Beware RFID

National Public Radio’s “Morning Edition” program today had a positive piece about Wal-Mart’s increasing use of radio frequency identification tags, or better known as RFID. According to the report, RFID has the potential to save the private sector billions of dollars because the technology can better manage inventory, such as reducing the amount of produce lost to spoilage or better tracking goods that in the past were simply lost in the supply chain.

The federal government, namely the Defense Department and the Department of Homeland Security, has been a leader in using RFID, but the results have been mixed to disappointing. DOD uses RFID to track supplies it sends to troops, but the Government Accountability Office reported in January that the department had yet to identify ways to measure how RFID reduces the time it takes the department to send supplies to troops as well as how much it improves its ability to keep track of those supplies. The findings from taking those measurements would determine if the investment was worth it.

Also in January, the GAO reported that the U.S. Visitor and Immigrant Status Indicator Technology (US VISIT) program, the system that DHS is in charge of building to track when foreign visitors enter and leave the United States, was unable to develop an RFID system to automatically determine when foreign visitors left the United States. During a one-week period at an exit point on the West Coast, only 14 percent of the RFID readers correctly identified exiting visitors, well short of the target rate of 70 percent.

Even the private sector is finding it a bit of a challenge to manage RFID and to come up with a definitive return on investment. That includes Wal-Mart. "Many of these consumer packaged goods companies are really struggling with the business case [for RFID]," Christine Overby, an RFID analyst at Forrester Research, told CIO Magazine in late 2004 about WalMart’s and other companies' RFID programs. "These are very costly projects, and they're hard to do with a technology that's a moving target." A white paper on cio.com also argues that the payback for investing in RFID could take a long time.

Update: EU Embraces RFID

InfoWorld reports that the European Union views radio frequency identification tags as playing a large role in its economy in the future.

"The potential growth of the RFID market is 'huge,' Information Society and Media Commissioner Viviane Reding told reporters Thursday at the Cebit trade show in Hanover, Germany," according to the report. " She estimated that the European RFID market will grow from â'¬500 million ($660 million) in 2006 to â'¬7 billion by 2016."

But Reding also warned industry to pay more attention to security and privacy concerns that have dogged RFID, as highlighted by such advocacy groups as RFIDKills.com. In classic EU style, a stakeholder group will report back with recommendations. "Reding stressed her intention to avoid a 'top-down approach,' or overregulation, which could stymie RFID development," the article states.