Wal-Mart's growth has been built on its supply-chain management innovations, which has made it one of the most efficient retail stores in existence. At $253bn (£137bn) in sales for 2003, it is the largest retailer in the world, and that gives it the ability to put a lot of pressure on suppliers to cut prices. Not surprisingly, Wal-Mart has some of the lowest prices of any retailer, which benefits consumers, but forces Wal-Mart suppliers to be extremely efficient if they are to avoid losing money.
Its latest supply-chain innovation, however, is a move to radiofrequency ID (RFID) tags. At present, Wal-Mart's mandate applies only to its top 100 suppliers, with a deadline set for 2005. Furthermore, it is not demanding this on a per-product basis (just for cases of product and pallets), in a nod towards the costs it must realise it is imposing. Currently, RFID chips cost about 20 cents (11 pence) per tag (registration for that link is required, but it's free), which doesn't include the cost of the antenna and packaging for the chip. Many analysts believe, however, that the growth in the size of the market for RFID technology, through pressure from Wal-Mart and the US Defense Department (which also requires such technology of its suppliers), will drive the price to 5 cents very quickly.
At that price, Wal-Mart is likely to require RFID tagging from all its suppliers, and may consider expanding the requirement to individual products. At that point, the benefits of RFID tagging will move beyond the supply chain into areas that directly affect consumers. Some think that there are privacy issues involved in such a move, as external entities could determine your buying habits with little more than an RFID reader. In my opinion, however, the productivity benefits of widespread RFID usage will outweigh any such risks, provided proper consideration is given to where, and how, RFID technology is used.
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Being a fan of technology, I'm always most excited by what that technology makes possible. RFID offers some serious opportunities for hardware companies and software developers who recognise the revolution that it represents.
First, consider what per-product RFID does to the checkout queue. Instead of having to wait for a shop assistant to swipe each product across a barcode reader by hand, you would simply roll your cart through a set of RFID readers. Your total would appear on the display almost immediately. If you pay by credit card, your interaction with a human being would be minimal, as at best the checkout person would be responsible for comparing your signature to the one on the back of your card. The entire process could take under a minute!
Another interesting area of innovation would be in the home. I've heard people talk about Internet connections for a refrigerator, but had a hard time imagining why that would be useful (though you would finally be able to confirm whether the light actually went out in the fridge after you closed it). RFID technology makes such a thing very useful.
Imagine running by a supermarket on the way home from work and not having any idea what you needed to buy (heck, that's the way I always shop). You can pull out your handheld or one of the new smartphones and ask your refrigerator exactly what it contains. It will know, assuming every product in the fridge has an RFID tag on it. Something similar might exist for the pantry, or even in the bathroom and kitchen cabinets, provided an RFID reader is placed near enough to all these places.
Such an arrangement enables a level of inventory management in the home which simply does not exist at present. I can think of a number of interesting software applications that might find a market in such an environment, but I'm not going to tell you what they are (ha ha).
I am not overly concerned about privacy when we're talking about RFID tagging of products. RFID tagging merely declares what the product is in a better way than was possible with barcodes. Stores already can link a particular customer to the products they buy using barcoding. RFID tags, from a consumer standpoint, merely streamline the process whereby stores process their customers.
Theoretically, someone could stand around outside a store with an RFID reader detecting everything you have in your shopping cart. However, unless they ask you who you are, they'll have no way to link you to the products you buy.
Privacy issues only become a problem when RFID tags are used to broadcast personally identifying information, such as credit-card details. I don't think it's a good idea for credit cards to be capable of any sort of broadcast, given that the capability opens a Pandora's box of security issues. There are few things as sensitive as your credit card information, making RFID tags in credit cards a potentially large lump of sugar for the cockroaches to come after. Even if someone claimed bulletproof security for this information, it would be a target of computer crackers, and that simply isn't worth the risk.
Other areas I want to keep clear of RFID technology are my driver's licence or identity documents (such as a passport). Companies would have a large incentive to send people to stand outside of stores with RFID readers if everyone was walking around with RFID-enabled driver's licences that enabled them to link products to a particular person.
One area of privacy that would be hard to resolve is the ability to determine from outside a house what a person owns (at least, the things which have RFID tags). Imagine a gym that drives around the neighbourhood detecting those families that have a few too many Twinkies in the pantry in order to send a salesperson to their door. I don't have a solution to this, short of the development of sheet rock that blocks radio signals (the housing craze of the future?). I don't think, however, that this mild loss of privacy outweighs the benefits generated from RFID technology.
People might want to ensure certain products are not identifiable in any way. For instance, Mr Tilburn might not want someone to detect that copy of "Debbie does Des Moines" that he keeps under the dresser so that Mrs Tilburn won't find it. In such cases, there are two options. One is a device that scrambles the signal so that it is no longer readable. The device to do such a thing could be cheap and available at local retail stores. Another is the decision simply not to use RFID tags on sensitive products. I would imagine the former option would be more appealing to retailers, as in a completely RFID world, it would be cheaper to use RFID in the supply chain than to fall back on older technology just to avoid creating an embarrassing moment for customers.
RFID is exciting technology that will enable new software and hardware opportunities. It need not become a serious privacy issue, however, provided people are intelligent about the places, and the manner, in which RFID technology is applied.
John Carroll is a software engineer now living in Geneva, Switzerland. He specialises in the design and development of distributed systems using Java and .Net. He is also the founder of Turtleneck Software.