August 18, 2003 (Computerworld) -- An RFID tag, also known as a transponder, contains an antenna and a microchip that transmits information about the tagged item to a reader. The tag reader then converts the radio waves returned from the tag into a digital form that can be passed to computer systems.
The technology has been used for years to track animals, collect tolls on highways and grant access to buildings. But cost has kept RFID tags from being used on a large scale to identify and track goods in the retail supply chain.
P&G's Larry Kellam says tags were a dollar apiece in 1999 when the company began looking at RFID technology to curb counterfeiting and retail theft and reduce out-of-stock situations. So P&G joined The Gillette Co. and Uniform Code Council Inc. as founding sponsors of the Auto-ID Center, an industry-funded research project at MIT.
One of the Auto-ID Center's chief missions has been to find a way to reduce the cost of RFID tags. The center recommends the use of passive tags containing a limited amount of information, because chips with less memory are cheaper. Passive tags draw power from electromagnetic waves that the tag's readers generate, whereas more expensive battery-powered active tags broadcast signals.
The Auto-ID Center's researchers also realized that the tag's silicon chips would need to be smaller to lower the cost. But reducing the size of the chips isn't easy, since robots have trouble handling chips that are the size of pieces of glitter, notes Kevin Ashton, executive director of the Auto-ID Center, who is on loan from P&G.
Alien Technology Corp. in Morgan Hill, Calif., an Auto-ID Center sponsor, is at the forefront of a new chip-packaging process called fluidic self-assembly that it hopes will reduce the cost of passive tags from 50 cents in small quantities today to 5 cents at a volume of 10 billion by 2006, says Tom Pounds, vice president of corporate development and product strategy. An Alien manufacturing line capable of producing a billion units annually will go online early next year, and a second manufacturing line capable of producing 10 billion units per year is planned for 2005, Pounds says.
Gillette made waves earlier this year when it negotiated a deal with Alien to purchase up to 500 million tags. Company spokesman Paul Fox says Gillette will achieve its goal of a sub-10-cent tag for field tests over the next few years, although Gartner's Jeff Woods says he thinks Alien is losing money on that deal.
Even though Gillette is doing pilots with European retailers on individual items, the company doesn't foresee item-level tagging in production for at least 10 years, according to Fox. For that to happen, per-tag costs must drop to a penny or less, he says.
This RFID tag, from Rafsec Oy in Tampere, Finland, contains a chip (the small black square) and a coiled antenna that are connected by a bridge. The tag is about the size of a credit card. Credit: Rafsec
Both Wal-Mart and Gillette have decided to focus on pallets and cases. The Bentonville, Ark.-based retailer this spring scrapped plans for a store trial with Gillette. Wal-Mart spokesman Tom Williams says item-level RFID is years away for the retailer.
Those testing the technology are encountering challenges at the pallet and case level. Woods says some users are experiencing read rates of less than 80% with tags. Wal-Mart found radio-wave interference problems in field tests of 500 pallets of paper towels.
And metal and liquids don't mix well with radio waves. That meant that P&G had to test different tags, since Bounty towels have different properties than Pantene shampoo.
"These problems are not fundamental," Ashton claims. "They will be solved with time and experience."
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