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Pinpoint Control

Tiny chips may revolutionize all areas of supply-chain management
What's needed for full-scale rollouts, in addition to the RFID tags, are scanners that work with the tags and services for businesses that need integration help, Ellis says. The Auto-ID Center is slated to publish a complete standard in the second half of next year. "If this technology is going to deliver the benefits, it's going to require a common approach, and that's not what we have today," Ellis says.

Unilever is working with pallet rental company CHEP International to develop reusable shipping pallets with built-in RFID tags and with RedPrairie Corp. on applications for warehouse management that work with RFID tags. But there's more to do. Unilever hasn't yet tested how RFID data will be managed across its SAP applications or how new data sources will affect its databases. "It's still not entirely clear how the whole system is going to work," Ellis says.

Vendors also need to figure out how their systems will process the massive amounts of data potentially produced by RFID technology. "You're looking at very large amounts of transactions and data measured in the tens or hundreds of terabytes," says Jon Chorley, senior director of development for Oracle's inventory- and warehouse-management products. Oracle, SAP, and others are enhancing their apps to support RFID.

One potential benefit of the technology, the ability to track items after they're purchased, could make it easier for manufacturers to recall defective products or provide services. For instance, a "sprayable" RFID tag being developed by NASA's Marshall Space Flight Center and due commercially in three to five years could be used by automakers to monitor parts on assembly lines and, later, to service those parts, says Fred Schramm, manager of high-risk research at Marshall. Yet such capabilities could trigger a backlash from consumers worried about having their movements tracked or intrusive profiling and marketing. Experts say the devices, which transmit signals short distances to RFID readers, can be turned off, so that shouldn't happen. Still, because of potential privacy concerns, Unilever isn't ready to use the tags on individual products. "We would have to have a much clearer idea of what consumers think," Ellis says.

And cost remains an issue for some. A 5-cent RFID tag "isn't cost effective for gum," says Jeff Martin, director of Wm. Wrigley Jr. Co.'s Global Center of Excellence. "Even at the box or pallet level, it's just not in our future right now," (see story, "New Wrigley Flavor: SAP"). To be practical for some retail applications, RFID tags need to drop to a penny or less, says Christian Knoll, VP for global supply-chain management with SAP.

Others, however, aren't waiting. Old Dominion Freight Line Inc. is using RFID tags on 12,000 pieces of trucking equipment to control inventory in its freight yard, track shipments, and monitor employee productivity. The result: a one-year payback. "It saves clerical time and helps us manage yard time," says David Congdon, president and chief operating officer.

As the cost of RFID tags drops from dollars to pennies, more business-technology professionals will begin to get out the scratch pads to assess when and where to use the devices. "It's easy to get wrapped up in the cost of the chip," Unilever's Ellis says. "Ultimately, it's a function of what you save."

-- With John Foley, Robin Gareiss, Mary Hayes, and Cheryl Rosen