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ID chips revolutionizing the supply chain
Scripps Howard News Service


July 20, 2005

NEW ORLEANS - Expect to find many more products sold with radio-controlled identification chips as the Pentagon and major retailers begin a slow transition to a technology revolutionizing the supply chain.

Both the Pentagon and giant retailer Wal-Mart say they're so impressed at the reduced waste and efficiency brought by using such chips during trial runs this spring that both are telling contractors and suppliers they want more goods identified with them rather than bar codes.

Stephen Moody, team leader of an Army unit at Natick, Mass., studying how the military can use radio frequency identification technology (RFID), said that the chips aided in the delivery of fresh food, playing a crucial role in improving the morale of front-line forces in Iraq.

"We never know if rations are going to the desert or a frigid climate like Bosnia," Moody told the annual convention of the Institute of Food Technologists here this week, and using RFID chips allows Army commissary officers to monitor the temperatures all along the delivery route.

Moody said the Pentagon is wedded to using the new technology for all its supplies and is informing contractors in newly published regulations that they will be required to use RFID tags on all boxes shipped to the Pentagon.

Tiny RFID chips are battery-powered and activated by radio signal. Once activated, the RFID chip sends out a coded number sequence that can be used to decipher what the box contains without opening it. They are used by work crews to find an item in a warehouse, and can tell workers what's inside without the crews having to open the box.

Ron McCormick, vice president for produce at Wal-Mart's headquarters in Bentonville, Ark., said he has found similar benefits in the last seven months since the chain started using the technology at 100 super-centers, mostly in Texas, on Jan. 1.

McCormick said that in October, Wal-Mart will expand use of the chips to 600 super-centers and 12 distribution centers, and is also notifying more than 200 suppliers and manufacturers that they are expected to put the chips on products they deliver to Wal-Mart.

"This is only getting started," McCormick said. He said suppliers and manufacturers will have to switch from using bar codes to RFID chips soon because it results in less waste, more efficiency in stocking goods, and it saves money.

"If you don't adopt it now, you are going to wake up and find the train is gone."

McCormick said bringing produce to Wal-Mart is a complex enterprise, since the company draws its produce from farms and producers around the world, and on an average night, each super-center is replenished by 30 truck deliveries.

He said the RFID technology helps Wal-Mart reduce confusion in stockrooms and end a persistent problem of produce not being sent to store shelves for sale before sell-by dates. "Huge, staggering dollars are lost" to discarded produce, he said.

McCormick said the company is sensitive to concerns by privacy groups, who contend the chips could be coupled with store loyalty cards to give supermarkets individualized information on what customers are buying, and when.

McCormick said computer manufacturer Hewlett Packard is alerting its customers with labels on boxes, telling them the box is identified with an RFID chip, and Wal-Mart is monitoring consumer reaction.

"We don't know what the consumer reaction will be, and we do want to be sensitive to that issue," he said. He said the company is considering some way of deactivating the chip or removing it, as department stores currently remove anti-shoplifting devices.

"We're hopeful, and we believe, the consumer will not find this a major issue," he said.


Reach Lance Gay at gayl(at)

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