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Monday, May 03, 2004

Wal-Mart launches RFID pilot, but will privacy concerns stall adoption?

Walmart is on track with its Radio Frequency Identification (RFID) initiative, having started its pilot test at the case and pallet level in Dallas last week. The pilot is intended to demonstrate the efficiency of using RFID tags in place of bar-codes. In addition, Walmart hopes the pilot will encourage adoption of the electronic product code (EPC) standard under management of EPCglobal that is part of MIT's AutoID Center.

Walmart's RFID pilot test so far is limited to several SuperCenters and one regional distribution center in the Dallas/Fort Worth area. The eight consumer products manufacturers participating in the pilot include Gillette, HP, Johnson & Johnson, Kimberly-Clark, Kraft Foods, Nestle Purina PetCare Company, Procter & Gamble, and Unilever. The next milestone is in January 2005, when Walmart expects its top 100 suppliers to be including RFID tags on all cases and pallets shipped to Walmart in the Dallas area. CNET has the details on the pilot test.

As I have written previously, adoption of RFID will require major IT infrastructure investments at all levels of the supply chain for those industries where it is implemented. In addition to the retail supply chain, led by Walmart's initiative, RFID efforts are also underway in the government contracting supply chain, led by the U.S. Department of Defense, and possibly the pharmaceutical supply chain, encouraged by the U.S. Food and Drug Administration (FDA). Although the cost is significant, the potential benefits are huge in terms of improved productivity, better supply chain coordination, and ultimately lower costs to consumers.

There is, however, one issue that may stall the effort to spread RFID--concerns over consumer privacy. A lot of fear, uncertainty, and doubt is being spread about RFID tags at the individual product level. I have tried to understand the exact nature of the concerns, but I'm finding it difficult to see what Walmart would do with RFID tracking that it can't already do with bar codes. Consumers give up an enormous amount of information about their shopping habits every time they use a club card in their local supermarket, but few individuals find that enough of a problem to give it up.

On the other hand, I suppose that if Joe buys a pair of underwear at Walmart, embedded with an RFID tag, it might be possible to capture Joe's identification at the point of sale and then associate Joe with the RFID tag number in some central database. Then, whenever Joe is wearing those underwear, Walmart could track his entering and exiting various Walmart stores in the future. But that's pretty unlikely, by any stretch of the imagination. And what exactly would be the point for Walmart to do that? And what if Joe was buying those underwear not for himself but for his son? I don't get it. Nevertheless, unless privacy concerns are addressed, no matter how far-fetched, they may become a significant impediment to adoption. Case in point: the California state senate has just voted to approve a measure, introduced by state Senator Debra Brown, that sets privacy standards for use of RFID in stores and libraries. California often leads the way with this sort of thing, unfortunately.

Update, May 13
Here's an RFID position statement from a group of so-called consumer advocates, describing in detail their RFID privacy concerns. After reading this entire paper, however, I still say, I don't get it. Nowhere do the authors address my point that it is the product that is being tracked, not the consumer.

Related posts
Users should push forward with RFID, despite issues
RFID coming to the pharmaceutical supply chain
Details on Wal-Mart's RFID specifications
RFID spreading to the auto industry, but competing standards threaten adoption
U.S. DoD mandates supplier adoption of RFID

by Frank Scavo, 5/03/2004 07:01:00 AM | permalink | e-mail this!

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