all the cases on the pallet -- and, in the worst case, the tags on each individual item as well. This can be avoided if the tags are embedded with information that directs them to respond only to certain signals - but this does complicate the management of the system.

Third, the very power and utility of RFID tagging raises serious and legitimate consumer concerns about privacy and confidentiality of data. If RFID tags remain active after purchase - and already there are tags on the market that are designed to survive washing machines - what assurance do consumers have that the retailer won`t try to track their movements? Will consumer data be adequately protected and secure from hackers and employees? How far away can tags be read? Is it really safe to walk down an aisle full of items emitting UHF radio waves, or will someone discover a nasty health effect in 10 years` time?

At least one consumer Web site has even raised the prospect of terrorists or criminals armed with RFID readers being able to target individuals or groups: in theory it might be possible for a "smart bomb" to target people wearing clothes from a particular retailer.

This scenario might seem far-fetched, but the underlying concern is valid. If RFID information is not adequately protected, there is no limit to what the criminal imagination might do with it - and there is no putting the genie back in the bottle once it`s out.

Most of these concerns are easily addressed: tags can be de-activated at purchase, and proper security including encryption can prevent unauthorised access to data. But consumers need to know that retailers respect their concerns and are willing to do what it takes to address them.

In conclusion, RFID technology has the ability to improve supply chain management, with huge resulting savings. One industry analysis suggested that Wal-Mart alone could save as much as US$8.35 billion per year. The potential for consumer backlash should not be underestimated, however, and retailers implementing RFID will need to demonstrate how consumers will benefit. Passing on a portion of the savings realised would be a good start.