The days of dominance of that most universal of identifiers — the bar code — may be coming to an end. And, like the dinosaurs before it, the ubiquitous code may be replaced by something smaller, more efficient and altogether more cunning.
The bar code may be toppled due to plans by Wal-Mart, the world's biggest retailer, which has the financial sway to force its suppliers to do just about anything it wants. Wal-Mart is pilot testing Radio Frequency Identification tags (RFIDs) at its Sanger, Texas, distribution centre and a number of retail outlets across the United States.
RFID tags are tiny chips that, when hit with a specific radio signal, can broadcast information stored on them. That information can be anything from a basic product number, to reams and reams of detail about the product itself, what it contains and how it was made.
"There's a little antenna in each case [of products], and a reader — it looks like a big metal detector — at the door of every warehouse and retail loading dock," said Kevin Groh, corporate communications manager of Wal-Mart Canada. "It can tell us exactly where any case of merchandise is at any time."
In the initial implementation, RFID readers installed in loading dock doors will show Wal-Mart the exact time and amount of merchandise of each shipment as it enters and exits the distribution centre. Although the project is largely aimed at the case and pallet level, some items — especially electronics — will have individual tags. Such items will be marked with a special symbol indicating its RFID tag to potential buyers.
RFID makes sense for retailers. Not only does it give an accurate on-demand inventory, it can also help locate items quickly in neighbouring stores.
"Suppose somebody wants a product and his Supercentre is sold out," Mr. Groh said. "We can, quickly and accurately, find it and get it to them."
But that tracking ability is also the problem.
If Wal-Mart can trace a package when it's in a warehouse or on its shelves, what's the prevent it from tracking it once it's in your home or office? Not to sound Orwellian, but the potential for surreptitious data-gathering is there on a scale not seen before in society.
"The surveillance potential for RFIDs is huge," said Scott Blackmer, a lawyer from the International Security, Trust and Privacy Alliance. Published reports that Wal-Mart and other companies, including chemical giant Procter & Gamble, have developed RFIDs with help from the U.S. Department of Homeland Security, have raised concerns that governments or other agencies will be able to track individuals with RFIDs in their clothes or other personal items. RFID evidence from toll booths already using the technology to speed up collection from regular commuters is regularly subpoenaed in the U.S. to determine where an individual's car has been, and when.
Critics of RFID bring up potential privacy-invading scenarios such as a van with a super-sensitive RFID sensor driving through a community and cataloguing the products present in every home. That type of marketing information would be pure gold to many companies.
"We can certainly understand and appreciate consumer concerns about privacy," said Linda Dillman, chief information officer for Wal-Mart's head office in Bentonville, Arkansas. "That is why we want our consumers to know that RFID tags will not contain or collect any additional data about consumers."
That promise is repeated for Canada as well. "There'll be no tracking beyond the shelf; the tags will be non-functional once they leave the store," said Mr. Groh. "We will be totally compliant with all privacy laws."
Besides streamlining inventory, RFIDs also help retailers by making counterfeiting and theft much more difficult. While bar codes are easy to forge and there's no efficient way to keep a real-time inventory with them, RFIDs are unique to the pallet, case or even item, rather than the product, making them all but impossible to fake. They can also be tracked as they leave a warehouse or retailer or with a handheld reader. According to Procter & Gamble's chief information officer Steve David, counterfeiting costs the world's retail industry $500-billion (U.S.) and employee theft accounts for another $50-billion annually.
The bad side from the retailer's perspective is that radio frequencies can be easily interfered with if thieves have the right equipment. Wal-Mart is aware of this.
"The RFIDs have been undergoing extensive testing," said Mr. Groh. "And they've looked at all kinds of security issues."
So far, the tags are being used on just 21 products from six suppliers in one distribution centre, but RFIDs are clearly part of the near future from Wal-Mart's point of view. And with suppliers being told to support the technology, it means other retailers will likely be paying close attention.
"We asked our 100 biggest suppliers to be RFID-ready by January 2005; and, already, 37 are," said Mr. Groh. "Of course, the cutting-edge stuff is happening south of the border, but we're keeping a close eye on things up here [in Canada]."
