Industry uptake of RFID increases despite privacy concerns

Consumer goods, healthcare, defence, government, transportation and automotive sectors all benefiting from radio identification technology.

RFID technology is having a tangible impact on a wide array of industries across the globe, according to a new briefing paper by the Economist Intelligence Unit. Companies in the retail sector have been the fastest to adopt RFID, but programmes in consumer goods, logistics, life sciences, automotive and government are now delivering reduced costs, better inventory control and improved responsiveness to consumer demand.

RFID (radio frequency identification) is a wireless technology consisting of tags and readers that can be used to exchange information about items, people or animals. Although most commonly used to track and identify goods and materials within supply chains, the technology is also being used in applications as diverse as contactless payment systems, passports and patient identification in hospitals. Wider industry adoption will help grow the global market for RFID from $1.4bn in 2003 to $10.9bn by 2009, according to US market research firm ABI Research. 

The briefing papers findings are published today in RFID comes of age, a report written by the Economist Intelligence Unit and sponsored by The North of England Inward Investment Agency (NEIIA), an organisation responsible for promoting direct business investment from North America.

The main findings include the following:

• RFID is gathering momentum. The decision taken by leading global retailers to mandate use of RFID by their suppliers, aided by the emergence of global technical standards, have eliminated any doubt that the technology will be used on a broad scale. Pilot programmes in retail, consumer goods, logistics, life sciences, automotive and government are under way and are already producing tangible benefits such as reduced costs, better inventory control and improved responsiveness to consumer demand.
• The supply chain is becoming smarter. RFID has already made its mark on the supply chain, with companies like Wal-Mart, Tesco and Gillette using it to track inventory and improve stock replenishment. But to fulfil its potential, the technology needs to be integrated into operational management tools such as ERP (enterprise resource planning) software.
• RFID works for people as well as things. Outside of the supply chain, a range of other applications are emerging, especially in applications that enhance customer convenience, such as contactless payment systems. Another growth area will be in identifying and authenticating people or items for safety or security purposes, such as within passports or to verify a patients identity at the operating table.
• Much work remains to be done. For all its promise, a range of technical, business and political barriers to RFIDs development still exists. Standards bodies and academic institutions need to harmonise hardware and software standards globally, while companies should lay out a framework that helps them understand and address the process changes required to get value from the technology.
• Privacy can be protected without killing RFID. The use of RFID in consumer goods has sparked controversy about consumer privacy. Although some of the concerns raised overstate RFIDs capabilities, there are genuine issues to be resolved, such as the ability for anyone with an RFID reader to track people by the items they wear or carry. This report concludes that legislators should require that RFID tags be deactivated at point of sale to allay privacy concerns, but not require the permanent killing of stored data, as this would limit users ability to opt-in to interesting post-sale applications that benefit consumers as well as businesses.

RFID is being used successfully in corporate supply chains, and there are a range of potentially valuable applications in the pipeline, said Gareth Lofthouse, director of custom research in Europe at the Economist Intelligence Unit. But for RFID to achieve its potential, the industry must address valid concerns over customer privacy.

"NEIIA commissioned the report to help promote informed debate about the RFID industry, commented David Allison, Chairman of The North England Inward Investment Agency. The report provides quality content that we believe will help RFID companies meet the broader challenges and opportunities confronting this burgeoning industry.