The News – 02/14/03

Razor King Cuts RFID Tag Deal

Although Radio Frequency Identification (RFID) technology has been around for about 40 years, the technology recently got a big boost when Gillette committed to buy up to a half a billion RFID tags.

RFID is a technology that allows manufacturers, warehousers, and retailers to wirelessly track inventory without physically scanning a bar code. A passive radio circuit is embedded in a cheap (from under 40 cents to about $1 each) adhesive tag. Special radio scanners activate the tags and read data from them. Applications in inventory management are fairly obvious – doing inventory is a snap, you can know immediately what has shipped and what has not, and you can locate a particular pallet among the thousands in the warehouse.

It’s not surprising, then that thus far, RFID applications have been concentrated in the supply chain automation industry, boosting RFID industry sales to $951 million in 2001, according to research firm Venture Development Corp.

But retailers and manufacturers are also using RFID tags for other applications, such as theft (shrinkage) control and to help trace the lifecycle of a product, such as a component in an auto. For example, Bloomington-Normal Seating Co., a manufacturer of seats for automakers such as Mitsubishi, began putting RFID tags on seat components earlier this year. The tags allow the company to know exactly where each component for a single vehicle is at any time. British retailer Marks & Spencer is using more than 1.2 million RFID-tags on plastic totes used for picking and sorting food, reducing the time it takes to identify items in a container—a process that used to be completed by bar code scanning—by 84 percent.

Most industry observers felt that by 2006 tags should sell in volume for about a nickel apiece and readers will drop to $100 and once the price drops other applications become practical. Well the future is now. Gillette’s half a billion tags is probably more than the total number of RFID tags in use today. Plus their chosen vendor, startup Alien Technology, said in July that it can assemble the tags for less than ten cents each.

Gillette said it would tag pallets and cases, equipping its two major packaging and distribution centers with RFID technology to internally track Venus women’s razor blades as they move from packing to inventory, are assembled on pallets and verified, and then are put on trucks.

The company, a founding sponsor of the Auto-ID Center at MIT (see the TrendSpot and this FAQ for more info), has other applications in mind as well. Gillette plans to use the tags with smart shelf technology developed for them by the Auto-ID Center. The smart shelves have built-in RFID readers and they are being tested in stores in the US and UK. A Gillette spokesperson said the company will attach the labels to grooming products such as razors and razor blades that ship to Wal-Mart stores. When supplies on store shelves run low, they alert stock clerks to refill them, and when stockroom shelves run low, the system orders more. The trial will run throughout the year. “We want to make sure the shelf is always full,” says Dick Cantwell, Gillette's VP of worldwide beauty care products.

“They're going to drag RFID to the mainstream,” said Deepak Shetty, a Frost and Sullivan analyst. “Many businesses have been waiting for innovators like Gillette and Wal-Mart to prove that the technology works before adopting it themselves.” Gillette’s purchase is also the first commercial order for products that incorporate the Electronic Product Code (EPC) developed by the MIT Auto-ID Center, of which Gillette’s Cantwell is chairman. Cantwell says that by 2006, if the tests go well, Gillette will have installed RFID systems in most of its warehouses and more of its products and will be sharing data with suppliers. “In 10 years, RFID will be as ubiquitous as the bar code,” he says.

Not only are there obvious benefits in tracking individually tagged cans of shaving cream and deodorant at retail, but some predict an automated home of the future that can read information from the tags (or look up information from identifiers embedded in the tags) and act upon it. For example, your pantry could tell you when you’ve used the last can of tomato sauce, or your microwave could find out how to cook your frozen dinner by reading the RFID tag.

All this progress certainly won’t come with a cost. For example, manufacturer, distributor, and retailer databases will have to be renovated to make room for more data. Peter Abell of AMR Research says, “Now, for every place a company has a Universal Product Code in its database, it will need a location, a time and a block of serial numbers.” The effort to do this will be huge. “This is bigger than Y2K,” Abell says.

Nonetheless, many industry observers feel that Gillette’s move has really started the ball rolling. And there have been rumors that another large manufacturer is about to buy upwards of 2 billion tags.

Baseline Magazine

Briefly Noted

• Shameless Self-Promotion Dept.: I’ve reworked the Opinion section, adding a Prediction Tracking page to track the various predictions I’ve made, and also added a Stuff I Said page with some quotes of things I said a decade ago on the Net.
  
  I repurposed and adapted an article about the wireless service known as Short Messaging Service (SMS) for the Reside newsletter. It’s entitled, Wherever they go, there you are and it points out how marketers can use – carefully – this new way to contact their customers.
  
  I’m featured in Manyworlds’ Thought Leader Showcase, which lists a few of the white papers I’ve done. I’ve also added their fancy icon to the StratVantage site.
  
  Finally, the CTOMentor wireless white paper, You Can Take It with You: Business Applications of Personal Wireless Devices, is available at ITPapers.
  
  
• Smart Dust: Self-organizing wireless-sensor networks a now being prototyped worldwide. The pilots are built on the "smart-dust"concept originated by Kris Pister, associate professor of electrical engineering at the University of California at Berkeley. The smart sensors, called Motes, were created by the Berkeley and Intel, and consist of a sensor array board mated with a generic wireless controller board, both in a hermetically sealed enclosure. They are still larger than dust, but once single-chip realizations are available, researcher figure they can downsize the wireless sensors to a volume less than a cubic millimeter. The researchers created TinyOS and TinyDB as well as a many Tiny applications to facilitate the self-organizing of Motes into a sensor network.
  
  They forsee several interesting applications, besides spying on law-abiding folks (sorry, news of Ashcroft saying he needs even more power to detain citizens for no particular reason has got me spooked):
  
  Engineers also envision other uses for the Smart Dust project, including:

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