The 21st century bar code

The ubiquitous bar code is showing its age. Although it's still the darling of retail sales, allowing companies to get real-time snapshots of store and warehouse inventory, the business vanguard wants to know what the bar code can deliver beyond that. Specifically, these companies are eager to find out not just what's on their shelves, but exactly where the item sits, down to the inch.

Enter the 21st century bar code: radio frequency identification (RFID). RFID technology puts on retail goods a microchip, called a smart tag, with an antenna that broadcasts its unique 96-bit identifier and location to corresponding receivers. The receiver relays the data to a computer, which decodes the information and processes it according to whichever application is running.

RFID hasn't gotten any further than the testing stage at this time, but retailers see many potential applications if and when it goes into widespread use. Security is one possibility, because items transmit their location. New checkout systems that bypass the cash register are another -- just walk out the door and a reader tallies up what's in your bag and takes the payment out of your bank account. Another proposed use is to install in-store readers that constantly count what's on the shelves and restock automatically. For consumers, retailers envision instant access to product information on the manufacturer's Web site, via scanner-equipped, Internet-enabled cell phones.

Pete Abell, research director for retail at AMR Research Inc. in Boston, says RFID could shave 10% off retailers' supply chain costs just by having an item's location accurately pinpointed.

Smart tags are useful for more than boxed goods, as well. They can be embedded in items that are hard to bar-code, like bananas. They can be embedded in raw materials, extending their benefits to manufacturers.

RFID can also produce more accurate inventory statistics than bar codes. According to Cathy Hotka, vice president for IT at the National Retail Federation in Washington, an industry trade group, smart tags have the potential to solve what she calls "the mackerel effect." That's when one item that has many variants, like cat food, gets rung up under a single flavor. Inventory gets skewed when someone buys one can of Mackerel Delight and nine cans of Liver Treats and the clerk scans the mackerel then hits "times 10."

That won't happen with RFID, she says. The difference between bar-code and RFID scanners is that the latter records data from each item at a distance of 4 to 5 ft. away. It doesn't require that a human manually pass the item over a scanner, eliminating the situation where a clerk sacrifices accuracy for the sake of an easier, faster transaction.

"RFID allows stores to keep track of what is actually selling," Hotka says.

For more information about RFID, visit the Auto-ID Center, a retail and technology industry group that's developing and promoting RFID technology.

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Copyright © 2002 IDG Communications, Inc.

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