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Source: Bennett Gold's Business Awareness Bulletin

Posted on December 29, 2004

      Radio frequency identification, or RFID, is being heralded as the most important development in tracking merchandise since the barcode. And interestingly, both were given momentum by Wal-Mart, which instructed its vendors to adopt the technology.

      RFID tags are chips about the size of a grain of sand and equipped with antennas that beam data to scanners. The tags have been implanted in pets for several years to verify ownership and the FDA in the United States is considering allowing them to be used in humans for medical purposes.

RFID v. Bar Codes

      RFID technology differs from bar codes in several important ways:

      Specific information. Bar codes apply only to an item. Every can of a particular brand of soda has the same bar code number regardless of where it's located. RFID technology, however, gives each can of soda its own code that can be linked to a consumer using a credit, debit or frequent shopper cards.

      RFID systems speak. Tagged items communicate to electronic readers over their entire lives, from the production plant to the retailer to the garbage. From a marketing perspective, this offers unparalleled access to data such as the place and date purchased, colour chosen, price paid, consumer identification, attitudes and behaviour.

      RFID has a long reach. Tags can be read over distances, in harsh weather conditions, and in other situations where barcodes don't work. Bar codes require line-of-sight reading.

Growing Global Reach

      RFID technology is finding growing support among companies around the globe:
- Ford Motor Co. announced that tires on its vehicles will contain a transponder for identification.
- Gillette teamed up with Wal-Mart in the United States and retailer Tesco PLC in England to test "smart" shelves that allow real-time tracking of inventory levels.
- Microsoft plans to develop software that allows retailers, manufacturers, and distributors to use RFID tags to track goods within stores and factories.
- Metro AG, a German retailer, is developing "stores of the future," where products are equipped with RFID tags.
- Marks & Spencer, a large British retailer is developing a project to tag clothing. The company also placed RFID tags on 3.5 million produce delivery trays.
- Prada, an Italian fashion retailer, is using RFID to label shoes, garments and other items as part of a "smart retailer" trial.
- The European Central Bank plans to embed RFID tags into Euro bank notes by 2005.

      RFID tags increase companies' ability to manage inventory, fight counterfeiting, gauge marketing efforts and even track library books.

      In Canada, the technology has begun to make inroads:
- Air Canada uses RFID to track galley equipment.
- Oil companies use RFID to allow customers to pay for gas without cash or credit cards through a transponder located in the pump.
- Commuters on the Highway 407 toll road north of Toronto are billed with RFID transponders.
- The Western Beef Development Centre in Saskatoon is running an RFID trial because meat packing plants say they will start providing carcass information only if electronic tags are used.
- Public libraries in Ontario plan to use RFID systems to improve stock checking and efficiency levels.

      So far, RFID tags are mainly affixed to cases and pallets, but companies are quickly expanding their uses.

      Eventually, the tags might replace bar codes altogether so all the items a customer buys will be scanned at once when the customer leaves, eliminating check-out lines.

      But despite the innovation, RFID is becoming the latest battleground over privacy issues because it's possible the technology could allow products to be tracked to customers' homes and beyond. Privacy advocates worry that the tags will link to personal information about the purchasers and enable retailers to track everything consumers buy without their knowledge.

      With access to the right databases, a simple identifier such as a credit card or phone number could be linked to other personal information, such as name, address and purchases made through a shopping club.

      And that would violate the federal Personal Information Protection and Electronic Documents Act (PIPEDA).

      If your business is considering adopting RFID technology, keep in mind that you are accountable for the information you store on the tags. To help ensure you comply with PIPEDA you should, among other steps:
1. Obtain consumer consent before storing personal information on tags.
2. Store the minimum amount of data necessary.
3. Guarantee the personal information will be safeguarded and will not be disclosed for purposes other than those for which it was collected.
4. Inform the public of privacy policies and the use of RFID technology.
5. Allow consumers to access data collected about them on RFID tags.
6. Create a written policy covering RFID use, including the rationale for the system, obligations under the law, and who is responsible for compliance and dealing with breaches.
7. Develop a mechanism for handling complaints and challenges about the RFID system.

      Remember that although RFID technology offers a fast and effective way to track inventory, it can expose businesses to liabilities for invasion of privacy.

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