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By SaintCroix
August 7, 2003

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Hi guys,

It was while researching Manhattan Associates that I came across RFID, or "radio frequency identification." These are small nanochips that can be placed in any product in order to electronically track where that product is.

It's the sort of technology that can make people paranoid. "Big Brother will know if I'm using a razor. Oh my God!" But it's also technology that is coming, quicker than you think.

For instance, Walmart has recently "requested" that its top 100 suppliers be RFID compliant by 2005:

Wal-Mart to throw its weight behind RFID [CNET]
 
Gillette recently bought 500 million RFID tags (not a typo) from a company called Alien Technology. (Cool name, huh?). Gillette and Walmart were to do a trial run with the technology in a Walmart to test whether inventory levels could be measured electronically.

Privacy advocates got wind of it, and Walmart recently canceled the trial. The P.R. guy sounds a little hysterical. ("We've never had RFID on any of our shelves, ever! There's no contamination! You can still shop here!"):

Wal-Mart cancels 'smart shelf' trial [CNET]

Clearly there are privacy concerns here. Will the government want to put RFID chips in every gun that is sold? Is that a good idea or a bad one?

But the privacy issues will work themselves out. For instance, companies are talking about building a "kill chip" into the RFID tag, so that it quits working after checkout.

Right now, RFID can and will be used in the warehouse, for purposes of streamlining distribution. While the above article seems pessimistic at first, if you scroll down you will see how Walmart is focusing on RFID in their warehouse. Also check on that chart on RFID sales, which are expected to skyrocket in 2005.

Walmart's involvement is critical. The bar code was introduced in the early 70's, but didn't catch on until Walmart pushed it in the 80's.

At a minimum, RFID will replace the bar code. What good is that? Well, bar codes have to be scanned. If you don't scan the bar codes, nobody knows if the product is there or not. Stuff gets lost easily.

RFID takes scanning out of the equation. Little radio signals are built into the product at the nanochip level. If a box "falls off a truck," the signal quits beeping, and you know something is missing. Companies can track their stuff automatically.

How much will this technology save companies? Billions of dollars, and that's just at the warehouse level. It's estimated that Walmart alone will save over $1 billion dollars using RFID in the warehouse.

One of the early leaders in RFID semiconductors appears to be Alien Technology. They're the ones who sold 500 million of the suckers to Gillette, earlier this year:

Alien Announces Major Order for Low-cost RFID Tags [Alien PR]

And of course Alien is private, so we can't buy them. But you can buy shares of Manhattan Associates (MANH). (I own shares in Manhattan). MANH is an equity investor in Alien and the two companies are working closely together. The idea is that MANH software and Alien hardware will introduce RFID into the warehouse. The two companies have recently released "RFID in a box". Here's the press release:

Manhattan Associates and Alien Technology Corp. Announce 'RFID in a Box' Supply Chain Solution [PRNewswire]

Here are some articles I found from the Alien website about RFID:

RFID is about to explode [InfoWorld]

RFID Rising [Line56]

(following article was written by guy from Manhattan):

Now's the Time for RFID [Line56]

Taylor


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