Companies heavily dependent on fast and reliable transportation are actively looking into mobile and wireless technologies that make it easier and less time consuming to track and monitor sealed container shipments worldwide. One of the technologies that show a lot of promise is radio frequency identification, or RFID, and the use of tags that are equipped with such technology. Wal-Mart Stores has canceled testing for an experimental wireless inventory control system, ending one of the first and most closely watched efforts to bring controversial radio frequency identification technology to store shelves in the
Instant eye on inventory: Retailers are ever watchful for ways of improving the balance between inventory supply and consumer demand. They want to make sure there are enough products on the shelves to meet demand but not so much that they are sitting in a warehouse taking up costly inventory space. The use of RFID technology is viewed as one of the more promising tools to improve visibility of inventory almost instantly. But companies have only dipped their toes into the water, examining installation behind the scenes in warehouse settings. The smart-shelf trial by blue-chip company Wal-Mart was viewed as a potentially aggressive endorsement of an in-store application because of the company’s ability to influence its suppliers and push the adoption of new technologies–something it helped to do with bar-code scanning technology in the 1980s. The unexpected cancellation of the test is letting some of the steam out of the market, but that may be a good thing, according to one analyst. “The RFID industry has been floundering in a sea of science projects, which is what these trials have been to date,” said Jeff Woods, an analyst with research firm Gartner. “This is one of the most over hyped technologies out there, and this can be viewed as a precursor to the bubble bursting for RFID.” Soon after Wal-Mart first discussed its smart-shelf trial, privacy advocates began to raise concerns about the technology. The main questions: Would retailers and manufacturers be able to monitor products after consumers purchased them? Could the technology be misused by hackers and criminals or exploited for government surveillance? In answer, several RFID chip manufacturers pledged to incorporate a “kill switch” into their chips in a move to relieve consumer fears of the technology. The kill switch would let retailers and consumers disable the chips at the checkout counter.
Not-so-cheap chip: Economics ay have played a role in Wal-Mart’s decision to shelve its in-store RFID test. RFID chips are still too expensive for wide-scale use with consumer merchandise. While today’s price of around 10 cents a chip is cheap enough to fuel initial trials, the cost of the chips have to fall to a fraction of a penny if they are to become ubiquitous in stores. And that will take about 10 to 15 years, he added. Privacy concerns, though they’ve been overblown, have become significant enough to be a factor in the development of the technology and market and push the technology farther. Another issue for companies looking to test RFID technology is the strain on their inventory networks. For a company Wal-Mart’s size, it could have more than a billion products worth of data being collected, stored and sent through its inventory network, which means an extremely sophisticated system, would have to be in place to properly process the data.
The Network Effect: The “network effect” is a term used by technologists to describe the way some devices grow more useful as more people use them. The classic example is the telephone. More recently, e-mail has followed the same trajectory in going from a device used primarily by university researchers in the 1970s to ubiquitous public use in the 1990s. In contrast to the situation for Retail RFID, recent press reports about ship-container tracking have all been positive. Despite the heavy reliance of proprietary technology in tracking shipping containers, this market is growing as clients eagerly adopt the technology. Retail RFID, on the other hand, has adopted an open-standards approach to spurring the market; but despite this growth is slow and imposed primarily by big-box retail mandates. The root cause is the network effect. Due to the incomplete infrastructure of EPC RFID tools, the retail RFID market is currently not big enough to drive significant value-add to all participants in the supply chain. Companies are right to moderate their investments in this area while carefully choosing pilot programs to prepare themselves for the future. RFIDs in particular are being adopted widely by retail majors. “If somebody steals goods without paying, it is the public who ends up paying for it. We identify compulsive shoplifters and often catch them three or more times in the same month. We try not to involve the police especially when teenagers are involved. This is where RFIDs are useful in protection of goods,” says Biyani, Director, Pantaloon. Dharmesh Lamba, Country Head, Checkpoint echoes the sentiments. He points out that
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