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12/3/2004
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Wal-Mart: Thinking Ahead On RFID

Wal-Mart thought about using RFID in supply-chain apps more than a decade ago, but cost issues made the idea prohibitive.

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Twelve years ago, radio-frequency identification technology was in use, but not widely, and very few people were talking much about its potential beyond certain limited applications. RFID tags, at about a cost of $20 a pop, were used most prominently on the side of railway boxcars by companies that wanted to keep track of shipments' status. But an executive at Wal-Mart at the time was already thinking about how the technology might transform the retail industry. Harley Heinrich and René Martinez, now chief technologists at technology provider Intermec Technologies Corp., were working in IBM's research organization back in 1992. They recall that Jim McGroddy, at the time senior VP of research responsible for the work of about 2,500 technical professionals in seven research laboratories worldwide, was approached by a Wal-Mart exec with a request to make an affordable RFID tag that could be used in supply-chain applications.

"It was a flamboyant project within IBM Research," says Heinrich. "After Wal-Mart approached IBM, we would give presentations at IBM customer conferences and talk about new technologies on the horizon. We showed the concept of RFID in the supply chain to the 500 attendees--not IBM technology because we didn't have it at that time--but talked about the concept and what it could do." (For details on what IBM is doing on RFID today, see "IBM's R&D Projects Include RFID, New Search Techniques.")

It would be years before RFID tags came down far enough in price for them to be the focus of Wal-Mart's and other retailers' big supply-chain initiatives. But in 1996, Heinrich and Martinez created one of the first working single-chip passive RFID tags while at IBM Research, they say. The patents were later sold to Intermec.

Heinrich says the industry eventually will see a 1-cent tag--a price point Wal-Mart couldn't have even dreamed of in 1992. "There will need to be breakthroughs to get the tag down to 1 cent," he says, but "there is a lot of interesting stuff on the horizon, as well as advances in chip packaging and conductive plastics."

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