- NEW YORK -- While analysts
say radio-frequency identification tags don't work well enough to replace
UPC codes, and costs are still prohibitively expensive, some technology
companies, retailers and government entities remain determined to infuse
RFID into daily consumer life.
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- "We are at an incredibly early stage of this technology
and what it is actually capable of doing. All the promise of real-time
supply chain visibility is just that. It's promise," said IDC analyst
Christopher Boone, according to a Reuters report.
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- But low reliability and high cost aren't stopping Wal-Mart,
the world's largest and most influential retailer, and the Department of
Defense from pushing their hundreds of suppliers to use the technology,
suggesting the tags could see wider adoption in the next few years.
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- With the ability to track everything from cases of razors
to a car passing through a toll booth, analysts say the electronic tags
are to this decade what the Internet was to the 1990s -- a promise of radical
change in the way business is done.
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- "Everyone has a hunch there's something big here,
but no one can articulate it," said Jeff Woods, a Gartner analyst.
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- The tags use low radio frequencies to transmit data about
items or locations, enabling companies to better manage inventories, replenish
supplies and cut costs. Tagging items could create a more efficient way
of doing business, similar to the way Dell used the Internet to change
the personal computer industry.
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- Companies lining up for a piece of the action include
venture capital start-ups that make radio frequency identification tags,
such as Alien Technology, and technology services giants such as IBM, who
want to show corporations how to use them.
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- For tags to be more widely used, analysts say the price
must drop to under 5 cents each, which would happen only with higher volume.
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- Amid all the hype, companies are looking at real deadlines.
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- Wal-Mart and the Department of Defense have set January
2005 as the date for use of RFID technology by their suppliers. Costco
Wholesale, the largest U.S. warehouse club operator, has said it is looking
at RFID as well.
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- In fact, Wal-Mart's top 100 suppliers will meet on Nov.
4 and 5 in its hometown of Bentonville, Arkansas, to discuss the specifics
of implementing RFID technology.
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- But the giant retailer's suppliers won't be able to meet
a demand for all of their products to have RFID tags by 2005, analysts
say, and some expect the company to soften its message.
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- "We suspect that, for Wal-Mart, the 2005 deadline
is a call to action and not a mandate, and they will have a handful of
suppliers they will pilot this with in 2004, to be ready in 2005,"
said Sean Campbell, a partner in IBM's business consulting services group.
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- IBM competes with consulting companies such as Accenture
to advise companies on using RFID. IBM could also benefit as it sells the
software that's needed to make use of the data, as could other software
companies like SAP, Siebel and Oracle.
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- RFID tags fall far below the 99 percent reliability rate
of UPC tags because of the difficulty of transmitting clean radio signals.
At 20 cents to 30 cents apiece, plus the cost of altering packaging lines
to accommodate them, the tags are also too expensive for most companies
to use.
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- Campbell said that also hindering Wal-Mart's deadline
is the fact there are not enough RFID chips out there right now.
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- Companies that make the RFID tags or part of them include
Alien Technology, Philips Semiconductors, Texas Instruments, Zebra Technologies
and Matrics.
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- The technology is so far from being ready, analysts say,
that some companies may not last long enough to reap the benefits, as was
the case when UPC codes were introduced in the 1970s.
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- "Radio frequency has some limitations. It cannot
be read through liquid ... or through metal. If you have nylon conveyor
belts it causes RF noise. We don't know what happens when you shrink wrap
this stuff," said Kara Romanow, a senior analyst at AMR Research.
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- "So, when you look at companies like Matrics and
Alien that are providing this technology today, I don't know if they will
be able to survive long enough for this to pick up," she said.
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- There are also privacy issues. Civil liberties advocates
fear that, under the guise of protecting national security, RFID will be
used to invade peoples' privacy by monitoring their activities.
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- One storm of controversy developed when Tesco, a grocery
retailer in Cambridge, England, reportedly photographed customers removing
Gillette razors from the shelves.
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- Tesco was not immediately available for comment.
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- Efforts to use the technology for inventory management
in places like libraries and supermarkets have met resistance from groups
who are concerned the tags will link consumers with purchases to develop
customer profiles.
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- - Reuters newswire service contributed to this report
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