Radio Frequency Identification Devices (RFID) and Electronic Product Codes (EPC) are the wave of the retail future. RFID and EPC are relatively new developments to retail, but the technology itself has been used in other areas for years. They are revolutionizing not only the present but also the future possibilities of the retail market. Although RFID and EPC are going to drastically change the way retailers will do business there are some opponents to this technology. No matter where one stands on the issue of RFID and EPC they are coming and the race to adopt this technology is on.
RFID & EPC Defined
So, exactly what are RFID and EPC? According to the Aim Global website in a recent article: “A basic RFID [Radio Frequency Identification Device] system consists of three parts: an antenna or coil, a transceiver (with decoder), and a transponder (RF tag) electronically programmed with unique information.” (2004). The antenna on the RFID device sends out a radio signal and controls the system’s communication and data retrieval (2004). When a RFID device goes through an electromagnetic zone it detects an activation signal which is decoded by a reader that sends the information to the host computer for processing (2004). Clayton Boyce of the journal of commerce explains that when considering RFID in retail it is nearly synonymous with EPC (Electronic Product Code) (2003). EPC’s hold the RFID chip and will eventually replace the old style UPC (Universal Product Code) that are currently on merchandise. ( Brewin, and Jaikumar, 2004).
The History and Current use of RFID
For years RFID devices have been used in many different areas (Clayton Boyce, 2003). One such area has been as an anti theft device. Most consumers have purchased products that have held RFID devices. Stores at the local malls have been using hard plastic tag anti theft devices on merchandise for at least ten years. If a customer is in the local Gap or almost any other clothing retailer, he or she knows it is not a good idea to walk to close to the entrance way. Many patrons have suffered the embarrassment of walking around a clothing rack near the front door with items to be purchased and hearing an ear splitting sound. This was caused by the RFID device on the clothing coming into contact with the electromagnetic field at the door (aim global, 2004). Other past and present uses for RFID include: automatic toll booth passes, animal tracking chips, and company access badges.
The Future of RFID is closing in.
The future of RFID technologies is expanding exponentially, and the drive for implementation is fast paced and lucrative. The retailer leading the way to converting RFID technology to everyday use is Wal-Mart. It is recorded in CIO Insight Magazine that on June 11, 2003, Linda Dillman Wal-Mart Stores Inc.’s CIO, announced that the top 100 suppliers for Wal-Mart would be required to be equipped with RFID tags (2003). Wal-Mart hopes that it will be able to have deployed nearly one billion RFID tags at the pallet and crate level by 2005 (Brewin, and Jaikumar , 2004). The use of RFID tags will help to improve its inventory management supply chain. When asked about how RFID tags could affect the retail industry Conner Riley (Pseudo Name) an Advanced Programmer for a leading retailer stated, ” [RFID will] help to alleviate the frustrations and aggravations of human error. With RFID replacing manual scanning, counting, and validation the percentages of over or understating merchandise received or shipped will be brought to a minimal.” In other words, the stores will know what they have, what they need and be able to keep a good supply of the products that are selling at a quicker pace than others. For years managers have had to manually count shipments and keep a long paper trail of reports concerning stock. RFID technology will change this and will most likely bring the paper work to a minimal if not to a complete end. This will save time and money for the stores.
RFID technology is going to save Wal-Mart billions of dollars. The advancements in RFID technology should lower the costs of products through out the store when it has been fully implemented, and this will pass savings on to the customer. In Mark Roberti’s report “RFID- Wal-Mart’s Network Effect,” he outlines the some of the savings that RFID implementation will cause.
“The ability to know where every item is in the supply chain and store could save retailers billions of dollars a year. Here’s an estimate of what Wal-Mart might save annually when RFID technology is deployed throughout its operations.
$6.7 Billion: Eliminating the need to have people scan bar codes on pallets and cases in the supply chain and on items in the store reduces labor costs by 15 percent.
$600 Million: Even with the most efficient supply chain on Earth, Wal-Mart suffers out-of-stocks. The company boosts its bottom line by using smart shelves to monitor on-shelf availability.
$575 Million: Knowing where products are at all times makes it harder for employees to steal goods from warehouses. Scanning products automatically reduces administrative error and vendor fraud.
$300 Million: Better tracking of the more than 1 billion pallets and cases that move through its distribution centers each year produces significant savings.
$180 Million: Improved visibility of what products are in the supply chain-in its own distribution centers and its suppliers’ warehouses-lets Wal-Mart reduce its inventory and the annual cost of carrying that inventory.
$8.35 Billion: Total pre-tax saving is higher than the total revenue of more than half the companies on the fortune 500.
It is easy to see that RFID will bring great savings to Wal-mart once it is implemented.
Wal-Mart stores believe in RFID technology, and for the last two and a half years they have worked with Auto-ID Center to develop and test RFID technology (CIO INSIGHT,2003). Wal;-mart’s use of RFID technology provides a sense of legitimacy to this technology, and it is causing a giant push of RFID use into the main stream (Brewin and Jaikumar, 2004 ). Wal-mart usually leads the way for the other retails stores, because Wal-mart is insisting that their top 100 suppliers comply with the RFID technology by 2005. Other retail chains are easily adapting to the RFID changes in progress.
There is no doubt that the future of RFID is going to change the way businesses operate from the inside out. It will be a key that will open the door to horizons never before thought possible by retailers and consumers alike. When asked about the importance of RFID technology Conner Riley said that he believes:
“RFID is the technology of the future and it will eventually be the driving force not only for retailers or suppliers but also for the consumer. It will be that next step to allow merchandise to become cheaper in price rather than more expensive. With this technology there will be a bigger shift from blue collar workers to white collar workers. Since many of the menial tasks of counting merchandise and freight will be done through technology.”
It is easy to see that RFID technology is going to revolutionize the way merchants conduct business and the workforce in general.
What are the Future Goals of RFID?
The question is, what is the ultimate goal of the RFID technology? Can we expect to live in a world once only imagined in science fiction? The answer to that is possibly. For a few moments imagine a time where a consumer can go to their refrigerator and without even opening the door know what they are out of and what they need. The consumer looks at the small flat panel screen on the front of the refrigerator door and knows exactly how many eggs they have, or if they are down to their last drop of milk. Is this likely? Well, the future is anyone’s guess. Conner seems to think that the future has many possibilities.
“While currently it [RFID] is being tested and planned to only be used on pallet and case merchandise the possible future outlook of it would be the idea of RFID chips for each item that could be read in every household to allow people to know when they need to reorder that merchandise. Thus allowing merchants to know the quantity they could possibly need for the product.”
This thought has many consumer watch groups up and arms and spreads panic of a “Big Brother” scenario. Some consumer privacy activists worry that RFID technology will allow consumers to be tracked through their daily lives (McCullah, 2003). Consumer groups are also concerned that retailers will use the RFID devices to track consumers’ daily shopping habits. Labor groups argue that the RFID must be used in an open manner. Fear is that consumer confidence will be shattered with the use of RFID devices (The Grocer, 2004).
These activists say that the problem is not the chip itself, but if the retailer will turn the chip off before it leaves the store. Wal-Mart has experimented with RFID technologies in partnership with Gillette in an in store trial (Covert, 2004). James Covert of the Wall Street Journal stated:
“The experiment was cancelled, though, before it even started. Credit for the abrupt about face was soon taken by privacy activists, who had waged a campaign in the local media against the tracking technology because of fears that it could someday allow marketers, the government of insurers to compile details about individuals’ shopping habits, or even allow people’s movements to be tracked. A few days later, Wal-Mart protested that it simply had elected to focus on a far bigger more immediate need: to upgrade its massive warehouse operations with RFID tagging” (2004).
Technology often brings change and with change comes the possibilities of misuse. At least one person who works in the retail industry in the Information Systems Department understands the fears of some activists. Conner Riley gave this answer to the question of consumer fears.
“While I can see the advantage of this [technology] for merchants and households I am also sympathetic to concerns that people express towards this technology being misused.” The consumer’s fears may have a foundation in a possible reality but for now that kind of technology is a long way off, if ever.
What Importance Is RFID to Consumers?
RFID is an exciting new technology and the very thought of it brings many mixed emotions. RFIDs will lower the in house costs of products for retail stores, and in turn it will lower prices all around for consumers. RFID technology when fully implemented will be an exciting technology that revolutionizes the world. In a few short years all major retailers will be using the RFID tags, and the Universal Product Code will be replaced with the Electronic Product Code. While some proclaim RFID is going to be a cost efficient way to run business and others say that it is a technology being created for government spying. Radio frequency identification devices are going to be here soon, and they will make the jobs easier for at least one retail company.
Brewin, Bob and Vijayan, Jaikumar, “Wal-Mart backs RFID technology will require
suppliers to use ‘smart’ tags by 2005,” Computerworld, 16 June 2005, Retrieved March1,2004 from the World Wide Web: http://www.computerworld.com/softwaretopics/erp/story/0%2c10801%2c82155%2c00.html
Boyce, Clayton, Last Chance [Electronic version], Journal of Commerce, Inc., Traffic
World (2003): 04
Covert, James, Technology (A Special Report): Business Solutions—Down, but Far
From Out: RFID technology is off to a disappointing start; But retailers are convinced its future is bright as ever [Electronic Version], The Wall Street Journal, 12 January 2004.
McCullah, Declan, “RFID tags: Big Brother in small packages,” News.com, 13 January
2003, Retrieved March 1, 2004 from the World Wide Web: http://www.news.com.com/2010-1069-980325.html
Public Confidence Risk [Electronic version], The Grocer, February 07, 2004
Riley, Conner, (2004) Interview: RFID Technology. Bentonville, Arkansas.
Roberti, Mark, “Analysis: RFID-Wal-Mart’s Network Effect,” CIO Insight, 15 September
2003, Retrieved March 1, 2004 from the World Wide Web: http://www.cioinsight.com/article2/0%2c3959%2c1269254%200.asp
“What is Radio Frequency Identification (RFID)?” Aim Global, Retrieved March 1, 2004
from the World Wide Web: http://www.aimglobal.org/technologies/rfid/what_is_rfid.asp