More Top Companies Eye RFID Technology's Potential

Recent moves by Wal-Mart, Delta spur increased interest in tags

Radio-frequency identification (RFID) tags are continuing to gain attention from a wide range of bellwether users, with American Express Co., United Parcel Service Inc. and United Air Lines Inc. adding their names to the list of companies that are piloting or evaluating the technology.

The heightened interest in RFID tags, which can be used to automatically track the luggage of airline passengers or items that are being moved through supply chains, follows announcements last month by both Wal-Mart Stores Inc. and Delta Air Lines Inc. that they plan to start using the devices.

Wal-Mart's requirement that its top 100 suppliers begin tracking shipping pallets via RFID by early 2005 caught the eye of UPS, according to Bob Nonneman, a corporate strategy manager at the Atlanta-based package-delivery company.

Bentonville, Ark.-based Wal-Mart is "a big UPS costumer, and we're working hard to understand their processes and [are] talking to them about opportunities" to jointly exploit the emerging technology, Nonneman said.

UPS has been studying RFID for more than a decade and started developing a detailed business case for using the devices before Wal-Mart disclosed its plans, Nonneman noted. As part of that process, the company is evaluating how RFID technology could help improve efficiency within its supply chain management service.

ROI Still Required

But like all the IT investments that UPS makes, any RFID projects will have to promise a good return on investment to get funded, Nonneman added. RFID tags typically cost between 30 and 50 cents apiece. He said that level of pricing remains "a real challenge" for a company like UPS, which ships millions of packages each year and already has made a large investment in bar-code systems.

New York-based Amex this month launched a pilot project to test a system called ExpressPay, which uses RFID chips that are embedded in key chains and can be linked to any major credit or debit card—including those offered by Amex's rivals.

The initial trial involves 170 fast-food outlets and other merchants in the Phoenix area, said Amex spokesman Tony Mitchell, who added that the company hopes ExpressPay will be adopted as a de facto industry standard.

Amex also wants to use the RFID technology to capture a larger share of purchases valued at $50 or less for its credit card business, Mitchell said.

According to Amex, ExpressPay users wave RFID tags in front of readers that are attached to point-of-sale terminals. Purchases may be treated like typical credit transactions, or customers can spend against a prepaid value built into their devices.

The specialized RFID tags used by Amex cost about $2 each, and the readers are priced at about $100, according to Mitchell. But he said those costs aren't a hindrance for Amex, which plans to run the Phoenix pilot through the end of the year and then evaluate the results before deciding how to proceed with the technology.

United spokesman Jeff McAndrews said the Chicago-based airline plans to monitor the 30-day test of RFID luggage tags that Delta plans to run in the fall on flights between Jacksonville, Fla., and Atlanta, where it's based.

United is also working closely with airports and technology vendors to track the development of RFID technology and "explore where it fits into our systems," he added.

How It Works

American Express’ RFID trial

Consumers who sign up receive a key chain that contains an embedded RFID chip.

The key chains can be used with RFID readers at participating restaurants and other retail stores.

Purchases can be made against credit cards or deducted from prepaid amounts.

Copyright © 2003 IDG Communications, Inc.

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