How to Find That Needle Hopelessly Lost in the Haystack

ew product tags equipped with microchips and tiny antennas could one day make it easy to scan all the groceries in a bag simultaneously, allow businesses to locate any item in a warehouse instantly and enable the Defense Department to better manage inventories of mundane necessities like meals and spare boots. Hitachi announced this month that it has developed tags so small that they can be embedded in bank notes to foil money launderers and counterfeiters.

Tags with the technology known as radio frequency identification, or R.F.I.D., transmit a digital response when contacted by radio signals from scanning devices. Older versions of the technology have been around for decades, but now major manufacturers and retailers and the Defense Department are pushing to speed the development of a new version that could be read by scanners anywhere in the world, making it cheaper and more efficient to track the flow of goods from global suppliers to consumers.

The Defense Department expects to issue a statement in the next few days calling on suppliers to adopt the new version of the technology by 2005. Wal-Mart Stores Inc. made a similar announcement in July when it said it was requiring its top 100 suppliers to place tags with the new technology on cartons and pallets shipped to its stores by the end of 2004.

Radio frequency tags are currently used in products like wireless auto keys, toll collection systems and livestock and military armament tracking devices. A radio tagging system at Prada's store in SoHo in Manhattan identifies the clothes a shopper takes into a dressing room and allows the shopper to call up on an electronic screen images of the items being modeled and information about other colors and sizes.

But as business's interest in the technology grows, so do efforts by privacy advocates to place strict limits on its use.

"Very few people grasp the enormity of this," said Katherine Albrecht, director of Citizens Against Supermarket Privacy Invasion and Numbering, a group that was founded in 1999 to protest the use of frequent shopper cards and credit cards to collect data on individual consumers' purchasing habits.

Ms. Albrecht and other critics say that companies and government agencies will be able to monitor what people read or where they assemble from radio tags embedded in their books or woven into clothing. Unlike bar codes, which cannot be scanned unless a laser has a direct line of sight to them, the radio tags can be read through walls, and multiple tags can be read in an instant.

"R.F.I.D. certainly has value in the supply chain and in inventory management," said Beth Given, director of the Privacy Rights Clearinghouse in San Diego. But she added that "there are so many potential issues once it gets beyond the point of sale that consumer protections need to be written into law."

Privacy advocates have suggested, among other things, that the tags be designed so that they cannot be reactivated once they are turned off, that all goods with a tag carry a consumer warning and that the tag must be removed when a product is sold unless the buyer agrees to leave it on.

In theory, there may be benefits from keeping the tags active once a product is sold. Washing machines, for example, might identify the clothes in a load and automatically select the appropriate cleaning cycle. And a smart medicine cabinet could tract the expiration on drugs.

Ms. Albrecht, however, has called for a one-year moratorium on using radio frequency tags on individual items while discussions about the implications of the technology take place.

The privacy concerns have already caused some technology managers to play down their interest in using the tags. The Benetton Group, the clothing retailer, for example, announced in response to consumer protests that it had not attached the tags to any individual clothing items. And Wal-Mart halted plans for a widely publicized experiment with the Gillette Company to place radio tags on razor blades.

For now, the cost of the tags - from 25 cents to 30 cents each - make them too expensive to put on most individual items. Beyond that, businesses are not yet prepared to handle, much less exploit, the flood of data that individualized tagging would create.

Even so, privacy advocates fear that it is only a matter of time before the tags become commonplace. One well-publicized experimental project at a Metro Group supermarket in Germany installed so-called smart shelves to track the presence of items equipped with radio tags. After months of fine-tuning the system, Metro Group recently began a two-month performance test of the shelves, according to Gerd Wolfram, project manager for the store.

I.B.M., which is one of the technology providers to the Metro Group store, is also sponsoring a test project in Denmark that will place radio tags on popular grocery items to allow customers to make quick, automated purchases from outdoor kiosks located near gas pumps.

In the near future, though, Wal-Mart and other supporters of the new version of radio frequency technology are focusing on shipping pallets and cartons of products, not individual items.

Logistics consultants say there are billions of dollars to be saved in creating automated tracking systems that can help reduce loss during distribution and speed up sorting in warehouses.

Until now, radio tagging systems have generally been based on technology owned by individual companies and restricted to niche applications where a small group of users agrees on identifying codes and other crucial standards. Many of the systems operate in the 13.56 megahertz range, a radio frequency that has limited capacity to transfer information rapidly. The market for R.F.I.D. devices and the software to support them is expected to be about $1.13 billion this year, according to the Venture Development Corporation, a market research and consulting firm in Natick, Mass.

That market is projected to grow rapidly as the new version of the technology takes hold. Specifications for the new version - developed by a four-year-old consortium called the Auto-ID Center that is based at the Massachusetts Institute of Technology in Cambridge and sponsored by nearly 100 companies - were released publicly two weeks ago. The new specifications call for R.F.I.D. systems to operate at an ultrahigh frequency, similar to that used by many cellphones.

The higher frequency standard would be able to handle much more data. But the high-frequency approach presents an engineering challenge because it could also cause interference with cellphones and some private radio systems that operate on those frequencies.

The work of turning the specifications into internationally accepted standards will be handed off next month to EPCglobal, a nonprofit subsidiary of the Uniform Code Council, which oversees the use of bar codes, and EAN International, a European commercial standards setting organization.

"I see nothing but green lights," said Michael Di Yeso, chief operating officer of the Uniform Code Council and leader of the team that is transferring the M.I.T. consortium's work to EPCglobal.

The momentum for those standards received a huge lift with Wal-Mart's endorsement this summer. In addition to the goal it set for its largest suppliers, Wal-Mart also said that it wants the rest of its suppliers to be using the EPCglobal standards by the end of 2005.

The Defense Department's decision to follow Wal-Mart's lead was another lift for EPCglobal. The department has been a leader in the use of a different type of R.F.I.D. technology, known as an "active" system, which requires tags to have batteries or other power sources to contact the scanning device.

Those systems are linked to global positioning satellites that track equipment in remote areas like Afghanistan and Iraq. The new commercial version of the technology, in which the tags do not have a power source, has a maximum range of about 20 feet.

The next big event for R.F.I.D. developers is a Nov. 4 meeting at which Wal-Mart will provide details for how suppliers can comply with its needs.

"Wal-Mart is so big it's like 10 companies getting together to force bar codes through 25 years ago," said Eric Peters, senior vice president for business development at Manhattan Associates, a supplier of software for product distribution systems. "Even if you're not in their top 100, you might want to do it so people think you are."