Building a 'Radar for Everyday Products'B2B: A new technology reinvents the bar code to track goods and change the basics of retail
- Scott Kirsner
Hamlet-like, Kevin Ashton holds aloft a one-serve carton of Tropicana O.J. and laments the limitations of the lowly bar code. Ashton is a Procter & Gamble brand manager on loan to MIT, where he serves as director of the Auto-ID Center. His mission: to reinvent the quarter-century-old bar code used at checkout counters everywhere. "The UPC code tells you almost nothing about this orange juice," Ashton says. "Just that it's a 10-ounce carton of Tropicana."
The next-generation technology that Ashton's group is developing, a cheap microchip affixed to the container, would tell all: which groves the oranges came from, where and when they were squeezed and bottled, the juice's expiration date and where exactly the product was located within the global supply chain. Ashton refers to it as "radar for everyday products." He predicts that the Auto-ID Center's technology could bring major new efficiencies to manufacturers, distributors and retailers.
Mainly, it would take humans out of the loop. With inexpensive electronic tags embedded in products and a network of wirelessly linked tag readers tracking those products, store managers would have a real-time tally of the products on their shelves. When stock ran low, the system could automatically request replenishment. "Procter alone figured that out-of-stock products were costing it $3 billion a year in lost revenue," says Ashton. "On 10 percent of shopping trips, the consumer can't find what she wants, and so she tends to buy something else, or nothing at all."
So far the Auto-ID Center has raised $9 million from about 50 sponsors for research on tracking technologies, including Target, Coca-Cola, Gillette, Johnson & Johnson, UPS and Kraft. A pilot test is underway at a Sam's Club and Wal-Mart in Tulsa, Okla., to follow forklift pallets and cases of goods as they travel from factories to distribution centers and then stores.
Some of the potential uses for the Auto-ID Center's technology, sometimes known as EPC (Electronic Product Coding), could change retailing basics. Tropicana, for example, might encourage supermarkets to discount juice that was approaching its sell-by date. Simon Ellis, a supply-chain futurist at Unilever HPC North America, believes the new tags could also aid in product recalls. "If there's a problem with a particular batch of products, you'd know exactly where that batch went, rather than having to recall every product on every shelf in every state," says Ellis.
Two things could stymie the Auto-ID Center's efforts. One is technological limits. Metal containers (like soda cans) tend to scatter the radio waves that the readers send out to locate the tags, and liquids tend to absorb them. The other is cost. The tags being used in the pilot tests cost between $1 and $3 apiece; the readers, between $2,000 and $5,000. Ashton expects those costs to plummet. Tags might go for a nickel and readers for less than $100 once enough manufacturers and retailers are using the technology. But he faces a chicken-and-egg problem: if users don't adopt the technology because it's too expensive, technology vendors won't be able to produce it in the volumes necessary for it to get cheaper.
So the Auto-ID Center's sponsors are massaging spreadsheets to show that the value of better information will exceed the investment in the infrastructure necessary to obtain that information. Once the pilot tests are completed later this year, all eyes will be on Wal-Mart to see if the company is willing to commit itself to the technology. "We see this technology as having the potential to help us further lower our costs and increase efficiencies," says Wal-Mart spokesman Bill Wertz, "but I don't think the jury's in yet."
One promising sign: the Uniform Code Council--keeper of the bar code--has endorsed the Auto-ID Center's efforts, and Ashton says the group is on track to have its technological specifications finished and released by October 2003. "We've said that we're going to put a man on the moon by then," he says with a smirk. "We'll either do that, or we'll leave a steaming hole in the ground."
(Kirsner is a technology columnist for The Boston Globe.)