Ninety-nine percent of the railroad cars in North America have them, millions of people already use them, and Wal-Mart Stores believes they can save the retail giant billions of dollars,
Based on the business world’s interest in radio frequency identification tags, Everett-based Intermec Technologies Corp. and other makers of the technology are looking toward a happy future.
Obstacles linger, however, even as Fortune 500 companies increasingly are trying out RFID tags.
"It’s a great technology," Tim Spofford of Hewlett-Packard Corp. said during a discussion of RFID’s potential at the recent Northwest eBusiness conference in Seattle. "But there also are significant challenges, especially given the price of the tag."
RFID tags, which use tiny radio transponders consisting of a microchip and mini-antenna, already are commonly found in key cards employees swipe to enter their office buildings. They’re also used in passes that allow motorists to automatically pay tolls without stopping.
A range of industries use them or are evaluating RFIDs for a long list of other applications, including the lucrative retail sector.
Spofford, director of Hewlett-Packard’s U.S. printer and supplies division, is monitoring tests of RFID tags to keep track of inventory at his company’s printer plant in Brazil and at inkjet supply centers in Virginia and Tennessee.
It’s more than just an experiment for Hewlett-Packard. As one of the 100 biggest suppliers to Wal-Mart, the computer firm will be required by the retailer to have RFID tags on all of its shipping cases and pallets by early 2005.
Jeffrey Jacobsen, president of the New York-based Applied Wireless Identifications Group, compared Wal-Mart’s mandate to an underwater earthquake — something that is quietly shaking things up.
"This will create a tsunami in the industry over the next two years," he said.
Target, Albertsons, the Department of Defense and others also have announced that they want to expand the use of RFID tags as well.
The motivation to embrace RFID is simple: Tt has the potential to improve efficiency in inventory purchasing and shipping. For Wal-Mart alone, the estimated savings could amount to $3 billion or more a year, said Christopher Kelley, Intermec’s director of professional RFID services.
As the company credited with inventing the most world’s widely used bar-code system, Intermec, a division of Everett’s Unova Inc., is keenly focused on RFID, which eventually could replace bar codes for some uses.
Along with other big companies making RFID tags and readers, Intermec is helping establish a common standard for the technology, Kelley said. That’s a key step for expanded use of RFID tags, as many of the competing systems can’t communicate with each other.
But the biggest key is lowering the cost, Kelley said.
"Because they’re disposable, we need a low-cost tag. That’s what’s going to drive use of this," he said.
Spofford said Hewlett-Packard pays about 25 cents to 30 cents per tag — a huge cost when added to every shipping box and pallet that leaves the company’s distribution center.
Jacobsen said some European companies can produce tags at 10 cents to 20 cents apiece, and that could be down to 5 cents within two or three years. Kelley thinks that goal is further out.
But as the price falls, use of RFID will expand. And as more tags are produced and sold, the cost will improve, Kelley said.
The last obstacle is educating consumers about the tags. Because each item in a store could have a unique tag, the potential to track how many products are sold and who they’re sold to is great.
That would make it easier to recall specific items if there’s a problem, and it builds in better protection against counterfeit goods, Spofford said. But it also worries some privacy groups.
"The risks around privacy are minimal," he said, "but the perception is there."
Reporter Eric Fetters: 425-339-3453 or fetters@heraldnet.com.
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