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RETAIL GETS TAGGED

Imagine saving your company $1 billion (all figures US) in inventory costs by installing a technology as small as a grain of sand. Well, that’s what Wal-Mart CEO Lee Scott says his company will save, thanks to the new barcode with brains.

A radio-frequency identification tag is essentially a miniscule computer that emits a radio signal. The signal allows the chip to “talk” to a network system so it can be tracked as it moves through a company’s supply chain.

In 2003, Wal-Mart announced it was going to require its top suppliers to use the tags and after much testing, its RFID campaign went live in January 2005. Execs drooled even more when analysts projected savings of up to $8.35 billion with a complete RFID makeover. How? Simply by making supply chains more efficient.

Before RFID, stockroom clerks would manually record products as they arrived to the store, sifting through order forms to confirm inventory. On the sales floor, if toothpaste was running low, the “associate” (as Wal-Mart calls them) would have to scan the barcode to see how many items were left in stock, then go through the tedious task of finding more Colgate in the crowded stockroom.

But by using RFID, Wal-Mart completely overhauled the process: On every door at the back of the store, the company installed RFID readers and antennas. As each skid and box passes an RFID antenna, a flashing light indicates that the case’s tag had been read — no computer screens, no manual counting. The products are automatically added to the store’s inventory through its computer system.

The retailer also installed RFID readers on doors leading out to the sales floor. As boxes are taken out of the stockroom to replenish shelves, tags on the cases are read and the system updates itself, knowing the items have been put on the floor. If a product is sold out, the computer sends a message to the store manager to indicate what needs replenishing.

In addition to finding product, RFID has the potential to eliminate one of shopping’s worst headaches: the checkout desk. Future versions could allow you to simply walk through an RFID checkout with all of your groceries in hand and readers could automatically debit your bank account or credit card. A cashier’s job might be rendered obsolete.

In fact, you probably already use RFID technology every day without even knowing it: automated payment (such as the keychain tag you wave at the gas pump), access badges for high-security areas, airline baggage tracking, and smart homes and offices. The technology is also popular for pet owners who want to track their wandering companions.

Perhaps the biggest use of RFID is in new vehicles — your keys (and only your keys) send an RFID signal to the car’s computer before the engine starts. Carjackers wouldn’t be able to start your car without keys outfitted with RFID.

RFID rollouts are also gaining momentum in dozens of other applications. Clothing retailers and libraries across the globe have implemented RFID technology to track inventory and stop theft. Toll-collection devices have been using this technology for years — if you drive with a transponder, you already take advantage of RFID.

The RFID frenzy has fuelled speculation that the technology will become as ubiquitous as the barcode. UK-based IDTechEx estimates that by 2016 the RFID market will be worth $26 billion.

One celebrated study from the University of Arkansas reported that RFID-enabled stores had reduced out-of-stock items by 16 per cent. The study also said that RFID-tagged items were put on the shelf three times faster than usual.

Companies work hard to develop brand loyalty, which can be fruitless when stores can’t replenish their shelves fast enough, says Clarke McAllister, president and CEO of Adasa, a company that sells RFID technology. “Manufacturers should never lose a customer because a store is out of stock.”

It’s not only retailers that are convinced RFID will reshape the future of business: The Pentagon and NATO, which manage huge supply chains to ship support material, have already built global systems with the technology.

NO PLACE TO HIDE

With the rising use of RFID technology all over the world, it’s no surprise people now worry how much RFID will track what we buy.

A small but vocal group sees RFID as nothing less than a threat to privacy. They have gathered loosely under the informal leadership of Katherine Albrecht and Liz McIntyre, authors of Spychips: How Major Corporations and Government Plan to Track Your Every Move with RFID. Their group is called Consumers Against Supermarket Privacy Invasion and Numbering (CASPIAN), and they are fighting the new technology fiercely.

As far as they’re concerned, RFID can track your every move, and that makes the chip evil (Mark of the Beast, anyone?). For them, RFID puts the average citizen under a Big Brother microscope, all the better to watch what we’re buying. Since RFID tags can hold much more information than barcodes, and don’t require line-of-sight scanning, your preferences in shampoo or underwear are easily discernible. More frightening scenarios concern the possibility of human tracking systems by government or hackers.

To CASPIAN, this is tantamount to totalitarianism. In a foreword to Spychips, author Bruce Sterling wrote that the people who promote RFID are “very covert, spooky, and…anxious to keep mum” about the technology’s dark side. The authors go on to say that with these chips, corporations and governments will be able to track items and people from a distance. “One of their insider terms for spying on customers is customer relationship management (CRM). You can think of it as a euphemism for consumer espionage.”

The book includes a relatively short history of technology that is full of such worries, some reasonable, others feverish doomsday scenarios. But RFID arrives at a time when media are reporting on unprecedented government intrusion. Washington’s post-9/11 efforts to conduct wiretaps without court orders have raised concerns about privacy violation. The FBI is still developing an enormous project to snoop on Internet traffic, which was given the awful name of Carnivore (later renamed DCS1000).

Another controversy surrounds government-issued travel documents that may feature RFID chips. These cards (part of a U.S. requirement for all North American travel starting in 2008) could be read from 25 feet away, sparking concerns that criminals equipped with a reader could collect your personal information without you ever knowing.

A top Homeland Security official tried to allay fears at a Virginia smart card conference, saying, “What we’re putting in the card is possibly nothing but a 96-digit serial number that is random and would do nothing but point back to a database…someone would have to hack into our database at the same time.”

Another RFID supporter echoes those sentiments. The kind of chips privacy groups fear need to be much larger to hold batteries, and would be about the size of a chalkboard eraser, says Nicholas Chavez, president of RFID Limited, in a rebuttal he wrote to the Spychips book.

Not only will these large chips be “both extremely uncomfortable and decidedly unfashionable as undergarment accessories,” Chavez wrote, they would be too expensive to deploy in mass amounts. What makes this kind of chip especially impractical is that to remain effective as a spychip, its batteries would have to be changed or recharged regularly, which defeats the secrecy of spying.

To further quell privacy unrest, IBM recently announced the unveiling of its so-called Clipped Tag, an RFID chip with a notched antenna that consumers can tear off like the end of a ketchup packet. This reduces the readable range of the device from 30 feet to less than two inches, ruling out the possibility of security attacks from a distance, according to IBM.

Another challenge for RFID adopters is the amateur hackery designed to exploit the technology’s weaknesses. Earlier this year, two German students known fondly as “MiniMe” and “Mahajivana” turned a disposable camera into a gadget that zapped RFID tags. Using simple rewiring and soldering, the camera emitted electromagnetic pulses that overloaded circuitry and destroyed the tags.

These experiments expose potential holes that can now be addressed, admits McAllister. “RFID is not as far along as other technologies,” he says, “and these are the things that ultimately give corporations the opportunity to go in and fix problems.”

In the industry magazine RFID Journal, editor Mark Roberti says these overhyped stories leave the public confused and afraid of the new technology. “Journalists love to scare people because it encourages them to read articles,” Roberti writes. “They love to use phrases such as ‘security expert’ or ‘encryption algorithm’ and ‘researchers at (fill in the blank) university’ to give credibility to claims. They tend, however, to leave out the context that makes the story less frightening, which means end users could make bad business decisions based on misinformation.”

Despite early challenges with RFID technology, Wal-Mart expects another 300 suppliers to be using RFID by the end of 2007, for a total of 600. It is also expected to add sensor tags to perishable items such as fruit, in order to ensure a crate of bananas, for example, is sold when it’s ripe.

With the great promises of RFID, the Gap, Walgreens, Gillette and others were quick to jump on the bandwagon, terrified they would be lost in the dust of Wal-Mart’s aggressive move. Target, Lowe’s and Home Depot have also demanded their suppliers arrange similar RFID retrofits. Now, every retailer looking to survive in its competitive field is moving to RFID.

A side-effect of this RFID compliance is the growing concern that retailers will know what you buy and from where. Tracking your shopping habits may help them “serve you better,” to use retail lingo, but it also worries those who prefer to keep their spending sprees to themselves.

If a tagged item is paid for by credit card or loyalty card such as Air Miles, it would be possible to connect the unique identity of that item to the purchaser. More futuristic outlooks envision consumers wearing tagged items, such as shirts or watches, that will trigger LCD billboards to display custom commercials for that RFID wearer.

“It’s not about RFID as much as it is about the use of personal information,” says McAllister. “People already give sensitive data like credit card information in some way.”

The anti-RFID camp is fighting an uphill battle, as RFID supporters are growing in number every week. The result: Competition lowers cost, allowing RFID to evolve into the next-generation tracking chip.

RFID Limited’s Chavez, in writing his rebuttal to the Spychips book, had good reason to believe RFID naysayers won’t topple this new tech trend. He carefully examined a copy of Spychips, and sandwiched between the pages of his copy was the object of the authors’ alarm: ironically, a paper-thin RFID tag inserted by the Barnes & Noble bookstore chain to prevent shoplifting.

“Certainly, if this tag wasn’t hidden, someone could walk out with the book and the authors of Spychips would have lost their royalty payment,” he noted dryly. “On a larger scale, if everyone stole the book, Ms. Albrecht and Ms. McIntyre would receive no monies at all.”

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