The Fast Track

May 20, 2004
By Patrick Giblin
Bee Staff Writer

Twenty years ago bar codes were introduced to retailers as a better way of tracking sales and inventory.

Now it appears an electronic version of the bar code will make it even easier to track inventory and speed up checkout lines.

These radio frequency identifiers, also known as RFIDs or smart tags, would be attached to individual packages. And instead of having a clerk swipe an item across a reader at the register, every item in a shopping cart would be scanned and the chips read in a fraction of a second.

There's talk of having refrigerators and kitchen cabinets be compatible with the chips. Those devices will be able to notify a person when milk is about to go bad or when they are out of an item.

But, critics said, the devices could erode privacy. Some fear that manufacturers could track their products after they have been purchased and taken into homes. Others believe the federal government will put RFIDs into passports and driver's licenses to track people's movements.

Like it or not, RFIDs are going to change the world, critics and supporters of the technology said.

"Secretly I'm smiling and saying I can't wait for it," said Tom Eakin, owner of MTC, a Modesto-based retail supplier. "It's like when they invented gun powder or the first combustible engine."

The interest in RFIDs grew last year after Wal-Mart officials announced that it will require its top 100 suppliers to have all their items tagged by January 2005. They said the tags will enable employees to inventory an entire shelf in under a second.

After the Wal-Mart announcement, Target and Albertson's said they too would require the RFIDs.

MTC has been studying RFIDs since then, Eakin said.

"The amount of information they are looking to track is amazing, said Tom Martineau, director of technology at MTC.

"Right now, we have pallets of mixed products that's 4 feet by 4 feet by 8 feet and someone has to break down that whole pallet to take inventory," Martineau said. "With the new chips, once you pass it through the reader, the computer will know every product that's on that pallet."

Potential savings are huge

The chips will help prevent spoilage, reduce losses in shipping and make the system more accountable, he said.

Officials with Pacific Southwest Container are looking at the new chips for the same reasons.

"It's an electronic bar code and there is an awful lot of information that can be managed on it, including what temperature

cycles a product has been through, how old it is and where it was shipped to," said Darin Jones, executive vice president of operations at Pacific Southwest Container in Modesto.

Gallo officials also are studying the electronic devices, said Ernie Chachere, vice president of Gallo's supply chain. He said the company would be testing the chips in the future.

The future is coming sooner than later, Jones said. History supports his belief; in 1984, Wal-Mart required its suppliers to have bar codes on all products. By 1987, bar codes were used in just about every retail store in America.

The chips -- they range from half the size of a penny to three quarters stacked together -- have been around for nearly two decades, but the older models had limited range and held little information.

Major improvements

The chips have substantially improved in the past few years. The cost of the chips has dropped from $2 each to 20 cents. The broadcast range has grown from five inches to nearly 100 feet. The information on the chips has grown from 64 bytes to 128 kilobytes. That's enough space to store a two-page single-spaced Word document.

The devices already are in use.

Commuters who subscribe to "Fast Pass" toll booth systems have used them for years. As a car passes through a booth, the chip is read and the driver's account is billed.

Pet owners can get the chips implanted in their dogs and cats. Many animal shelters have the ability to read a number on a pet's chip and use that to track down the owner.

About 5 percent of the nation's cattle also are tagged with the RFIDs, said Tim Niedecken, director of information products at Emerge Interactive, an RFID manufacturer in Florida.

There's recent legislation requiring all cattle to get the chips, he said.

"With the Washington (mad cow disease) issue, it took months to track down all of the cohorts and figure out where the cow came from," Niedecken said. "If we had had an electronic ID system tied in to a database, we would have been able to do that same tracing in a matter of hours."

Once the devices are put on off-the-shelf consumer goods, there's a chance to collect the information for better marketing techniques, Eakin said.

Retailers can track sales figures and trends by the hour, instead of by the week or month as is currently done.

"With RFID, these people will be able to air drop their promotionals in a blink of an eye by changing prices or offering three for one deals through the chip," Eakin said. "They will get more feedback on what consumers are doing, geographics income levels and what times the product is purchased in a blink of an eye.

"And if a product is selling well in one store but not in another, they will be able to offer three-for-one deals or other promotions just in the store that isn't doing well to see if it works," Eakin said.

Other ideas include using RFID technology to trigger certain electronic events. For example, an RFID on a key chain could activate house lights and air conditioners as a car pulls into a driveway.

"You can even incorporate a series of RFID devices to work together to see if grandpa took his pills," Jones said. "But then it starts to get really scary because it's that whole Big Brother aspect."

Privacy concerns

Some believe the chips could reveal too much about personal lives.

If a refrigerator in the future can read the chips and notify a homeowner when milk has run out, will it share that information with others, asked Barry Steinhardt, director of technology policy program for the American Civil Liberties Union.

"There is a question of where and how an item can be tracked, what notice consumers will receive if their information is collected, and if they can have the chip taken out of the stuff they buy," Steinhardt said. "These are questions that haven't been answered because there is no law addressing the issues."

Even more alarming are government discussions to use RFIDs to track the movement of people, he said.

"The government has proposed putting these in passports and it won't be very long before they are put in driver's licenses," he said. "When that happens, the capacity to track us will be extraordinary."

Legislation was introduced in Congress this year to limit the way the information can be used. A debate has erupted that some of the proposed laws hamstring many of the benefits of RFIDs, Jones said.

Despite questions about privacy issues, Wal-Mart is charging ahead with its plan. The first RFID-tagged items showed up for testing last month at Wal-Mart warehouses in Bentonville, Ark.

"Either way, this is going to happen," Jones said.

Bee staff writer Patrick Giblin can be reached at 578-2347 or <mailto:pgiblin@modbee.com>pgiblin@modbee.com.

The Associated Press contributed to this report.

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