Radio tags for China's products, blood
and people By Jayanthi Iyengar
The Chinese have been at the helm of the
electronic and semi-conductor revolution. They may also
be at the top of the radio frequency identification
(RFID) revolution, thanks to the 2008 Summer Olympics
and Wal-Mart.
The first is understandable. The
Chinese government has plans of showcasing the Chinese
achievements to the world through the Olympics in 2008.
Hence no cost or effort is being spared to harness the
very best in technology to the Olympian event. Yet
having Wal-Mart driving technology in China is another
matter. The mega-retailer has directed its suppliers to
use RFID tags on cartons and pallets, in which the
products are packed, supplied to them. Wal-Mart's RFID
implementation (currently in the United States) is going
to be in stages, but other retailers such as Tesco and
Metro AG have given similar directions to their
suppliers.
The catch here is that China has
become the factory to the world. Its manufacturers
supply directly to Wal-Mart and other such retailers.
They also supply to the suppliers of Wal-Mart and
others, which buttons up roughly 50% of all products
being sold by the mega-retailers worldwide. Naturally,
given the depth of China's involvement in global
manufacture, the retailer's directions to its suppliers
in the US on RFID tags will have a major impact on China
in course of time. "The Chinese are not unfamiliar with
RFID technology. However, the true impact of Wal-Mart's
direction to its suppliers would be felt in 12 months'
time in China," estimates Tony Cotterell, principal and
consumer business industry leader in China for Deloitte
Touche Tohmatsu.
What is RFID? To
understand the issues, one first needs to understand
radio frequency identification. RFID is a cutting-edge
technology. It is chip-based. It is also a
supply-management tool, which helps retailers manage
inventory better, thereby allowing them to cut costs and
increase profits.
In terms of technology, RFID
has two components. There is a tag with a microchip in
it. The microchip in turn is attached to an antenna that
picks up signals from and sends signals to a reader. The
tag contains a unique serial number, but may have other
information, such as a customer's account number. Tags
come in many forms, such as the smart labels that are
stuck on boxes; smart cards and key-chain wands for
paying for items; and a box that can be affixed to
windshield to enable toll collection without stopping
the vehicle. RFID tags could be active tags, passive
tags or semi-passive tags, meaning they may lie dormant
or send information of varying degrees and types,
depending on how the chip is programmed.
RFID
tags to replace bar codes in retail trade Within
the retail trade environment, RFID tags are expected to
replace the bar code. This is the code displayed on the
sides of product packages. It contains the price and
product identification number, which a shopkeeper is
able to read by running a scanner or reader up and down
the bar code. The bar code facilitates transactions,
rules out human error, and allows the shopkeeper to know
exactly what quantum of a product he or she has sold at
what price.
Very simply explained, the RFID tag
is a more advanced form of bar code. But unlike the bar
code, which requires the product to be taken to the
reader to read the information contained on it, the
chip-based RFID technology allows a retailer to track
the product wherever it is with the aid of radio
signals. Thus if a retailer wants to know where his box
of Kleenex is stored in his large store, the tag would
be able to tell him that is on the third shelf on the
fourth floor of his shopping mall without his having to
search for it.
RFID technology has stirred up a
hornets' nest since many commentators have gone on to
interpret it as meaning "a retailer being able to track
everything including the panty he has sold", and this
has raised privacy issues. Yet the mega-retailers are
unmoved by such concerns and are pushing forward with
their plans to adopt the technology to improve their own
efficiency and profitability.
Wal-Mart has been
at the helm of this movement. Linda Dillman, chief
information officer of Wal-Mart, set the ball rolling on
June 10, 2003. She spelled out Wal-Mart's rollout plan
under which its top 100 suppliers would have to use RFID
tags on their cases and pallets by January 2005, while
another 200 would adopt the tags by 2006. Other
mega-retailers such as Metro AG and Tesco too have
issued such directives to their suppliers.
The
point to be noted here is that at present, the
mega-retailers are demanding that RFID tags be attached
only to cartons and not to individual items and they are
also promising that they will build a self-destruct
character into the chip, so that it would stop
functioning when it leaves their premises. Both these
measures have, to an extent, stemmed worries and have
silenced the privacy brigade. Yet experts such as
Cotterell believe that the real benefits of the new
technology will come when item tags are adopted, since
this will allow retailers to manage their inventories
far better than with pallet tagging, meaning tagging the
larger containers of individual items.
The
China angle In 2002, Wal-Mart sourced US$12
billion worth of products from China. This was 12% of
total US imports from China during that year. Since
Wal-Mart sells products both in the United States and
China, nobody knows what quantum of the $12 billion was
sold in China through Wal-Mart outlets and what amount
found its way back to the US to line the shelves of
Wal-Mart outlets there. Wal-Mart isn't telling, given
the periodic paranoia about Chinese products flooding
the US market, but estimates vary anywhere between 10%
and 70% (depending on whether you are talking to the
pro- or anti-Wal-Mart lobby) of China-made products
finding their way back to the US through this route. If
you add imports by other mega-retailers such as Metro
AG, Carrefour, Tesco and others, the China-sourced
products by retailers adds up to a substantial number.
Understandably, the Chinese government is alert
to the possibility that it is a matter of time before
its suppliers will be forced to tag their supplies with
RFID tags, and have started to prepare for this
eventuality. An indication of this comes from the
statements made by Chinese government officials at
various public forums. Zhao Bo, a senior Information
Industry Ministry official, stated at the seventh
International Fair of Smart Cards held in Beijing that
China aims to develop applications this year for
"e-tags" (the Chinese version of RFID tags) and to turn
them into commercial products. Zhao is deputy director
of the Computer and Information Advancing Department of
the Ministry of Information Industry. He added that the
efficient development of China's smart-card and RFID
industry is important because cards with embedded chips
are becoming "closely related to the daily life of our
people".
Zhou is not alone in thinking ahead
about China's RFID preparedness. Rocky Shi, a Chinese
government official, told the RFID World Conference held
in Denver in April that the Middle Kingdom was set to
launch several major RFID-linked initiatives. Shi
estimated that Chinese suppliers would end up using
about 5 trillion tags annually to supply to Wal-Mart
alone during the next two years.
The utility of
RFID technology in the retail sector apart, the Chinese
government is also expanding RFID use domestically. It
has already announced its national ID card program,
which is estimated to consume about a billion
RFID-enabled cards. The country also has plans of
introducing RFID-enabled chips to track blood bags to
deal with the human immunodeficiency virus (HIV) and
hepatitis. These are the bags that contain the blood
donated by people for use by others. Since the Chinese
consume 47 million bags of donated blood annually, this
could be a source of another RFID tag consumption. As
Shi told the media after the Denver meet, "RFID is not a
technology or product. It is a revolution."
Given such plans and perceived potential, the
country is understandably preparing to host its first
RFID conference and exhibition in October, where it will
showcase technology and applications. Initially, Shi was
supposed to chair this conference, but it is now being
handled by Shorecliff Communications LLC, based in San
Juan Capistrano, California, though Chinese government
backing is likely to be solid behind this event. The
theme of the meeting is China's human preparedness for
RFID. The goal of the conference is to create awareness
and help accelerate investment and capital spending in
RFID and related technology.
Jayanthi
Iyengar is a senior business journalist from India
who writes on a range of subjects for several
publications in Asia, Britain and the United States. She
may be contacted atjayanthiiyengar1@hotmail.com.
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