The ongoing debate between RFID’s champions and those who want to rein in its exploitation will likely impact the technology’s future in our society. Any company engaged to some degree in supply chain issues should monitor the RFID developments in general, and those relating to privacy and regulation in particular.
So what is this divisive technology? An RFID tag is a microchip the size of a grain of sand attached to an antenna that transmits via radio signals information to an RFID reader device. On a very simple level, these chips work much like the barcodes, as they can record the movement of merchandise, such as packaged food, pharmaceuticals, and clothing. But RFID tags can carry far more information and are interactive. They can “listen” for a signal sent from a reader. When it "hears" a call, it responds by sending a signal back to the reader, revealing its exact location and any requested information.
Recently government and companies have begun to use the RFID tags to track the movement of products within the supply chain. Last year the Department of Defense, which developed the technology in the 1960s, and a number of commercial entities implemented policies that required suppliers to deliver products with RFID tags before the end of 2005.
Consumer advocates, concerned that the technology could lead to intrusions of privacy, have urged state legislators to consider regulation that would govern how companies use RFID technology. Over the next few years, this issue will continue to be debated by state and federal regulators, parties making vendor and distributor selections, and consumers groups.
The stakes in this debate are high. RFID advocates predict the technology will revolutionize supply chain management by changing the way products are moved globally. Some estimate that because of new efficiencies, the price of products could fall as much as 20 percent. Companies could save billions of dollars a year by reducing the amount of orphaned or obsolete inventory, streamlining ordering processes, improving shipping and handling procedures, and reducing service level failures that lead to credits.
Companies will realize these savings through various channels. RFID tags will enable corporate buyers to see into their suppliers’ supply chains by using the tag to locate the position of a particular product during the delivery process. This will allow buyers to better schedule manufacturing and plan for the receipt of the product. Handling will improve because companies will be able to pinpoint the location of a product anywhere in its facility, revealing whether a box of aspirin, for example, remains in a warehouse or whether it is in the store. The RFID dream for many businesses, such as grocery stores, will be realized when shoppers can walk a cart under a reader and have all the tags on the purchases scanned in a nanosecond.
Consumers could also benefit from RFID-enabled products because the information stored on the tags could influence a buyer’s purchase. Conceivably, a consumer purchasing a steak with an RFID tag attached could learn where and when the cow was butchered and packaged, what the cow was fed, and what type of antibiotics and other medications it was given.
Despite these potential benefits, privacy advocates fear that these tags could be used to track and store information well after a product is purchased. Such information may become available to nearly anyone in possession of an RFID reader, as the decision to turn off a tag’s transmission is a voluntary one made by the tag controller. The technology that would allow purchasers to disable the transmissions on their own remains under development.
Thus, in the same manner in which scanners are used to intercept cell phone conversations, RFID readers could be used to intercept RFID transmissions. People could troll the airwaves looking to pick up transmissions from tags well after the consumer purchased the product. Depending on the frequency of the tag, its information could be read by a reader at a distance of ten inches or ten feet. Thus, the medicines Joe Consumer buys, the food he eats, the books he reads might become accessible to an outsider, unbeknownst to Joe.
Similarly, critics envision a future in which spies or government agencies, exploiting RFID tags and access to commercial databases, could monitor people’s interest and activities in startling ways. Agencies, for example, could identify participants in a political protest using a RFID reader to pick up transmissions from tags embedded in shoes.
Another fear is that retailers could use the tags to track the movement of consumers inside or outside stores. Certainly, RFID technology could allow companies to harvest more sophisticated information about purchasing and shopping habits than is currently available. These advances could help companies target shoppers with advertisements and promotions tailored uniquely to them, which is precisely the sort of power that rankles privacy advocates.
These fears are gaining ground. In February, Utah’s House of Representatives passed the Radio Frequency Identification Right to Know Act, which would require all goods bearing functioning tags in stores to be labeled as such. California legislators are considering a related bill. Given the technology’s potential, the controversy will surely escalate in the months ahead.
If corporations are permitted to use the technology on an unrestricted basis they will be able to save large sums of money while leaving open the door to track consumers in unprecedented ways. If the privacy and consumer advocates win, American corporations may lose a competitive advantage to foreign corporations. Most likely, compromise and privacy-savvy technology advances will allay anxiety and allow RFID to progress.
No matter what transpires, companies that have not considered RFID should examine how they might use the technology to further business goals without arousing fears among clientele about breaches of privacy. The regulatory debate and its aftermath will impact how RFID is exploited in Maryland and beyond.