Subject: [NEXTEL-1] Radio Tags face technical hurdles, deadlines

From: [email-masked]
Date: Sun, 02 Nov 2003 14:15:53 -0500

Radio Tags Face Technical Hurdles, Deadlines
 
By Caroline Humer 

NEW YORK (Reuters)

The latest technology craze can be found hanging from a Prada shirt in
downtown New York or tacked onto cases of Boston-based Gillette razors. 

Small tags that use radio frequencies to gather information are turning
up as a potential replacement to the UPC code that keeps tabs on
consumer goods, and technology companies are betting they will emerge as
the next hot thing. 

But that may not happen any time soon, analysts say, because radio
frequency identification tags still don't work that well. 

The tags fall far below the 99 percent reliability rate of UPC tags
because of the difficulty of transmitting clean radio signals. At 20
cents to 30 cents apiece, plus the cost of altering packaging lines to
accommodate them, the tags are also too expensive for most companies to
use. 

"We are at an incredibly early stage of this technology and what it is
actually capable of doing. All the promise of real-time supply chain
visibility is just that. It's promise," IDC analyst Christopher Boone
said. 

However, the world's largest retailer, Wal-Mart, and the Department of
Defense are pushing their hundreds of suppliers to use the technology,
suggesting the tags could see wider adoption in the next few years. 

With the ability to track everything from cases of razors to a car
passing through a toll booth, analysts say the electronic tags are to
this decade what the Internet was to the 1990s -- a promise of radical
change in the way business is done. 

"Everyone has a hunch there's something big here, but no one can
articulate it," said Jeff Woods, an analyst at Gartner Inc. 

The tags use low radio frequencies to transmit data about items or
locations, enabling companies to better manage inventories, replenish
supplies and cut costs. Tagging items could create a more efficient way
of doing business, similar to the way Dell Inc.
used the Internet to change the personal computer industry. 

Companies lining up for a piece of the action include venture capital
start-ups that make radio frequency identification tags, such as Alien
Technology, and technology services giants such as IBM, who want to show
corporations how to use them. 

For tags to be more widely used, analysts say the price must drop to
under 5 cents each, which would happen only with higher volume. 

Amid all the hype, companies are looking at real deadlines. 

Wal-Mart and the Department of Defense have set January 2005 as the date
for use of RFID technology by their suppliers. Costco Wholesale Corp.,
the largest U.S. warehouse club operator, has said it is looking at RFID
as well. 

In fact, Wal-Mart's top 100 suppliers will meet on Nov. 4 and 5 in its
hometown of Bentonville, Arkansas, to discuss the specifics of
implementing RFID technology. 

But the giant retailer's suppliers won't be able to meet a demand for
all of their products to have RFID tags by 2005, analysts say, and some
expect the company to soften its message. 

"We suspect that, for Wal-Mart, the 2005 deadline is a call to action
and not a mandate, and they will have a handful of suppliers they will
pilot this with in 2004 to be ready in 2005," said Sean Campbell, a
partner in IBM's business consulting services group. 

IBM competes with consulting companies such as Accenture Ltd. to advise
companies on using RFID. IBM could also benefit as it sells the software
that's needed to make use of the data, as could other software companies
like SAP, Siebel and Oracle. 

Campbell said that also hindering Wal-Mart's deadline is the fact there
are not enough RFID chips out there right now. 

Companies that make the RFID tags or part of them include Alien
Technology, Philips Semiconductors, Texas Instruments Inc., Zebra
Technologies Corp. and Matrics Inc. 

The technology is so far from being ready, analysts say, that some
companies may not last long enough to reap the benefits, as was the case
when UPC codes were introduced in the 1970s. 

"Radio frequency has some limitations. It cannot be read through liquid
... or through metal. If you have nylon conveyor belts it causes RF
noise. We don't know what happens when you shrink wrap this stuff," said
Kara Romanow, a senior analyst at AMR Research. 

"So, when you look at companies like Matrics and Alien that are
providing this technology today, I don't know if they will be able to
survive long enough for this to pick up," she said. 

There are also privacy issues. Civil liberties advocates fear that,
under the guise of protecting national security, RFID will be used to
invade peoples' privacy by monitoring their activities. 

One storm of controversy developed when Tesco, a grocery retailer in
Cambridge, England, reportedly photographed customers removing Gillette
razors from the shelves. 

Tesco was not immediately available for comment. 

Efforts to use the technology for inventory management in places like
libraries and supermarkets have met resistance from groups who are
concerned the tags will link consumers with purchases to develop
customer profiles. 

http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=3738573

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