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Beyond the Bar Code

December 1, 2004

That old grocery-store standby, the bar code on every mop, magazine, and Mars bar, celebrated its 30th birthday this year. Considering the drastic advances in computing since 1974, it should come as no surprise that there’s a new product-tracking technology breathing down the bar code’s neck.

It’s called the Electronic Product Code, and at its core, it’s just a long number like the one embedded in a bar code. But whereas bar codes can only be read by laser scanners at close range, EPCs are stored in radio frequency ID (RFID) chips affixed to product packages, which radio-wave scanners can read at a distance of up to several meters. While all bags of Oreos bear the same bar code, Electronic Product Codes have so many digits that each bag could receive its own – as could up to a billion billion other items.

The EPC is part of an ambitious scheme to create a global, standardized network for tracking everything that’s shipped, stocked, and sold. This “Internet of inventory” will give manufacturers and retailers a God’s-eye view of their universe, potentially saving them billions of dollars collectively by highlighting shifts in demand sooner and averting overstocking and understocking. Even consumers should notice the change. “The benefits just in the short term are that you’ll have better availability of products, better freshness of perishable products because things aren’t stopping to be counted, and it will be harder for people to steal things,” says Kevin Ashton, vice president of marketing at ThingMagic, a maker of RFID readers in Cambridge, MA. “All those greater efficiencies should lead to lower prices and better service.”

The ideas behind the EPC have been brewing for years. Big organizations like Wal-Mart, Target, and the U.S. Department of Defense have already spent millions on RFID technology in order to get better snapshots of their supply chains and ensure that products go where they’re needed, when they’re needed. What’s changed is that the same efficiencies will soon be available to all companies, thanks to the emergence of common methods for storing, reading, and transporting RFID data. In October, after a year of wrangling, a score of rival RFID companies put aside their differences and settled on a global EPC standard. A final ratification vote was still pending at press time, but the near completion of the standard means that manufacturers and retailers can start testing and deploying the newest RFID equipment and software, safe in the knowledge that every reader can read every tag and that every organization’s product database can tap into every other’s.

Ashton says the key to consensus was convincing makers and users of RFID technology that the tags themselves should be as simple – and therefore as cheap – as possible. “An RFID tag is not a portable database. It’s just a small chip that contains a number – a tiny little network node that does nothing more than to point you at data available somewhere else,” says Ashton, who is also the former director of MIT’s Auto-ID Center, where the idea for the EPC was born. “That may sound like a tiny thing, but in the 1990s the RFID industry was convinced that it was in the portable-database business, and there was an incredible holy war that we fought for several years.” The new EPC standard not only specifies a common format for the codes but creates a uniform system for matching the codes with detailed product information, which can be stored anywhere on the Web.

Hardware based on earlier drafts of the EPC standard is already hitting the market. ThingMagic, for one, is making RFID readers able to use multiple frequencies to read tags. “You need that flexibility because radio regulations are different around the world, but supply chains are global,” says Ashton. “You want to be able to read a product in China where it’s made, translate that for DHL, read the shipping containers for homeland-security reasons when they come into port, then keep track of the stuff domestically.”

Bigger players like IBM are getting into the EPC act, too. IBM is building software that will use the EPC standards to synchronize product data across the computing systems of entire chains of trading partners, eliminating costly errors and safety lapses. Says Dan Druker, director of product information management solutions for IBM, “You’ll know all the physical information about the product – not just the price, but all of the policies associated with it. Like, if it’s broken, what do I do with it? If it’s exposed to high temperatures, what does that mean? How should it be stored? What can it be put next to?”

And that’s good for consumers, not just businesses, says Sue Hutchinson, a product manager for the U.S. branch of EPCGlobal, the industry consortium overseeing the standard. “The first way my aunt or my grandmother are going to see this is that they’re going to open the Thursday afternoon circular from the XYZ store, and when they go on Saturday they’ll be guaranteed their products will be there,” Hutchinson says. “For my grandmother, there may over time be additional benefits from her pharmacy, in guaranteeing the safety and availability of her prescription medications.” There could even be a time, says Hutchinson, when an in-home RFID reader will scan her grandmother’s pill vials and remind her when to take her medicine.

If the technology stays on track, it is certain to alter the average consumer’s shopping experience. “The Holy Grail is the checkoutless supermarket, where you just wander out the door” and your selections are automatically scanned and charged to your credit card, says Ashton. But “that’s not going to happen until 2011 at the very earliest,” he says. First, there’s the matter of the RFID chips themselves: the entire EPC scheme assumes that the cost per chip will drop from an untenable 20 to 50 cents today to a nickel or less. At the same time, companies must modify their back-room supply-chain software to work with the EPC standard, then apply the tags to every pallet, case, and package. And in a world where many smaller merchants haven’t even adopted bar code scanners, that could be a lengthy process.

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