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Smart Chips For Inventory Could Be The Future Wave
Paul Reed
Guest Commentary
For Nashville Business Journal
Wal-Mart and the U.S. Department of Defense are
asking for a new technology that has been around for
more 50 years. They want their vendors to provide an
intelligent label on the pallets they receive by
January 2005.
This "intelligent label" is coming in a big way. If
you haven't already heard about it, you will. I'm
talking about Radio Frequency Identification (RFID).
The science behind it is ancient in the technology
world. The British used a primitive form of RFID
technology during World War II to distinguish
British and German planes.
The RFID chip, sometimes known as a nanochip, is
the size of glitter and can store 96 bits of data.
RFID can be placed in packaging, lining of clothes,
important documents and currency.
RFID does away with the need of line of sight
needed for a traditional barcode. Imagine a
hospital patient with his wrist band under the
sheets. The nurse can scan the patient without
disturbing him, virtually eliminating incorrect
identification regarding medication or
prescriptions. A courier tracking a box as it goes
through an archway doesn't have to locate a barcode
to scan, slowing down the tracking process.
Second, the RFID technology can read several chips
simultaneously. A forklift operator could check a
pallet with an RFID label attached as it rolls by,
simultaneously reading all of the items in the
pallet and updating inventory immediately.
Some RFID chips are "active," meaning that a reader
not only can read information from the chip but
update and change the data. Imagine using this
information to track bins or totes that move from
one warehouse to another. The RFID operator enters
new information about the operator who picked up the
items in the bin or who stocked it at a specific
location.
Wal-Mart has estimated that once RFID is
implemented throughout its supply chain, the company
could save over $8 billion dollars a year in net
profit. To give you some perspective on that figure,
half of the Fortune 500 companies combined don't
equal $8 billion in profit.
In the future, Wal-Mart envisions "smart shelves"
that can track inventory for certain items to ensure
the product is always available for the shopper.
Additionally, the shopper will be able to take a
cart and roll under an RFID gateway that will
automatically track every item in the cart.
This RFID gateway could eliminate the need for
check-out clerks scanning barcodes. Payment could
take place via credit or debit cards, or account
money transfer. In addition, vendors will know when
a certain item they stock for Wal-Mart is running
low at different stores around the country.
Are we ready for this new and exciting future?
Well, there are several issues that need to be
addressed before this Jetson Family trip to Wal-Mart
becomes a reality.
First, there is the issue of cost. Wal-Mart has
talked about the 5 cent label for the pallet. The
problem is that there are no 5 cent RFID labels.
Currently, the cost is 75 cents to 95 cents. RFID
label experts predict a cost of 50 cents only when
billions are sold in the future.
Additionally, the cost to implement an RFID system
at a manufacturing plant is significant, with
start-up costs ranging from $100,000 to $250,000,
including the software to manipulate data generated
from the system. Return on investment for an RFID
project, however, can come as early as one year.
Second, there is no agreed upon standard for bit
technology or frequency. While the technology has
been around for over 50 years and practical
applications abound, the regulatory groups and large
retail chains have not provided a working RFID
standard for different vendors to use. Since RFID
technology can only work with one type of frequency
and one data bit standard, there will have to be
agreed upon standards for every company involved.
Finally, there are privacy concerns. CASPIAN
(Consumers Against Supermarket Privacy Invasion and
Numbering) is a consumer group that was formed to
combat the spread of data to marketing groups and
governmental agencies. Last year, a smart shelf test
in Massachusetts was stopped due in large part to
CASPIAN. In Italy, clothing seller Benetton halted
plans to implant the RFID chips in its line as it
faced the threat of a boycott from privacy
advocates.
Proponents of RFID have discussed a "kill switch" -
a mechanism to eliminate data on the chip - but that
doesn't sit well with privacy groups either. "A kill
switch is not particularly reassuring to people with
my world view," says Katherine Albrecht, founder of
CASPIAN.
What is the future of RFID technology? As with any
technology-based product, there will be illusions of
plug and play. Eventually, prices will drop to a
reasonable level, the standards will be agreed upon
and an entire new market will develop that will work
in conjunction with bar codes.
Privacy concerns will be addressed, but retailers
with razor-thin margins see that there is too much
money to save. It's the kind of future that the
British Air Defense could only dream about while
watching the skies for German planes.
Paul Reed is president of Brentwood-based
BRS, which specializes in barcode labeling
products. www.busresource.com |
