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Smart labels may be about to change the way that companies distribute and sell almost everything they make
At a Tesco’s supermarket in Cambridge, England, the shelves have begun to talk to their contents, and the contents are talking back. Soon, razors at a Wal-Mart store in Brockton, Massachusetts will begin to let staff know when they suspect theft. This spring, a group of firms will attempt to track, in real time, many thousands of goods as they travel from factory to supermarket shelf. Consultants tout cost savings and extra sales that could run into tens of billions of dollars a year.
The reason for the sudden buzz of excitement is a new, supercheap version of an old tracking technology called Radio Frequency Identification (RFID). RFID systems are made up of readers and “smart tags”—microchips attached to antennas. When the tag nears a reader, it broadcasts the information contained in its chip. In the past four years, the cost of the cheapest tags has plunged, from $2 to 20 cents. In the next two to three years, prices are likely to fall to five cents or less. Already, RFID tags are made in their millions and used to track pets and livestock, parts in car factories and luggage at airports. Last month, Gillette announced that it had put in an order for half a billion smart tags, signalling the start of their adoption by the consumer-goods industry. If they catch on, smart tags will soon be made in their trillions and will replace the bar-code on the packaging of almost everything that consumer-goods giants such as Procter & Gamble and Unilever make.
The inspiration behind the new, cheap tags is a partnership between academic researchers and business called the Auto-ID Centre, based in Cambridge, Massachusetts. Founded in 1999, the centre boasts 87 member companies, including the world’s biggest retailers and consumer-goods firms. Traditional RFID tags, says Sanjay Sarma, the centre’s research director, carry all their information. That makes them big and costly—fine in small numbers, but expensive in the sorts of quantities that the consumer-goods industry might want. Procter & Gamble, for instance, makes 20 billion products a year. So Mr Sarma has stripped the information his tags carry to the bare minimum—a single serial number. This serial number is unique, identifying the exact can of fizzy drink or bottle of shampoo on which it is stuck. But detailed information about the product—what it is, where and when it was made, and so on—is stored on a computer elsewhere, to be looked up as needed via the internet.
When Less Information is More
Nobody had got it, says Kevin Ashton, who runs the centre. Big technology firms such as Intel and Motorola thought it was impossible to build a tag costing a few cents. Traditional RFID makers, who grew up without the internet, did not understand the beauty of removing information from the tag and storing it centrally. So Messrs Sarma and Ashton did the work themselves, designing specifications for a new chip and inventing new software and network services to support their idea.
Abandoning the likes of Intel, Mr Ashton and Mr Sarma turned instead to a handful of start-ups. One of them, called Matrics, says that it is now ready to start making the new tags. The price will depend on volume, says Matrics’ boss, Piyush Sodha. If Matrics makes 1 billion tags a year, they will cost ten cents apiece, he says. At 10 billion tags a year, the price falls to five cents. Gillette is buying its 500m tags from a firm called Alien Technology, which has pioneered a promising low-cost manufacturing technique that involves suspending chips in liquid, then flowing the liquid over the chip mounts. Mr Ashton expects other members of the Auto-ID Centre to place big orders (some exceeding Gillette’s) for tags this year.
Gillette is piloting two uses for its tags. The first combines smart tags with “smart shelves”, which are fitted with tag readers. Gillette says that retailers and consumer-goods firms in America lose around $30 billion a year in sales because shop shelves run out of products and stand empty. On Gillette’s smart shelves, the tagged razors let the shelf know when they are coming and going, and the shelf keeps count. If it gets too empty, the shelf sends a message to store staff to fill it up. Because Gillette’s razors are small, valuable and easily resold (for evidence, visit eBay), they are also often stolen; tags and shelves will do double duty as security against theft. If the shelf notices that lots of razors have left at the same time, it alerts staff.
Gillette is also piloting the use of smart tags to track products as they move from factory to supermarket. Using bar-codes, this can be a labour-intensive, error-prone task. Readers can scan smart tags automatically as pallets of products pass along conveyor belts and through loading bays. That will reduce shipment errors and cut theft, argues Gillette. Because manufacturers can be certain that they are shipping the right quantity of goods to the right place at the right time, they can also afford to shrink the inventories they maintain in case of error. Consultants at IBM have worked with six member companies of the Auto-ID Centre. Their work suggests that smart tags can shrink inventories by 5-25%, says IBM. If so, the increase in efficiency of inventory management during the past two decades, thanks to “just-in-time”, “Dell-isation” and so forth, will take another huge leap forward, helping to keep America’s recent productivity miracle going—and, with luck, spreading it to the rest of the world.
Having finished two field trials, Mr Ashton says that most technical difficulties are now behind them. “We are ready to go,” he says. Following pilot projects this year, says IBM, companies will start deploying smart tags in earnest in 2004, beginning with pricey, oft-stolen goods such as razors, cosmetics and pharmaceuticals. If all goes well, Matrics and Alien Technology should be making tens of billions of tags by 2005 or 2006.
The biggest worry is that consumers might reject smart tags because they seem too invasive of their privacy. If firms link products to customers at the checkout, ordinary objects could become traceable to their purchasers (imagine a stray coke can at the scene of a crime). Following Gillette’s announcement, e-mails sent to the RFID Journal, an online trade magazine, hint at some of the concerns. “I’ll grow a beard and fuck Gillette,” wrote one reader.
(adapted from The Economist)