(2 of 5)
And that's precisely what freaks privacy advocates like Katherine Albrecht, founder of New Hampshire--based CASPIAN (Consumers Against Supermarket Privacy Invasion and Numbering). In Albrecht's nightmare, her grocer scans her credit card--at the bottom of her purse--and tracks her around the store recording her selections. Police come knocking after tracing an RFID-tagged soda can found at a crime scene to her credit card. While RFID certainly has the potential to be the most invasive consumer technology ever, supporters--consumers themselves, after all--are working on safeguards, such as "kill codes" for tags after checkout. "Privacy mavens are going to wring their hands over this, and I'm sympathetic," says Saffo, "but RFID is too good to stop."
Kevin Ashton's obsession with RFID began with a single shade of lipstick. When he launched Oil of Olay's ColorMoist Hazelnut No. 650 at Procter & Gamble in 1997, it was popular--too popular. "Four in 10 stores couldn't keep the item on the shelf," says Ashton, "and we were losing money because of it." He needed to track this item and others through the supply chain so clerks would know when to reorder and replenish the shelves. It took Ashton a year to identify RFID as a technology that would solve his problem and to hook up with two M.I.T. professors who could help him. The profs, Sanjay Sarma and David Brock, had their own obsession: getting a robot to recognize anything, whether a sheep or a car, that crossed its path. That task proved daunting until Sarma had a revelation: "Why don't you just ask the damn thing what it is?" Thus was born the idea for giving each item a 96-bit code, or EPC, to communicate its identity.
In 1999, with the help of P&G and Gillette, the three men co-founded the Auto-ID Center at M.I.T. to pursue RFID uses. Today 103 companies are members, including consumer giants like Johnson & Johnson, Kimberly-Clark, Kraft Foods and Unilever. Ashton estimates that U.S. retail giants alone lose up to $70 billion a year in potential revenue because of their labyrinthine backroom networks. Half of that loss results from failure to restock popular items. The rest comes from lost or stolen items (shrinkage, in the parlance), particularly stuff like Gillette's Mach 3 razor blades and Duracell batteries--possibly the two most frequently stolen items in the world. (If you doubt it, look at all the Mach 3 blades selling on eBay, says Ashton.) What if a retailer could always know the whereabouts of every razor blade? The Accenture consulting firm, an Auto-ID member, says such a system--Auto-ID's holy grail--could increase sales 1% to 2%, decrease inventory 10% to 30%, and reduce labor costs between 5% and 40%. Those are huge numbers in the $3.6 trillion retail industry.
Manufacturers and retailers are moving forward with RFID for backroom logistics. In June Wal-Mart CIO Linda Dillman gave the firm's 100 top suppliers--which provide half the goods on its shelves--a veiled ultimatum about the stuff flowing into its 103 U.S. distribution centers. Vendors who don't use EPC codes on pallets and cases by 2005 could risk losing business. "By 2006, we'd like to roll it out with all our suppliers," says spokesman Tom Williams. Wal-Mart, which did much the same with the bar code, has admitted there is no timeline for RFID-tagging each product--reassuring news for privacy wonks.