|
|
 THE STAT 26Percentage of wireless customers who use their cell phones to take picturesMore Vitals
| |
AUGUST 31, 2004
Inching Toward the RFID Revolution The promise of smart tags is progressing slowly but somewhat surely as the industry grapples with a host of remaining roadblocks Somewhere in Neuss-Norf, Germany, a customer is approaching NCR's new FastLane self-checkout machine. Using radio-frequency IDs, or smart tags, on every item, the customer's groceries are being scanned on-the-spot and tallied up -- no need to take them out of the cart. At the same time, the RFID tags are being automatically disabled so security sensors will know the customer isn't shoplifting. The store, called Metro Group's RFID Innovation Center, is a mock-up of a retail environment that displays the bleeding edge of RFID for suppliers. RFID systems, the successor to bar codes, use wireless technology within tiny chips -- or tags -- to track items as they move from the factory floor to store shelf to checkout. The buzz around RFID has been steadily building over the past two years, promising labor savings and improved inventory management. If the scene at the Metro store sounds more like science fiction than reality that's because -- at least for now -- it mostly is (see BW, 4/26/04, "Test-Flying Tomorrow's Supermarket"). Metro is just one of a handful of large retailers and purchasers, including Wal-Mart (WMT ), Tesco (TSCDY ), and the Defense Dept., that have mandated that their suppliers begin using the new technology during the next few months. That means RFID is still in its infancy with many technology, cost, and privacy hurdles yet to be jumped. BACKROOM GENESIS. In the U.S., Wal-Mart has handed down the biggest edict. By Jan. 1, 2005, the behemoth's top 100 suppliers must begin RFID tagging on certain cases and pallets going to three Texas warehouses. Most vendors, consultants, and analysts say those mandates will be met. When that begins, the predicted revolution in so-called smart tags will begin. RFID spending is set to explode in the next few years, growing from $1 billion this year to $4.6 billion in 2007, estimates Wall Street research firm Robert W. Baird & Co. Almost all of this will be in backroom warehouses and distribution centers -- not on grocery shelves or mall store racks. Consultants and analysts have been spinning tales about the virtues of RFID, such as digitally encoding receipts for paperless returns and warranty claims. But most of these sophisticated uses require tagging on the item level. That's happening in a few pilot tests of high-price or high-margin goods. But among North American manufacturers that expect to start using RFID in 2005, only 3% will do so at this level, according to Accenture (ACN ). That means instead of putting tags on individual Coke cans, they'll slap them only on pallets of Cokes. Tagging of individual items won't be prevalent for more than eight years, estimates Ellen Boerger, director of RFID at NCR (NCR ) in Dayton, Ohio. WHICH COMES FIRST? Consultants and analysts expect tags to replace bar codes one day, but substantial roadblocks are in the way. The most obvious is cost. Tags still hover around 25 cents each, and that's if you're buying in high volume. If not, they can cost 75 cents. That's down from more than $1 a year ago but still too expensive for most consumer goods. The goal is 5 cents, and chipmakers say they can get there, but it'll take scale. It's a bit of the chicken and the egg, says Stavro E. Prodromou, chief executive of Alien Technology in Morgan Hill, Calif., a venture-backed chipmaker. The more customers buy, the faster cost will fall, but mass adoption won't happen in some areas until the price falls. That's why the mandates have been important in pushing RFID out of the labs and into real use. But in June, chipmaker Intermec Technologies, one of the top three RFID tag-makers, further complicated matters. It filed a suit in U.S. federal court against a competitor, privately held Matrics, alleging patent infringement. Matrics has since been acquired by Symbol Technologies (SBL ) in Holtsville, N.Y., which declined to comment for this story. "MINOR ROYALTY"? No one knows how the lawsuit will play out, but it flies in the face of the Electronic Product Code Global group's plan to set a standard -- and hence jump-start adoption -- by companies giving up claims to licenses and royalties. The fear is that royalty payments will keep tag costs high, stalling widespread adoption. Intermec, which has been investing in RFID since its earliest incarnations in 1966, says it's willing to share its entire portfolio of 135 patents with competitors -- just not for free. "You can use the cost argument for any kind of technology, it doesn't give them the right to take someone else's intellectual property," says Intermec President Tom Miller. "Some sort of minor royalty is not going to hold the market back." Besides, he says, costs will fall naturally as technology gets better and volume increases. He's not sure RFID tags have to get to five cents per chip to be an important, money-saving technology.
BW MALL
SPONSORED LINKS
Buy a link now! | | |
 Copyright 2004, by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Notice |
Printer-Friendly Version