RFID Tags: Bar Codes on Steroids

Radio Frequency identification (RFID) tags are like bar codes on steroids; they’re to traditional SKUs what Robocop was to your ordinary cop on the beat.

RFID tags are already here but ubiquitous RFID is still a work in progress.

Here’s how RFID works. Labels, or RFID tags, containing microchips are attached to products, or more likely to cases of products. The chips are then read by a device that identifies the product inside the case. There are two types of tags: passive tags that are identified by an RFID reader; and battery-powered active tags that emit a constant signal. RFID readers do not require line-of-sight access to the tags; that feature promises to revolutionize the way warehouses will be run.

Furthermore, a company could (and someday will) track a product from creation through the sale process, all the way to the point of consumption. That, in turn, will bring us those smart refrigerators (“You need milk”) and medicine cabinets (“Time to renew your Paxil prescription”) you’ve heard about.

Of course, that’s all decades in the future. (The bar code, by way of comparison, was patented in 1952 and took nearly 40 years to arrive at your local supermarket.) The immediate problem is cost. Even the cheapest RFID tags today run about 40 cents a pop?more than many of the products to which they could be attached.

The price will eventually come down, but Forrester Research analyst Christine Overby says that right now it’s a chicken-and-egg scenario: Companies can’t afford to buy RFID tags in bulk, and manufacturers can’t make them cheaper until they do.

Today’s RFID ROI comes from warehouse management efficiencies, but there will be a huge first-mover advantage for the company that figures out how to incorporate RFID and all the information it can contribute to its data systems into its business, says Gartner senior analyst Jeff Woods. CIOs should start thinking about that today. But what does 2003 really hold for RFID?

“More talk,” says Woods.