The Implementation of RFID in the Distribution and Retail Sector - Research Paper Example

Table of Contents Introduction 2 Need of RFID in the Distribution Sector: 2 Scenario of RFID in Retail segment: 3 Literature review: 4 Technologyand types of RFID tags: 6 Advantages of RFID 7 Disadvantages of RFID 7 Risk of Privacy Concern with RFID: 8 8 Limitations of RFID Technology: (Position Statement) 10 10 Solutions to mitigate privacy Concerns: 12 a. Killing Tags at Point of Sale , (Position Statement) 12 b. Blocker Tags , (Position Statement) 13 Recommendations for Sustainable practice of Management with RFID: 13 Introduction RFID is a recent technology explosion benefiting to conventional industry to automate certain functionalities of Distribution like inventory checking of retail stock, integration of POS information to the Supply chain management etc., But this classic IT tool if not utilized with care, may reflect in loosing the interest of public in terms of privacy protection of consumers. The general Privacy issues concerned with RFID tags involve - Consumer profiling and tracking which are high in retail segment The current study tries to identify the advantage and disadvantages of the RFID in the distribution sector from the privacy perspective. And the study also mainly analyses the reality behind the privacy issue of the consumer. The study also concentrates on the supporting guidelines and practices in use for sustainable management to prevent the privacy concerns with RFID. Need of RFID in the Distribution Sector: RFID enables not only automatic supply chain data collection to improve inventory visibility and reduce stock outs at the retail level, it can also result in reduced need for manual handling, labor cost reductions, greater accuracy of shipments, and other benefits, (arcweb) RFID solutions provide real-time information by automatically detecting product movements throughout the distribution process. RFID technology provides real-time inventory visibility while minimizing the need for manual checks, allowing to: - Track pallets, cartons and containers with unmatched speed and accuracy - Automate product identification and authentication - Increase speed and efficiency along with fewer errors throughout the entire distribution process - Improve efficiencies for inventory control and reporting - Gain greater control over costly material handling assets - Improve inventory visibility to feed enterprise systems and giains customer assurance on stock - Reduce Increase in-stock merchandise for higher sales volumes and increased profits - Reduce shrinkage, fraud and spoilage - Automate reporting of all material moves both inbound/outbound and within your facility - Reduce human intervention and decrease labor costs - Gain Competitive Advantage and Operational Excellence with Real-Time Visibility Scenario of RFID in Retail segment: The retailer segment expects that the technology can be used as a next-generation barcode, automating inventory levels, and thus cutting costs for manufacturers and retailers. - The key to success in the retail RFID market depends on optimizing hardware, software and middleware roles and providing one-stop complete suites or solutions, which facilitate easy integration across the three domains," Shyam While RFID is reaching retailers across the revenue barrier, the high level of investment allows only the biggest retailers (typically $5 billion and above in revenues) to pilot and roll out the RFID technology in their stores and distribution centers, Shyam. Literature review: The concepts of Distribution chain and logistics are closely connected in the context of raw materials, manufacturers, transporters, warehouses, retailers, and the customers themselves. The functions include the flow of information, and the transformation and delivery of goods from raw material stage through to the end user (Handfield and Nichols 1999 p. 2; Chopra and Meindl 2001, p. 3). Significant factors that determine the success of a supply chain and distribution outlets include process integration among the suppliers and buyers, networks that connect the partners, and market sensitivity on the basis of information instead of inventory (Christopher 2000, p.38-9). RFID technology has been noted as an example of the emergence of inexpensive and highly effective pervasive computers that will have dramatic impacts on individuals, organizations, and society (Stanford 2003). As the various entities associated with business processes become increasingly mobile in the presence of RFID, the ability of the organization to monitor the location, history, and changing states of these tagged entities increases the level of process freedom referred to by Keen and Mackintosh (2001). Several major buyers and retailers have come to recognize the potential usefulness of RFID technology as a way of tracking physical goods across the supply chain, which has led them to mandate its adoption to their trading partners (Bacheldor and Sullivan 2004). Technology and types of RFID tags: RFID tags are tiny computer chips connected to miniature antennae that can be affixed to physical objects. The most critical applications of RFID, the microchip contains an Electronic Product Code (EPC) with sufficient capacity to provide unique identifiers for all items produced worldwide. When an RFID reader emits a radio signal, tags in the vicinity respond by transmitting their stored data to the reader. RFID tags can be either active, semi-passive or passive: "Passive RFID tags have no internal power supply. The minute electrical current induced in the antenna by the incoming radio frequency signal provides just enough power for the CMOS integrated circuit (IC) in the tag to power up and transmit a response. Most passive tags signal by backscattering the carrier signal from the reader. This means that the aerial has to be designed to both collect power from the incoming signal and also to transmit the outbound backscatter signal. The response of a passive RFID tag is not just an ID number (GUID): tag chip can contains nonvolatile EEPROM for storing data. Commercially available products exist that can be embedded under the skin. Passive tags have practical read distances ranging from about 10 mm up to about 1 metre." (Wikipedia) "Semi-passive RFID tags are very similar to passive tags except for the addition of a small battery. This battery allows the tag IC to be constantly powered. This removes the need for the aerial to be designed to collect power from the incoming signal. Aerials can therefore be optimised for the backscattering signal."(Wikipedia) "Active RFID tags, on the other hand, have an internal power source which is used to power any ICs and generate the outgoing signal. They may have longer range and larger memories than passive tags, as well as the ability to store additional information sent by the transceiver. At present, the smallest active tags are about the size of a coin. Many active tags have practical ranges of tens of metres, and a battery life of up to 10 years. Because passive tags are cheaper to manufacture and have no battery, the majority of RFID tags in existence are of the passive variety. Analysts from independent research companies Gartner and Forrester Research agreed that a price less than $0.10 (production volume of one billion units) is achievable in 6-8 years, thus limiting near-term prospects for widespread adoption of passive RFID; however, the high demand for the tags from Wal-Mart, DoD, etc., has created a big enough market to support these prices." (Wikipedia) Advantages of RFID - No line of Sight Required to read: - Multiple Items Read - Large Data Capacity - Read/Write/Rewrite Capability - Withstand harsh environments Disadvantages of RFID - COST - Lack of Standards - Proximity Issues - Ghost tags - No Proof of Read on Multiples - Affected by metal and liquid - Consumer Privacy Issues Risk of Privacy Concern with RFID: Civil and consumer rights protection groups have identified five major points concerning privacy and civil liberties issues. Rfid Postion paper issues some of the possible privacy threats as given below: Hidden placement of tags. "RFID tags can be embedded into/onto objects and documents without the knowledge of the individual who obtains those items. As radio waves travel easily and silently through fabric, plastic, and other materials, it is possible to read RFID tags sewn into clothing or affixed to objects contained in purses, shopping bags, suitcases, and more."(Spychip) Unique identifiers for all objects worldwide. "The Electronic Product Code potentially enables every object on earth to have its own unique ID. The use of unique ID numbers could lead to the creation of a global item registration system in which every physical object is identified and linked to its purchaser or owner at the point of sale or transfer. "(Spychip) Massive data aggregation. "RFID deployment requires the creation of massive databases containing unique tag data. These records could be linked with personal identifying data, especially as computer memory and processing capacities expand. "(Spychip) Hidden readers. "Tags can be read from a distance, not restricted to line of sight, by readers that can be incorporated invisibly into nearly any environment where human beings or items congregate. RFID readers have already been experimentally embedded into floor tiles, woven into carpeting and floor mats, hidden in doorways, and seamlessly incorporated into retail shelving and counters, making it virtually impossible for a consumer to know when or if he or she was being "scanned." "(Spychip) Individual tracking and profiling: If personal identity were linked with unique RFID tag numbers, individuals could be "profiled and tracked without their knowledge or consent. For example, a tag embedded in a shoe could serve as a de facto identifier for the person wearing it. Even if item-level information remains generic, identifying items people wear or carry could associate them with, for example, particular events like political rallies. "(Spychip) Specific privacy concerns with RFID in Retail Segment: RFID tags have several advantages than the conventional barcode tags giving benefit of adopting the technology. Along with this RFID does also involve lot of privacy issues generated by the demand and hype created by the industry. With RFID, each pack that is labeled and sold out would have a unique ID code which could be tied to the purchaser of that product when they use the same purchasing system like Purchase card or a credit card. With this purchasing system attached to RFID, the purchaser could be tracked when ever entering that same store again, or perhaps more frightening, if they entered any other store with RFID reading capability. The RFID reader can identify the time and date of purchase along with frequency of purchase in the store. The Distributor and store could also tie this information to the purchaser's name, address, and e-mail. Ultimately the Consumer will start receive the targeted advertisements by similar companies, or receive regular mail about other products. Limitations of RFID Technology: (Position Statement) The following technological limitations have been proposed as reasons why consumers should not be concerned about RFID deployment at this time. The perceived limitations are as below: Read-range distances are not sufficient to allow for consumer surveillance: RFID tags have varying read ranges depending on their antenna size, transmission frequency, and whether they are passive or active. Some passive RFID tags have read ranges of less than one inch. Other RFID tags can be read at distances of 20 feet or more. Active RFID tags theoretically have very long ranges. Currently, most RFID tags envisioned for consumer products are passive with read ranges of under 5 feet. Reader devices not prevalent enough to enable seamless human tracking: The developers of RFID technology envision a world where RFID readers form a "pervasive global network" It does not take a ubiquitous reader network to track objects or the people associated with them. GPS can be used to locate a person or a product but tiny RFID tags cannot read satellite signals, nor do they transmit strong radio signals, to be connected with GPRS. A better analogy for how RFID tags help "track" an item is the way a barcode helps FedEx "track" a package Limited information contained on tags. Some RFID proponents defend the technology by pointing out that the tags associated with most consumer products will contain only a serial number. However, the number can actually be used as a reference number that corresponds to information contained on one or more Internet-connected databases. This means that the data associated with that number is theoretically unlimited, and can be augmented as new information is collected. Passive tags cannot be tracked by satellite. The passive RFID tags envisioned for most consumer products do not have their own power, meaning they must be activated and queried by nearby reader devices. Thus, by themselves, passive tags do not have the ability to communicate via satellites. In addition, active RFID tags with their own power source can be enabled with direct satellite transmitting capability. At present, such tags are too expensive to be used on most consumer products, but this use is not inconceivable as technology advances and prices fall. High costs of tags make them prohibitive for wide-scale deployment. RFID developers point to the "high cost" of RFID tags as a way to assuage consumer fears about the power of such tags. However, as technology improves and prices fall, predictions show that more and more consumer products will carry tags and that those tags will become smaller and more sophisticated. Solutions to mitigate privacy Concerns: In order to avoid the privacy concern issues of RFID, some proposed steps to be practiced by the managers are, labeling of all RFID-tagged products very clearly to give consumers an acknowledgement of RFID Products, and if concerned to choose the untagged products. And another option for the consumers who does not want to disclose their information even after buying the RFID tagged products, is Products with "Kill Codes," a command which turns off all RFID tags immediately as the consumer comes into contact with them, thus entirely eliminating the effectiveness of the technology. Another countermeasure against RFID privacy invasion is "RSA Blocker Tags," which try to address privacy concerns while maintaining the integrity of the product. Here the information collected from the RFID reader will not be shared by the outsider but will only be tracked within the premises of retail store. a. Killing Tags at Point of Sale , (Position Statement) Some have proposed that killing the tags at the point of sale, rendering them inoperable, could solve the RFID tag problem. There are several reasons why one cannot believe this approach alone and without other protections will adequately protect consumer privacy: Killing tags after purchase does not address in-store tracking of consumers. Tags can appear to be "killed" when they are really "asleep" and can be reactivated The tag killing option could be easily halted by government directive. Retailers might offer incentives or disincentives to consumers to encourage them to leave tags active. The creation of two classes of consumers. b. Blocker Tags , (Position Statement) RFID blocker tags are electronic devices that should theoretically disrupt the transmission of all or select information contained on RFID tags. The proposed blocker tag might be embedded in a shopping bag, purse, or watch that is carried or worn near tags with information consumers want blocked. Blocker tags are still theoretical. According to our understanding, the blocker tag does not yet exist. Until a blocker tag is built and tested, there is no way to know how effective it will be and whether it can be technically defeated. And also, The blocker tag Encourages the widespread deployment of RFID tags. The blocker tag could be banned by government directive or store policy. Adds a burden to consumers Fails to protect consumers once products are separated from the blocker tag. The creation of two classes of consumers.- those who block tags and those who do not. Recommendations for Sustainable practice of Management with RFID: Principles of Fair Information Practice gives guidelines for organizations which wants to implement RFID, with certain practices that can avoid the privacy issue concerns. RFID technology and its implementation must be guided by strong principles of fair information practices (FIPs) under the following lines: Openness, or transparency: RFID users must make public their policies and practices involving the use and maintenance of RFID systems, and there should be no secret databases. Individuals have a right to know when products or items in the retail environment contain RFID tags or readers. They also have the right to know the technical specifications of those devices. Labeling must be clearly displayed and easily understood. Any tag reading that occurs in the retail environment must be transparent to all parties. There should be no tag-reading in secret. Purpose specification: RFID users must give notice of the purposes for which tags and readers are used. Collection limitation: The collection of information should be limited to that which is necessary for the purpose at hand. Accountability: RFID users are responsible for implementation of this technology and the associated data. RFID users should be legally responsible for complying with the principles. An accountability mechanism must be established. There must be entities in both industry and government to whom individuals can complain when these provisions have been violated. Security Safeguards: There must be security and integrity in transmission, databases, and system access. These should be verified by outside, third party, publicly disclosed assessment. At its final board meeting in late October, the Auto-ID Center, a nonprofit research organization that developed the Electronic Product Code (EPC) stated that effective management of RFID should involves the guidelines practice in the areas like, 1. Consumer Notice, 2. Consumer Choice, 3. Consumer Education, 4. Record Use, Retention and Security. Conclusion: The Implementation of RFID in the Distribution and retail sector along with the involvement of many benefits also poses some threats in the area of privacy concerns, as it is also evident in other industry sectors. Only educating and acknowledging them with proper technology education can avoid the most of the myths and fears involved with RFID consumers. Along with this there is a need to the practicing organization to follow the fair information practices advised by authorities in order to build the trust in the consumers. On analyzing the advantages, disadvantages and limitation of the RFID very closely, one can conclude on the beneficial measures of the technology at an affordable cost in near future, especially in the retail segment. References: 1. RFID Position Statement, avaialble from asccessed on April 28th, 2006. 2. Advantages & Disadvantages of RFID, available from accessed on April 27, 2006 3. Advantages & Disadvantages of RFID, Available from accessed on April 27, 2006. 4. Christopher Koch, The ABCs of Supply Chain Management, available from < http://www.cio.com/research/scm/edit/012202_scm.html -->accessed on April 30, 2006. 5. Interest in RFID Solutions Rises as Retailers Seek to Improve In-store Efficiency, available from http://www.frost.com/prod/servlet/press-release.pagdocid=50742694&ctxixpLink= FcmCtx1&ctxixpLabel=FcmCtx2 -->accessed on 28 April 2006. 6. Handfield, R.B. and Nichols, E.L. (1999), Introduction to Supply Chain Management: Logistics Management in China, available from accessed on 28 April 2006. 7. Keen, P. G. W., and Mackintosh, R. The Freedom Economy: Gaining the M-Commerce Edge in the Era of the Wireless Internet: Research Directions on RFID, available from accessed on 2nd May, 2006. 8. Bacheldor and Sullivan: The Freedom Economy: Gaining the M-Commerce Edge in the Era of the Wireless Internet: Research Directions on RFID, available from accessed on 2nd May, 2006. 9. Types of RFID tags, Available from accessed on 3rd May, 2006. 10. Chris Richard, Can your razor blade spy on you; available from http://www.csmonitor.com/2003/1106/p14s01-stct.html Accessed on April 28, 2006. 11.Jerry Brito, Relax Don't Do It: Why RFID Privacy Concerns are Exaggerated and Legislation is Premature, available from accessed on April 26, 2006. 12. Beth Givens, Privacy Rights Clearinghouse, RFID and the Public Policy Void (Aug. 18, 2003) (presented to Joint Committee on Preparing California for the 21st Century, California Legislature, Sen. Debra Bowen, Chair), available at accessed on 28th April, 2006 13. Auto-ID Centre, Executive Briefing, Public Policy: Understanding Public Opinion 6 (Feb. 1, 2003), accessed on 27th April, 2006. 14. Charles Homs, Exposing The Myth Of The 5-Cent RFID Tag, Forrester Research, at accessed on April 26, 2006. 15. Matt Hines, RFID Deadline Hits a Wall, Study Says, C-Net News.com, available from accessed on 29th April, 2006. 16.Christine Spivey Overby, RFID At What Cost What Wal-Mart Compliance Really Means, Forrester Research, at accessed on April 26, 2006. 17. Auto-ID Center Field Test Report, RFIDJOUNRAL.COM, available from accessed on May 1st, 2006. 18. Federal Trade Commission, Radio Frequency IDentification: Applications and Implications for Consumers, available from accessed on 28th April, 2006. 19. Joanna Ramey, RFID: Is It A Threat To People's Privacy Lawmakers Act to Restrict Use of the Devices in Stores, while retailers question the need for legislation, Women's Wear Daily, May 2, 2006. 20. Mark Baard, Lawmakers Alarmed by RFID Spying, Wired News, available from accessed on April 25, 2006. 21. Mark Roberti, RFID's Consumer Benefits; available from accessed on April 26, 2006. 22. Zoe Davidson, RFID Right to Know Act of 2003, (CASPIAN, Boston, Mass.), available from accessed on April 29, 2006. 23. Beth Givens, Privacy Rights Clearinghouse, Implementing RFID Responsibly: Calling for a Technology Assessment: Radio Frequency Identification: Applications and Implications for Consumers ; available at accessed on April 28, 2006. 24.Christine Spivey Overby, Commentary: An RFID code of conduct, C-Net News.com, available from accessed on April 28, 2006. 25. Larry Dignan & Kim S. Nash, RFID: Hit or Myth, eWeek, available from accessed on April 28, 2006. 26. Jane Black, "Playing Tag with Shoppers' Anonymity," Business Week Online; Available from accessed on April 28, 2006. 27. Privacy risks of Radio Frequency Identification "tagging" of library books, Available from http://www.eff.org/Privacy/Surveillance/RFID/20031002_sfpl_comments.php accessed on April 24, 2006. 28. Hiawatha Bray, You need not be paranoid to fear RFID, April 30, 2006, available from Accessed on April 27, 2006 29. Jonathan Collins, Consumers Voice Opinions on RFID; survey on US consumers for RFID by Cap Gemini Ernst & Young, Available from Accessed on April 27, 2006. Read More