Wal-Mart's use of RFID tags - a privacy issue or supplier's bane?

Like us on Facebook

Also the product can be synchronized with other products like a particular brand of garments can be synced with a washing machine so that the cloth is identified by the machine and it can automatically match the water temperature etc. according to the garments material.

But the tags have raised security concerns with Katherine Albrecht, director of a group called Consumers Against Supermarket Privacy Invasion and Numbering stating that Wal-Mart and others would be able to track movements of customers who in some border states like Michigan and Washington are carrying new driver's licenses that contain RFID tags to make it easier for them to cross borders. Also that these tabs even though removed cannot be turned off and can be traced in the garbage.

However, to allay such fears Dan Fogelman, a Wal-Mart spokesman said, "Wal-Mart is using it strictly to manage inventory. The customer is in complete control," he said. Fogelman added that Wal-Mart's readers identify only that inventory which is in the store.

The new initiative currently does not require every apparel maker to tag their items but it takes into purview only products that have certain common attributes that ascertain how much value these tags can deliver. Other products to follow suit could be electronic items which require a more complex purchasing decision compared to buying products such as toiletries and groceries.

Wal-Mart with its sufficient bargaining power can compel its suppliers to follow suit as it its traditional inventory management system works whereby the need to maintain the inventory lies with the supplier rather than Wal-Mart.

However, the technology limitation such as the radio-frequency becomes difficult to read when combined with metal and liquid items as metals reflect radio-frequency and liquids absorb them thus restricting the use of technology.

But the greatest barrier seems to be cost as the return-on-investment for the makers of low-cost products such as toilet papers and toothpaste does not exist. Currently, Wal-Mart is helping suppliers get the best price on tags by forecasting the total pooled volume of the tags it will purchase for its private label apparel. In this way, a supplier needing a small volume of tags will pay less than it would pay if it purchased tags on its own. It is not giving money to suppliers to subsidize the cost of the tags, but sharing in a cost-of-goods model that includes tags as a component item into a total cost of goods.

It remains to be seen whether Wal-Mart can use RFID to gain a competitive edge as it did earlier with its SMART inventory management system and use of methods such as cross-docking system.