RFID: Proceed with caution

Given all the hype around radio-frequency identification, you'd be forgiven for thinking that it was some new, blue-sky technology. But the system of electronic tags and radio readers, being heralded as the saviour of the supply chain by retail mammoths like Wal-Mart and Tesco, has actually been used for everything from animal husbandry to tracking missiles.

RFID roots can be traced to 60s technology called Electronic Article Surveillance or EAS. These systems used 1-bit tags, with a tag simply detected as either absent or present. By the 70s, interest in RF technology was accelerating around a diverse set of uses, from animal and vehicle tracking to factory automation. In 1991, the world's first open-highway electronic tolling system opened in Oklahoma, removing the need for cars to stop at gates or barriers.

In the mid-to-late 90s, the possibility of using RFID as a replacement for the barcode began to gain ground. RF has the advantage of enabling automatic scanning; crates or pallets equipped with an RF tag can be scanned by readers attached to a factory door. Barcodes have to be scanned by hand -- a process that is open to human error.

Better than barcode
"If you are trying to receive goods of all shaped and sizes, it is very difficult to scan the barcodes automatically; in fact it is almost impossible, so that makes it a manual process. Manual operations aren't perfect; you need a lot of discipline to make sure the code is found every time. With RF, all you have to do is make sure that every product that comes on goes through the portal with the readers on it," explains Andrew Osbourne, director of policy and research at RFID standards body e.centre.

RF tags will give retailers and suppliers greater visibility through the supply chains, says Wal-Mart's RFID strategy manager Simon Langford. "It's all about total supply-chain visibility. We have visibility today but it is quite fragmented."

Langford recounts an incident involving Tylenol in the US, when two contaminated batches resulted in the pain-killer being recalled from every store in the country. The manufacturer had no way of knowing where a specific batch had been sent.

Big retailers such as Wal-Mart have been quick to seize on RFID's potential. Last year, the supermarket giant set a deadline of January 2005 for 100 of its biggest suppliers to adopt the technology. Initially this will only be at a case-and-pallet level but the retailer has long term goals of item-level tagging and further.

"Our focus is at case and pallet. The Holy Grail is the automated checkout but that is not going to happen for 10 -15 years. We need some significant breakthroughs in price and technology for that to happen," says Wal-Mart's Langford.

Negative press for Wal-Mart
The retail mammoth has attracted a lot of negative press for taking the initiative with RFID, with many suppliers concerned about the steep implementation costs and the relative immaturity of the technology in the supply chain. At the end of March, industry analyst Forrester Research issued a report warning that most RFID technology is still immature and it would cost the average Wal-Mart supplier up to $9m (£5.02m) dollars to comply with the mandate.

"There is no business case for most suppliers in the short term," said Forrester Research senior analyst Christine Spivey Overby. "The technology is not ready, and there is a lack of deep expertise in the industry to help suppliers implant RFID."