Wal-Mart recently told its top 100 suppliers to adopt it by 2005 or find someone else to supply for. Gillette is using it to curb shoplifting of its razor blades. And Benetton plans to weave it into its products to track every item of its clothing worldwide. What is it?
It's a chip the size of a grain of sand that sends a signal or
reacts when it approaches a reader. The technology has been around since World
War II when it helped ground soldiers identify fighter planes as friend or foe,
but the cost has kept it from being adopted widely.
Now, however, many experts believe that it will be found in anything and
everything by 2010, and it will revolutionize supply chain, manufacturing and
retail efficiency.
Why Will RFID Change Your World?
What if your merchandise could talk? What if it communicated automatically not
just when you picked it up and scanned its bar code?
"Imagine each and every item talking about itself as soon as it pulls into the
warehouse." says Bjarne Schøn, director of supply chain at Microsoft Business
Solutions.
"You don't have to register the items manually all the relevant information is
read from the items automatically. Packing instructions pop up on your warehouse
staff's reader, and detailed item information is automatically entered into the
inventory and purchasing areas of you business management software system. All
you have to do is unload the truck.
"Once in the warehouse, there are no more stock counts because every item is
continuously sending a signal to a reader. What's more," Schøn finishes his
scenario, "if the items have passed their expiration date, they scream to the
reader: 'I'm too old!'"
Big software companies, like Microsoft, are backing the Auto-ID
Center, a joint American/European organization that is setting RFID standards.
"We intend to make sure that all of our products related to inventory, retail
management, manufacturing, distribution and point-of-sale include built-in
support for RFID technology," says Satya Nadella, corporate vice president in
the Microsoft Business Solutions Group.
Deploying RFID solutions that are connected to business management solutions
will be straightforward plug and play. Still, the solutions won't show their
full potential until RFID has been widely adopted.
But as supply chain masters like Wal-Mart push RFID on their suppliers, who in
turn push it on their sub-suppliers, the cost will go down, and it will become
more common.
When an RFID chip costs the same amount as what it costs to pick up an item and
scan its bar code, about five cents, then it will be found everywhere from small
businesses to large enterprises and from manufacturers to retailers.
It's estimated that if Wal-Mart put an RFID tag in every item, it
would generate two terabytes of data every second. That's one trillion bytes.
"The only limits of the impact RFID can have on your business are the limits of
your imagination," says Schøn.
"It's already being used in innovative ways. For example, I visited a dairy farm
recently, and I noticed that there was an antenna blinking on the ceiling. It
turned out that it was reading chips located on the cows, detecting their
whereabouts and alerting the farmers when a cow remained stationary for too long
a sign of sickness."
But what about issues of privacy? It's one thing tracking a cow's
location. But if there's a tag that can send and receive information in every
consumer good, how can we protect ourselves from infringements of privacy, or
even illegal collection of data? Imagine a thief with a scanner checking for the
house with the best merchandise.
It's possible, however, to kill the send information function when an
item leaves a store. What's more, RFID technology will probably take off in a
Business-to-Business context before it's widely adopted in the
Business-to-Consumer market. That will give time to solve privacy and security
issues.
"Microsoft has done significant work in the area of privacy on the Web and in
stores," says Nadella. "We are looking at this issue at a fundamental level, and
I am confident that we will be able to deliver solutions that will create value
for businesses and consumers alike."