Replacing Bar Codes: Chip-enabled tags eliminate checkout-line headaches

A provocative new technology is driving widespread changes in the consumer packaged goods industry. Known as radio-frequency identification, or RFID, the technology uses small, wireless chips to replace the bar codes on the packaging that suppliers and retailers use to track consumer products.

The new technology is more expensive, but proponents contend that automatic wireless readers are more efficient than a stock employee wielding a laser scanner. With RFID readers transmitting directly into computerized databases, details about specific shipments and products become instantly available and ?synchronized? for users throughout the supply chain. In this way, advocates say, RFID technology can track shipments and individual products more effectively, reduce pilferage, simplify product recalls and eliminate a variety of shipping and inventory headaches.

The long-term goal is to replace the bar code on each consumer product on store shelves. Within the next decade or so, advocates say, a shopper could push a cart full of goods through a checkout scanner that would automatically read the RFID tag on each item, add up the total and present the bill. Civil liberties groups warn, however, that the new technology also could lead to unprecedented surveillance of consumers. After a shopper leaves a store, for example, the RFID tag on each purchased item would presumably remain active and scannable.

Wal-Mart takes the lead

Wal-Mart Stores told its 100 biggest suppliers last June to implement the use of RFID tags in their case and pallet shipments by this January. Target, Albertsons, Britain?s Tesco and Germany?s Metro Group have followed Wal-Mart?s lead by imposing similar RFID requirements, and costs, on their top suppliers. Even the U.S. Department of Defense announced plans in October to require its 43,000 suppliers to use RFID tagging.

Richard Cantwell, who has been overseeing the adoption of RFIDs at Gillette, the Boston consumer products giant, calls Gillette?s version of the technology an ?electronic product code, or EPC. ?We?re designing the value chain of the future, using EPC so we can track our products from the manufacturer through packaging and shipping, distribution centers and onto the store shelf,? he says. He argues that retail shelves left empty by lax restocking practices or shoplifting represent a lost opportunity for sales he puts at $70 billion a year. With RFID tags embedded in each product, a retailer will know when a shelf is empty, a perishable item has expired or if it?s being shoplifted.

Privacy concerns

Katherine Albrecht of Consumers Against Supermarket Privacy Invasion and Numbering, has raised privacy and civil liberties concerns over the ability of companies and governments to compile computerized databases that can link every purchase to a consumer and even track them home. RFID chips can be read from a distance, right through your clothes, wallet, backpack or purse by anyone with the right scanning device, Albrecht says. She worries that RFIDs could be secretly embedded in credit cards or sewn into clothing and used to observe people?s movements without their knowledge or consent.

Still, there also could be important benefits by using RFID in certain markets, such as prescription drugs, says Stephen Leng of CVS Pharmacy, a Rhode Island-based chain that operates 4,000 drugstores. By embedding electronic tags at the item level in pharmacies, Leng says, RFID represents a ?major enabling technology in the fight against counterfeit drugs.? Moreover, by using RFID technology, a pharmacy database will show if customers failed to pick up their prescription, or if inventoried drugs have expired. It also will enable users to quickly identify specific product lots subject to a manufacturer?s recall.