RFID: Impacts on business and
consumers
MGMT002: Technology and World Change
Professor Gurinder Singh Shahi
Siew Lin
S9125943I
G12
Executive Summary
The highly competitive world of business has further enforced the need for better efficiency and greater
saving cost in companies yet still able to meet the increasing demand of consumers. Having the advantage
of creating an automated environment in businesses, the Radio Frequency Identification Device (RFID)
has since gained more attention and popularity. As RFID steadily replaces the convention Universal
Product Code (UPC) system and become more mainstream, more companies are riding this wave and
sought of ways to implement it to their business processes; the opportunities this technology creates
becomes immense. Yet, this has regurgitated the already pervasive issues within consumers. Problems
such as ethical usage of RFID and the breaching of consumer privacy surface more prominently even as
the benefits reaped are substantial. However, the fundamental issue of using this technology is not the
concerns of consumers or the automation of businesses. It is the necessity of actually implementing this
technology in businesses in general. This article focuses on the growing impacts of the new technology,
RFID, on businesses and consumers, and the concerns that are tied together with it.
Introduction
Radio Frequency Identification Device (RFID) is the new rage in the business world today. Since the
official announcement in WalMart, where all pallets used in their company has to be equipped with an
active RFID chip, the society has started to take more notice of this technology (Clarke, 2008). According
to the Economist, this move by the giant can potentially raise their sales by about 7% when the stockout
rate reduced by 1%. Yet, the cost of implementing this, to both WalMart and its suppliers, was immense.
At that point of time, costs of following the newly added rule rose up to $2 billion. This was due to the
cost of the equipments needed to support the technology and the cost of the tag itself.
However, what was once an expensive investment, and thus a high barriers of entry, has now become an
affordable and usable system for businesses. As prices fall, greater percentage of companies swamped in
to this new technology. In fact, many companies in different industries have taken steps to integrate this
new technology into their business processes. In retail sectors such as H&M and ZARA, tags are placed
in the clothing to track the availability of stocks and which items are the “hot” items.
Hospitals have also shaped the technology such that doctors are able to access patients information with
the minimum delay duration. This is done through an implant in humans to store the tag within the body
itself. The severity of the patient’s condition can thus be noted quickly, which will then able to reduce any
wastage of time processing data. Patients life can be saved because of this technology.
With these examples, it is clear that RFID has impacted a variety of industries with varying degree.
Fundamentally, RFID helps to reduce the processing time by providing an automated process for the
business. Human errors are thus reduced; goods can be produced at a faster rate.
History
RFID was first invented in the 1940s by USA to have a form of tracking device on their military
equipment and prevent targeting any “friendly fire”. Thereafter, the usage of such technology still remain
limited, where little opportunities are explored in depth. Rather, especially the supply chain companies, it
was the manual paperwork system that was the common practice in the past. Many of the processes are
manual and data are usually stored in a hardcopy. Companies have to go through the tedious and
laborious work of sifting through the paperwork just to get certain information they need. The main issue,
however, is the high human error rate and the high level of labor required to complete that certain
activities. Business processes were generally inefficient and high in labor costs due to the nature of
having a paperwork system.
A new system was introduced in the late century to provide a better alternative that reduces the manual
work done in an activity. This system is called the Universal Product Code (UPC) system. UPC focuses
on the idea of barcode scanning, where products are labeled with a barcode storing simple details such as
the identity number. Thus, companies just have to label their products with barcode tags and, through
scanning the tags, they can identify and locate their products. While this does reduce the labor rather
significantly, manpower is still required for certain processes in UPC. Tracking of certain details still
prove to be a challenge even as there are now more automation in using UPC. For example, it might be
possible to track the products after scanning, but the exact location of the products cannot be detected.
Companies would have to rescan the barcode again to identify the products again. In addition, the barcode
tags are paper-based, which signify that it is fairly easy for the tags themselves to be destroyed while
handling the products. Thus, either the products have to be handled with care, which may be hard in
certain types of products, or the tags have to be constantly changed, which may increase the cost and
hinder the efficiency of the process.
Surprisingly, RFID technology has been around in the industry for a long time. Yet many companies have
not implemented or have not delved into using this technology. The two main factors why this is so is the
lack of available information in the mainstream and the extremely high cost of implementing RFID. RFID
was still much unknown to many companies, where many were using either the paperwork or the UPC
system. In addition, the cost of one RFID tag is more than twice the amount of the barcode tag.
Companies are unwilling to bear a cost which they are unsure how much more “efficient” and automated
when using this technology.
However, as the prices of the tags starts to fall in recent years and the heavy promotions on RFID done by
large corporations such as WalMart, corporations start to see this as a great opportunity to step into,
where benefits reaped from it seems enormous. While the cost of a RFID tag is still relatively more
expensive than traditional barcode tag, the time saved through automating process and a batter tracking
systems seems to suggest that RFID has a greater savings ultimately in the long run. Thus, RFID has a
sudden boom in popularity as businesses start to experiment the usage of this technology. As mentioned
by Clarke (2008), a survey by the Frost & Sullivan and the Computer Technology Industry Association
showed that over half of the corporations that were interviewed are actually implementing and
researching on the use and the potential opportunities of the RFID technology. It is thus obvious that
RFID is definitely an ongoing and rising star in the near future.
What is RFID?
RFID fundamentally uses radio frequency tags to track products. It is an automatic identification method,
where data are stored and retrieved from the RFID tags. It is essentially an electronic version of a barcode
tag. However, one major difference is that RFID tag forms a unique number to individual items while
barcode tag only assigns one to a bulk item. Additionally, barcode scanning can only be tracked when the
code has been scanned; RFID tags can still be read even in a distance away. This is done without the
traditional “line-of-sight” proximity mandatory in UPC.
RFID system consists of three main components: an electronic tag for the individual item, a reader, and a
computer system. The tag itself can be further broken down into two parts, which is the antenna and a
small, implantable silicon chip (). The tags serve as the data storage area, which provides the
identification of the products. The reader acts as an input device for the computer system, which process
and manages the automatic transfer of information.
As an item is tagged with a RFID tag, the item is assigned with an unique number through the tag, The
reader, which is essentially a low-powered radio transmitter, will then release a radio signal with a
frequency that easily passes through objects. If the tags are within the “hearing distance” of the signal, the
tags relate back using the programmed signal, which holds any data that is stored in the tag and those that
identifies the item. The reader then transfer these data received to the computer system, where it will
manage and process the information. Usually, the information gathered are real-time. With the high
threshold of data the computer system can hold, such as detailed past information of production,
distribution and even sales, these data can then be used for other business activities. Some of these
activities include data mining and management of resources (Clarke, 2008).
RFID tags can be further split into 2 main types: passive and active tags. Active tags function with the
usage of a power source, which can be attained from a battery source or can be attached to a powered
infrastructure. While the cost of implementing this is very high due to the battery, the benefits this tag
have are that the reading distance from the tag to the reader and that the tag can remain active so long as
the battery last. For example, countries attached such tags to aircraft to identify that plane’s origin.
Passive tags, on the other hand, require no battery sources or maintenance, which makes it more
appropriate to corporations. In addition, they have no actual lifetime and are sized appropriately for the
realistic usage in businesses (Want, 2006).
The technology used in RFID
RFID generally use two types of technology to function: Magnetic Induction and Electromagetic (EM)
Wave capture. These technology make use of the EM properties. Depending on the types of tag, the
power transfer ranges from 10µW to 1mW. Depending on the various modulations, the ability to send and
get data in either the near-field or the far-field can be determined.
Benefits of usng RFID (in relation to consumers and business)
Many substantial benefits can be reaped from the usage of RFID in businesses. Firstly, as mentioned
earlier, RFID technology enables activities to be automated. Employees do not have to manually scan
barcodes or key in information to their system. This will decrease the risk of encountering human error to
the minimal. Inventory management will then be streamlined as data are captured automatically. This will
result in a more cost-effective and time-effective process. In addition, with the goods being tracked,
managers are able to identify the exact amount of goods and the amount of spoilt products in their storage.
Any misplaced or missing products can also be traced accurately and quickly. Time wasted to check and
replace goods will thus be mitigated; with the appropriate management, RFID can help maintain the
inventory products to be of the company’s ideal quantity and quality.
Secondly, forecasting of future demand and stocks required to meet that demand will be more robust and
accurate. Due to the nature of the tags, specific settings can be set on individual products to retrieve and
store different data required. Together with the automation of data retrieval, managers are able to get upto-date information on their current inventory status. Managers are then able to predict and forecast a
more concrete future demand of their products. As information are real-time, any changes in the
forecasting can be done in a minimal time.
As much as businesses reap the benefit from the usage of RFID, consumers will inevitably be impacted as
well. With the automation of processes and data are retrieved in real-time, the front office are able to have
a better grasp of the current situation of the company, in terms of stock inventory. Thus, salespersons are
able to give a more satisfying and substantial answers to their queries. In addition, if a proper
management is in place in the company, stocks will always remain sufficient for the current demand and
there will be a quick countermeasure to any unforeseen issues. Thus, customers are able to get a quick and
better service, where products are readily on the shelf and any issues solved at a minimal time.
Moreover, consumers are able to receive more customized services from the company. Companies are
able to use the gathered data and portray the next “in” trend consumers are looking for. In addition, to
maintain a better relationship between customers and business, some companies have incorporated RFID
into their business strategy to increase customer loyalty. The adoption of EZ-Pass toll-collection system
for the customers is one good example. This system enables the doing of an activity by the customer to be
easy and fast. This convenience in using this system has garnered much acceptance, despite the high rate
of exploitation of this system by criminals.
In addition, implementing RFID will prevent any counterfeits from arising. This is even more essential
for companies that have very strong branding as their marketing tool. The surfacing of counterfeit can
potentially destroy a company’s hard-attained brand, especially when it is difficult for customers to
differentiate them. Having a RFID in place can enable authentication of their products, which will remove
any doubts customers have on the company’s product. Customers will also have a positive impression of
the corporation, where the company seems prepared and firm about their own product. This will thus
boost the company’s reputation within the consumers.
In general, integrating RFID in businesses affects both the companies themselves and the consumers.
With the appropriate management, operations will become cost-effective and time-effective. In addition,
customers are able to get more personalized and quality service, where the products are always with stock.
If RFID is implemented correctly and accurately, this will become a win-win situation for the
corporations and the customers.
Risks and social issues pertaining to RFID
However, since the issue of WalMart’s announcement of the mandate use of RFID in their pallets, many
stakeholders, ranging from suppliers, government to the consumers, have launched a blowout on the
ethical and the rights of using RFID. This has sparked a range of debate through the various levels of
stakeholders in business. Despite the large amount of benefits that are reaped from RFID, there appears to
also be a range of problems associating with this technology.
Consumers
The key issue most consumers have with is the breaching of consumer privacies. While storage of data
can be seen as a good way for companies to track their performance and efficiency, the controversial issue
of data mining has been a main concern for many consumers. This is exceptionally critical where RFID is
concerned; information are constantly updated and stored in the database. The following shows certain
possibilities how RFID have removed the basic consumer privacy.
Being very small in size, RFID tags can be placed anywhere and can almost become invisible to the
naked eyes of consumers. In fact, there is a new type of RFID has been invented such that it is impossible
to remove the tag at all. “Magic ink” enables the tag to be implanted together with the ink of clothing,
making it virtually impossible to remove the tag. Consumers may never notice that their products had in
fact been tagged with RFID.
Another problem that is pertinent to RFID is that the tags can be “activated” so long as a reader is nearby.
The issue here is that some of these readers are actually undetectable; at certain times, consumers are not
even aware that any tags on them are actually “activated” and that information are accessed by unknown
sources. The fact that any materials between the tags and readers do not affect the transfer of information
makes this scenario scarier.
Due to the ease of retrieving information from the tags, it is also very easy for crimes to occur. Identity
theft may prove to be a significant crime for RFID. Valuable information is stored within the tag; some of
them contain several confidential data. So long the criminals have a tag reader to send the radio signal,
information can just be obtained, just like that. Criminals can then use these data to their discretion.
Suppliers / Manufacturers
Just as the case of WalMart, making the usage of RFID in the products mandatory may create a massive
backlash within the suppliers. While the cost of RFID has been decreasing over the years, the average
cost is still much higher than the traditional UPC system. Reports have shown that corporations have to
fork out an additional $2 billion to meet WalMart’s criteria. Many companies are already facing much
difficulties to break even with their financial statements. Furthermore, in industries such as that of
WalMart’s, the products acquired from suppliers are usually raw materials or necessity goods. Thus, the
profit margin of the products itself is very marginal. Having this additional cost of implementing RFID
system can create certain discord between the company and the suppliers, as suppliers are unhappy about
the “unnecessary” costs incurred while dealing with WalMart. Thus, implementing RFID might result in a
souring of relationship between the company and the suppliers.
Risks of the company
Creating an automated system might enable a faster and more efficient process, but it will also cause a
great dependency on the technology. This is especially prominent if there is no hardcopy in the company.
Should any crisis appear, say there is a major power shortage, the company may not have the ability to
respond quickly to the issue, which may reduce the adaptability of the company.
Future of RFID
The future possibilities of RFID are immense. Instead of the conventional methods companies are using
currently, corporations will definitely sought to maximize this technology, seeking other means to
increase efficiency in their process and improve the relationship with the consumers.
One high possibility is the extinction of hardcopy documents. Majority of the information are stored in
the database and systems are all integrated together. Thus, having hardcopy document may become
redundant and become just a cost to the company.
Another possible extension of the usage of RFID is using it as a form of a wallet. The US money has
already embedded with RFID technology. Thus, in the future, the value of money can be stored in a RFID
tag, where transactions can be done through a reader. This will definitely save a great deal of time as the
activity of exchanging money can become automated. However, it is expected that this will pose a very
high security issue should this really become a reality. A comprehensive and robust security check should
then be in place to support this new application.
Conclusion
The RFID technology has greatly impacted the world, especially in businesses. It provides a new solution
to increase the efficiency of retrieving data and promotes the automation of business. While the cost of
implementing it is still rather high, the lowering of price in recent years may ultimately makes this
technology a mandatory one in the future. As mentioned earlier, RFID, if used correctly, may further
enhance the relationship between companies and customers. The benefits of RFID are very significant.
However, many ethical issues still rose just as the awareness of RFID increases. Problems such as
consumer privacy and identity theft may spark a great resistance within the consumers as their consumer
rights are compromised. Relationship between the suppliers and company may become soured as well.
Thus, it is necessary for companies to have a good management of the technology to fully utilize the
advantages of RFID.
Ultimately, it is undeniable the benefits that are reaped from the technology. RFID still is a rising star and
has only just begun gaining the recognition. RFID definitely have a large potential for more innovation in
the future. Give RFID a few more years and the full extent of this technology will be felt in the world.
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