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the tags that knew too much

Sophisticated technology makes it possible to track a product's exact whereabouts through the entire supply process and beyond. But the story it reveals might be more than you want to or ought to know.

the tags that knew too much

The ability to track cargo in a continuous sweep and in exquisite detail is an idea only slightly less attractive to the average logistics manager than the teleportation of goods. But it has the advantage over teleportation in that the technology that can make it happen is right here right now.Whether they use the bar codes that appear on everything from ketchup bottles to circuit boards, or radio-frequency identification (RFID) tags with tiny digital memory chips, companies can track the whereabouts of their goods from the warehouse bin to the retailer's shelf and at every step in between.

Historically, the tracking technology of choice has been the bar code. It's cheap, it's time tested and it's easy to use. But bar codes also have limitations: They are restricted in the amount of data they hold, their scanning requires a clear line of sight and once data are programmed in, there's no way to change or update the information.


RFID tags have no such limitations: They can accommodate enormous amounts of data, they transmit data via radio waves (eliminating the need for a clear line of sight) and in their most sophisticated incarnation—read-write tags—they even allow users to update or modify their contents. You pay for all these capabilities, of course. RFID tags cost much more than bar codes do. But they come in different varieties—passive, active, read-only and read-write models—that are priced according to their capabilities.

The market has responded favorably. In June, retailing giant Wal-Mart announced that it would require its top 100 suppliers to insert radio-frequency identification (RFID) tags on pallets and cases by January 2005, a mandate that will extend to all of its suppliers by 2006.Wal-Mart believes this move will drive down excess inventory and stockouts,which currently cost it tens of millions of dollars. "With all that data coming in we'll see things we've perhaps not seen before in terms of spikes and inventory management," says Tom Williams, spokesman forWal-Mart. "We do that now with bar codes and scanners but that's a bit of a step-by-step process, whereas RFID gathers that all at once as long as you have readers close by. That's where we're going and we're going there fast."

Though Wal-Mart's announcement essentially introduces the heavy artillery into the battle, the RFID revolution has been under way for sometime. Research conducted by ARC Advisory Group back in May 2002 found that 60 percent of 95 logistics executives from 1,000 global companies planned to begin RFID testing by 2006, and nearly 24 percent said they would do so in the next 12 months. What's spurred their interest in tracking? Some believe the technology will help them comply with regulatory requirements designed to counter terrorism, which require earlier and more detailed information about cargo entering the United States. Others want to detect and stop theft.

Troubles dog tags
Though no one disputes RFID's superior data-collection abilities,Wal-Mart's mandate has also raised some hackles. Some suppliers grumble that it's yet another example of a large retailer's pushing supply chain costs back onto the suppliers, who have for years had to bear inventory carrying costs. Though RFID tags are getting cheaper all the time, they still cost from 10 to 50 cents apiece at a minimum, with necessary antennae and readers driving the cost up further.

Others have questioned the aggressive schedule, arguing that it may not give them enough time to implement the systems for attaching and programming tags, along with scanners and software to keep track of them all. "The question is … whether it's possible to do what Wal-Mart wants in the time Wal-Mart wants to do it," says Jack Gold, vice president for mobile and pervasive computing at analyst Meta Group in Westborough, Mass."… I think it's going to be hard for suppliers.2005 is not that far away and there's a lot of stuff that needs to be done: getting the tags, figuring out how to make the tags work, even changing packaging."

Still others charge that RFID is not yet ready for prime time."RFID is undoubtedly a part of our future, but people have got to understand that the technology has not been refined," says Paul Richardson, business director for retail for Exel, a third-party logistics service provider based in London. Exel has been conducting trials for 10 unnamed retailers in the UK, as well as a manufacturer in China. "During trials, we found readers that don't read when they're supposed to. "Metal, for example, interferes with the radio signal bouncing between tags and readers, Richardson says, making the technology virtually useless for items like aluminum-lined cartons."… [T]he technology still has to prove itself. Until that happens we have to be very cautious about saying it eliminates the need for bar codes," Richardson continues. "I think bar codes will be around for many years."

The secret life of cargo
Beyond the mundane concerns of price and radio-waveproof containers, however, there's an intriguing political issue raised by giving someone the ability to quietly track a product's movements at all times. Sometimes, learning more about where your assets are—or have been—raises problems of its own.

For example, consider the political sensitivity of learning too much about the secret life of beer kegs. Simon Ranner is all too familiar with the problems caused by tags that know too much. Ranner is director of logistics for Punch Taverns plc, based in Burton-on-Trent, which owns 4,500 pubs in the UK. Punch Tavern's pubs are under agreement to buy beer exclusively from the parent company, which itsel f buys beer from 40 different brewers. Although brewers of ten extend discounts to pub owners, those savings are not always fully passed onto the pub managers, giving them an incentive to circumvent their buying agreement with the owners.

For this and other reasons, kegs of beer delivered and collected weekly from the pubs had a habit of going missing. That upset the brewers and distributors that owned the kegs, which are worth $80 to $90 apiece. But more of a concern to Punch was that the kegs often turned up in places they weren't meant to be, indicating that publicans had either accepted discounted beer from another source or even that the kegs had been refilled with off-label beer and resold. This ate into Punch's profit margins and raised concerns about quality control among the brewers.

It's not as though the brewers, pub-owning companies and distributors didn't try to keep tabs on their kegs; they've long used bar-code labels to trace the containers' whereabouts. But bar coding wasn't entirely effective for the simple reason that the labels can be removed or forged. On one occasion, the same bar code turned up on 27 kegs of beer in London alone, according to Graham Miller, former head of logistics development for Scottish Courage, one of the UK's largest brewers.

That kind of stunt isn't so easy to pull with RFID tags, however. And new technology from Englewood, Colo.-based TrenStar Inc. promises to tighten up the tracking process for good. By inserting RFID tags that can't be removed or tampered with into the kegs, brewers, pub owners and distributors alike can use handheld scanners to read the tags and tell exactly which pub received which keg and when. By down loading the delivery and pickup information to a computer, they then can track where kegs were picked up and any discrepancy can be questioned. Given that Scottish Courage alone was losing some 50,000 of its 2.2 million kegs a year, this solution promises to revolutionize the industry.

But not everybody likes the idea. The draymen who deliver the beer see it as a threat to their pay structure. Draymen get paid according to an estimate of how long each delivery will take. If a driver completes in six hours a delivery that's been budgeted for 11 hours, he still gets paid for 11 hours and may even be able to deliver another load in the time left over. Small wonder that many are hostile toward an RFID scanning system that keeps a split-second record of when deliveries were made.

Then there's the problem of knowing things you'd prefer not to know. Being able to bust a publican every time he makes the kind of under-the-counter deals he's been making for years doesn't necessarily do anything to enhance the business relationship between him and the pub owner. Nor does information revealed via the keg-tracking process strengthen the pub owners' relationship with the brewers. Ranner notes that tracing kegs back to their origin sometimes reveals a brewer is supplying a pub direct, instead of through the exclusive distributor. "There is some commercial sensitivity there," Ranner says. "This was previously a sleeping dog."

Clash with consumers
But beyond the tempest in the beer keg, a much larger political battle looms as tracking and tracing technology approaches the point where logistics meets the consumer. Ironically, the more adept companies become at gathering data, the more problems arise regarding the way they use it.

A highly politicized rejection of RFID tagging came when the clothing retailer Benetton recently stepped down from a trial with RFID tags in individual items of clothing in response to pressure from consumer groups such as Consumers Against Supermarket Privacy Invasion and Numbering (CASPIAN) concerned about privacy issues.

CASPIAN also reacted strongly to recent news that Gillette and Wal-Mart would begin testing "smart shelving" in Wal-Mart stores. Smart shelves interact with RFID tags affixed to individual items—like toothbrushes or razors—to record what has been removed and when. Wal-Mart recently announced that it would abandon that test, but the idea remains troublesome to some consumer advocates.

This is the most advanced end of tracking and tracing … and the most controversial. Retailers and manufacturers have competed with each other for years to gather as much information about consumers as possible. Knowing and predicting buying patterns, tailoring discounts to particular buyers and watching inventory move at the item level could drive enormous efficiencies in the supply chain. But critics fear that the technology would allow retailers to look deep into the personal habits of their customers.

At this point, there's no resolution in sight. But one thing is clear: As the tracking issue heats up, fueled by the differing interests of manufacturers, retailers and consumers, logistics managers are sure to get caught in the crossfire.

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