- The Washington Times - Wednesday, December 29, 2004

Wal-Mart’s plan to track shipments from its suppliers to its stores using high-tech tags will go into effect Saturday.

More than 100 suppliers will adhere to Wal-Mart’s mandate to place radio frequency identification — or RFID — tags on cases and pallets going to 150 Wal-Mart and Sam’s Club stores in northern Texas and south-central Oklahoma.

“They’re ready, we’re ready; there is no need to wait,” said Carolyn Walton, vice president for Wal-Mart’s Information Systems Division. “I sometimes get the feeling that people think we are going to flip some gigantic switch on January 1st and tagged cases and pallets will appear from more than 100 suppliers.”

The suppliers have been upgrading their systems gradually to comply with Wal-Mart’s mandate since the retailer announced its plans in June 2003. In April, Wal-Mart started the pilot program with eight suppliers, one distribution center and seven stores in Texas.

Many of the suppliers won’t be tagging everything they send to the three distribution centers next month, but Wal-Mart officials say the participation it is receiving is a good start. The mega-retailer plans to expand the technology to more stores in other markets next year.

Wal-Mart, as the world’s largest retailer, is in a powerful position to drive the technology into widespread use. The industry is watching and waiting to see whether the program is a success and whether it will need to scramble to catch up. Other retailers, such as Target and Albertson’s in the United States and Metro and Tesco in Europe, also have been testing RFID technology.

But privacy advocates are concerned the technology will open the door to allow retailers to “follow” merchandise from the store shelf into a customer’s home.

“What Wal-Mart’s involvement has done is make this technology real,” said Katherine Albrecht, founder and director of Consumers Against Supermarket Privacy Invasion and Numbering (CASPIAN), an industry watchdog group. “These corporations using RFID are playing with a dangerous technology. It has the potential to eradicate our privacy.”

The tags use the same technology found in the E-ZPass, which allows motorists to go through tolls, and “smart ID” cards, which give employees access to their offices. The airline industry is considering tagging to reduce the amount of lost luggage.

The technology allows retailers and other businesses to track items wirelessly through radio signals.

RFID tags are computer chips that contain identifying information and transmitters that read that data. For retailers, the system eliminates the scanning of individual bar codes and employees having to sort through each case that arrives at a warehouse or a store.

The technology is expected to help retailers run their businesses more efficiently.

“Anytime you have a human being touching merchandise, it takes time, money and effort,” said Dave Hogan, senior vice president and chief information officer at the National Retail Federation, an industry trade group.

In December, 35.5 percent of consumers indicated they are aware of RFID — up from 28.2 percent in September, according to a report by research firms BIG research and Artafact.

As awareness of RFID increases, so do concerns.

Of those who are aware of RFID, fewer than half — 44.7 percent — said they feel the technology used to track products is a “good idea,” while one in five consumers say it is “not a good idea.” More than one-third were not sure.

“Soon RFID will be a household word and no longer require definition by us or the press,” said Linda Stegeman, president of Artafact. “The question is whether the early RFID applications hitting the market have a benefit to consumers or fuel their concerns.”

Wal-Mart says RFID will allow the retailer to read electronic product codes from tags as product cases or pallets move through their distribution centers and into their stores. The technology will allow the company to better understand the location of products in the supply chain.

Individual products will not be tagged, unless the case is also the consumer packaging — like a television or printer.

Despite the retailers’ moves, RFID will not be adopted by the masses anytime soon. Mr. Hogan doesn’t expect it to catch on until at least 2010. Others say it could be 2015 before the technology is widely used in retail.

Nonetheless, privacy advocates fear Wal-Mart’s plan will speed up the process and help drive down the cost for the technology. Each tag costs between 25 cents and 40 cents.

The biggest concern is that the technology will lead to tracking a consumer’s buying habits and that those habits will be shared with other businesses and the government without their permission.

“If they need to use [RFID], we better not see it on the store shelves,” Ms. Albrecht said.

Last year, Wal-Mart canceled plans with Gillette to tag each piece of merchandise from the world’s largest shaving-supplies maker. The company said it wanted to track inventory in its warehouses, not in its stores. At the same time, CASPIAN organized a letter-writing campaign against the program.

Wal-Mart’s mandate has stirred talk in the industry.

“What it did was create an incentive structure that pushed its partners in the market to better understand the technology while standards were being developed and innovation was taking place,” said Erik Michielsen, director of RFID at ABI Research, a market research firm. “Wal-Mart’s goal is to get companies to integrate this technology into their changing business processes.”

Some of the suppliers are tagging 100 percent of their shipments to the distribution centers while others are using RFID on as little as 2 percent, said Wal-Mart spokesman Gus Whitcomb. The average supplier is tagging about 65 percent of the cases and pallets, he said.

“Our goal remains 100 percent,” Mr. Whitcomb said. “We think that’s where the biggest benefit will be for everybody — that means the customer, the supplier and Wal-Mart.”

ABI Research found that Wal-Mart’s suppliers have spent $1 million to $3 million on RFID to meet the minimum requirements for the January deadline. That investment is just enough to purchase tags, readers and some software.

Suppliers will see significant benefits only when they fully integrate RFID into their systems, but that is a much heftier investment of $13 million to $23 million, ABI Research said.

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