The document discusses the emergence of radio frequency identification (RFID) as a next-generation technology that could replace barcodes in retail supply chains. RFID offers advantages such as distance scanning, inventory alerts, theft reduction, and faster checkout processes but currently faces cost barriers for widespread use. It emphasizes the importance of industry collaboration and public education to maximize the benefits and address privacy concerns associated with RFID technology.

1. Chain Store Age Guest Column
RFID – The Future of the Supply Chain
During the 1970s, universal product codes (a.k.a. UPCs or “bar codes”) emerged as a
technology that had a significant impact on the movement and sale of merchandise. Bar
codes gave retailers a better way to track inventory, helped reduce labor costs, and
enhanced the overall customer shopping experience. However, the emergence of the bar
code did not take place overnight. It required years of work developing standards,
winning over minds, and creating the necessary hardware.
Well, as revolutionary as the bar code was, it may soon be a thing of the past. While still
in the developmental and testing stages, radio frequency identification – known as RFID
– is emerging as the next generation of the bar code, although far superior in many ways.
RFID tags are tiny microchips, embedded in an individual product or case of
merchandise, that transmit their unique ID code by emitting a radio wave that is picked
up by a reader. Using RFID, cases of merchandise on pallets could be scanned from a
distance of up to 15 feet instead of each case’s bar code having to be scanned individually
with a hand-held device. Also, readers built into shelves could alert a store when a
particular product needs to be replenished, and RFID can help reduce theft and shrinkage,
which costs retailers about $33 billion annually.
For an extra investment, the basic functioning of a “smart tag” could be upgraded to store
additional information. Point of Sale systems could process a shopping cart full of
merchandise in seconds, making self-checkout quicker and simpler for the customer.
The underlying technology already exists and several major retailers and manufacturers
have begun testing programs. They recognize that this new tracking system will
transform the supply chain, further reducing labor costs and offering instant, up-to-the-
minute inventory information.
While RFID is currently too expensive to be practical for widespread deployment, most
experts agree that by the end of this decade the price of each microchip will be low
enough to encourage broad industry use. So, while not practical as a bar code
replacement for several more years, retailers who prepare for the RFID future now will
be best positioned, and first to realize its benefits.
Most customers will readily embrace this easier shopping experience and the cost savings
RFID technology will generate. However, RFID’s ability to gather information about a
customer’s purchases and the potential to identify customers when they enter a store may
create concern among some privacy advocates. It will take industry-wide efforts to
educate the public and lawmakers on this new technology.

2. NRF’s CIO Council, composed of CIOs from leading retail chains, serves as the leading
forum for addressing retail technology issues, including RFID implementation. NRFtech
2003: IT Leadership Summit, hosted by the CIO Council in August, will bring retail
companies together with technology providers to develop common frameworks for retail
technology. Working with the Association for Retail Technology Standards (ARTS), a
division of NRF, the CIO Council is collaborating with the independent Uniform Code
Council to maximize the potential of RFID chips. This cooperation is essential to prevent
bumps down the road, and ensure that the retail industry is engaged and informed on
matters that have important business ramifications.
The combined technical standards expertise of ARTS and strategic decision-making
objectives of NRF’s CIO Council have made NRF a full-scale technology support
organization. NRF’s expertise working with lawmakers will be vital to ensuring that any
emerging public policy proposal that might touch on this new technology will be based
on reality, not myths, and will not endanger retailers’ use of RFID in the future. Through
attendance at NRFtech and involvement in the CIO Council, ARTS, and general NRF
membership programs, retailers will gain the insights and information now to harness the
technology of the future.
RFID is the wave of the future. Don’t let your business get left behind.