Wal-Mart recently urged its top 100 suppliers to start using this security-and-identification microchip. Gillette is using the chip to stop shoplifters from stealing razor blades. And Benetton plans to weave it into all company clothing products and track them worldwide. What is this powerful little device? Introducing Radio Frequency Identification (RFID) TechnologyRFID is a generic term for technologies that use radio waves to automatically identify people or objects. There are several methods of identification, but the most common is to store a serial number that identifies a person or object, and perhaps other information, on a microchip that is attached to an antenna (the chip and the antenna together are called an RFID transponder, or an RFID tag). The chip, which is about the size of a grain of sand, activates a signal when it approaches an electronic reader. Though RFID technology has been around since World War II, when it helped ground soldiers identify fighter planes as friend or foe, the cost of developing it has been prohibitive. Now, thanks to advances in technology, RFID is here to stay. Business experts predict that RFID chips will be found in thousands of products by 2010, and that the technology will revolutionize supply chain, manufacturing, and retail efficiency. How Will RFID Change Your World?What if your merchandise could talk? What if a new shirt or hammer or CD player communicated automatically, and not just when you picked it up and scanned its bar code? "Imagine each and every item talking about itself as soon as it pulls into the warehouse," says Bjarne Schøn, director of supply-chain management at Microsoft Dynamics. "You don't have to register the items manually; all the relevant information is read from the items automatically. Packing instructions pop up on your warehouse staff's reader, and detailed item information is automatically entered into the inventory and purchasing areas of you business management software system. All you have to do is unload the truck. "Once in the warehouse,” Schøn says, “there are no more stock counts because every item is continuously sending a signal to a reader. What's more, if the items have passed their expiration date, they scream to the reader: 'I'm too old!'" Don't Start the Revolution Without MeMicrosoft and other software giants are backing the Auto-ID Center, a joint American/European organization that is setting RFID standards. "We intend to make sure that all of our products related to inventory, retail management, manufacturing, distribution, and point-of-sale include built-in support for RFID technology," says Satya Nadella, corporate vice president in the Microsoft Dynamics Group. In addition, Microsoft Dynamics recently announced that it was expanding the scope of its RFID initiative to help small and midsize businesses meet RFID technology compliance mandates from large trading partners and drive efficiencies in internal operations. For example, Microsoft and several partners recently began working with Jack Link’s Beef Jerky, a U.S.-based midsize snack manufacturer, to implement RFID. (Read story.) Lowering the Cost of RFIDAlthough deploying RFID solutions that are connected to business-management solutions will be straightforward plug and play, the solutions won't show their full potential until RFID has been widely adopted. But as supply chain masters like Wal-Mart push RFID on their suppliers—which, in turn, push the technology on their sub-suppliers—the cost will go down, and it will become more common. When an RFID chip costs the same as scanning an item’s bar code, then it will be found everywhere from small businesses to large enterprises, and from manufacturers to retailers. A Mind Boggling Amount of InformationIt's estimated that if Wal-Mart put an RFID chip in every item, it would generate two terabytes of data every second. That's one trillion bytes. "The only limits of the impact RFID can have on your business are the limits of your imagination," says Schøn. "It's already being used in innovative ways. For example, I visited a dairy farm recently, and I noticed that there was an antenna blinking on the ceiling. It turned out that it was reading chips located on the cows, detecting their whereabouts and alerting the farmers when a cow remained stationary for too long—a sign of sickness." The Privacy IssueIt's one thing to track a cow's location, and another to track the whereabouts of someone’s personal merchandise. For example, if there's a chip in every consumer item that can send and receive information, how can we protect ourselves from infringements of privacy, or even illegal collection of data? Imagine a thief scanning your neighborhood in search of the house with the most valuable merchandise. It's possible, however, to remove the send-information function when an item leaves a store. What's more, RFID technology will probably take off in a business-to-business context before it's widely adopted in the business-to-consumer market. This should give the business community time to solve many privacy and security issues. "Microsoft has done significant work in the area of privacy on the Web and in stores," says Nadella. "We are looking at this issue at a fundamental level, and I am confident that we will be able to deliver solutions that will create value for businesses and consumers alike."
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