`Smart tags' let retailers' goods track themselves

Wal-Mart hopes to use system for all suppliers

April 25, 2004|By CHICAGO TRIBUNE

Crates of shampoo headed for Wal-Mart's shelves will silently announce their arrival to a computer when they roll through a cavernous Dallas warehouse.

The computer will immediately determine whether they are the same crates of Pantene that left Procter & Gamble's plant in Iowa City. If any are missing, it will issue an alert.

The first tests for this system, scheduled to begin this month, will be an early step in a closely watched "smart tag" program that eventually will involve all of Wal-Mart's 25,500 suppliers and the 3.7 billion crates they ship annually.

A smart tag contains a chip with an antenna that communicates using radio waves.

The world's biggest retailer plans to use a network of smart tags, or radio frequency identification technology, to save billions in inventory costs while increasing sales by reducing the times when items are out of stock.

Wal-Mart Stores Inc.'s requirement that its 100 biggest suppliers start tagging shipments with RFID chips by January is a big boost for a fledgling industry that promises to push products faster and with greater precision from plants to consumers.

"There are so many people jumping up and down in that Wal-Mart cloud of confusion, it's really created a technology feeding frenzy," said David Adams, strategy and technology senior vice president of TrenStar, which manages containers for companies such as Kraft Foods Inc.

The sheer size of Wal-Mart's initiative, and a similar requirement by the U.S. Defense Department for its suppliers, promises to advance a technology that one day could create an automated world of objects that communicate without human intervention.

Shirts might tell washing machines how to launder them, and frozen dinners could tell microwave ovens how to cook them.

The spotlight is on Wal-Mart's program and similar initiatives by chains including Target Corp. and Albertson's Inc.

Consumer-goods manufacturers are scrambling to figure out how to meet Wal-Mart's deadlines and how to pay for expensive systems that are still evolving. Meanwhile, technology companies are jockeying for business and leadership positions.

Total spending on RFID hardware, software and services is expected to hit $2.1 billion next year, nearly double last year's $1.1 billion, according to Venture Development Corp.

Many predict an early shakeout among vendors and dashed expectations.

"We think there's a big hype bubble that's going to burst," said Janiece Webb, senior vice president and general manager of Motorola's RFID start-up, Secure Asset Solutions. "We think the Wal-Mart initiative will take off, but it's going to go through some bumps along the way."

Wal-Mart's RFID project manager, Simon Langford, is confident that the program is well on track. "It's refreshing to see how [suppliers] are approaching this. A lot of them have identified internal benefits," he said.

The push to use RFID in the consumer world started in 1999 at the Massachusetts Institute of Technology with the development of a common language and standards.

MIT's Auto-ID Labs, backed by such companies as Procter & Gamble and Gillette Co., developed a 96-bit electronic product code capable of identifying 268 million manufacturers and an infinite number of products.

A crate of Pantene shampoo in Wal-Mart's warehouse would communicate its code to a reader, which would relay the information to a computer.

The Chicago Tribune is a Tribune Publishing newspaper.

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