BENTONVILLE, Ark. -- Wal-Mart officials last week began testing a state-of-the-art electronic product code identification system at a Sam's Club store in Tulsa, Okla.
The test of the new electronic product code system is designed to increase the tracking capabilities of products as they move through the supply chain. It is part of an extensive research program currently being conducted at Massachusettts Institute of Technology's Auto ID-Center in Cambridge, Mass.
Bill Wertz, spokesman for Wal-Mart here confirmed the retailers' participation in the pilot in an interview with SN. Wal-Mart operates the Sam's Club store where the pilot began Oct. 2.
In terms of overall benefit to the retail chain, Wertz said the technology will help them improve the management of the tracking of merchandise from the manufacturer through the distribution center to the store, with potential benefits for customers.
"I think ultimately [this technology] will help lower the cost to the consumer. Any efficiencies that we can gain in our distribution process ultimately benefit the consumer," Wertz said.
To judge the technology's viability, however, it would have to allow the chain to capture more information, more efficiently and less expensively, Wertz said.
"It's a very early stage in the process and a lot has to happen to prove the potential of this technology. I think we are conceptually excited about the potential but a lot has to happen on the practical level before it's something that we'd feel comfortable implementing," Wertz said.
Wal-Mart began its participation in the pilot program with a shipment of Bounty paper towels from Proctor & Gamble, Cincinnati.
The prototype technology is being tested in Sam's Club with a variety of manufacturing partners, including Johnson & Johnson, Kraft Foods, Procter & Gamble, Unilever and Gillette, said Kevin Ashton, executive director of the Auto-ID Center.
The Auto-ID Center's other retail partner, Tesco, Great Britain, will not be participating in these first two phases of the test due to their location outside of the United States.
Two readers, which function much like radio receivers, have been installed on either side of the store's loading dock door. Delivery trucks will deliver goods to the store as usual, and the readers should automatically detect the wirelessly transmitted data from the tags.
That information is relayed to a computer network that will pass the information to the store's existing system.
The technology of the reader is designed to be compatible with a store's existing software, using an Internet connection to relay information to the back-end system of the store.
The cost of the hardware is difficult to estimate because not too many people are buying it, Ashton said.
The chips currently cost between $1 and $2 each and readers can be thousands of dollars, Ashton said.
The goal of the Auto-ID Center is to drive those costs much lower. Ashton hopes to get tag costs below a dime at minimum, and reader costs down below $100 to make the technology viable in a real-world setting.
Concerns about the future of this technology center around privacy issues. Some groups and businesses have expressed concern over what use the tracking information might have once products are in consumers' homes. Privacy is the Auto-ID Center's biggest priority, Ashton said.
"First of all and most importantly, the general public needs to be very comfortable with this technology. It can't be used in any way they don't want it to be used. Equally important but a less general point, business data is also something that needs to be kept secure and confidential. Nobody would use this technology if they couldn't be certain that the information associated with it was something that they could control," Ashton said.
The Auto-ID Center is working closely with consumers, consumer groups and privacy groups, Ashton said, to ensure that the technology is as benign and safe as it can possibly be.
Consumers could always opt to have tags de-activated in future uses and tags cannot be tracked over great distances or through walls, making it necessary for consumers to have a reader in their home for the tags to be detectable outside of the store. In addition, Ashton added, there are a number of ways of keeping information confidential.
Wertz said he is untroubled by potential privacy issues that he views as being far in the future. "Privacy is only an issue if you imagine a lot of things happening down the road. It's really pretty hypothetical at this point. Privacy issues are well understood and will certainly be addressed by the time we reach that point. I don't have any concerns about that."
The pilot will be measured and evaluated over the next eight to nine months, Ashton explained.
The technology being tested uses tiny tags and wireless readers to track shipments of products through the supply chain.
The electronic product code system technology was developed by computer scientists at the MIT's Auto-ID Center and presented at the Food Marketing Institute show in Chicago last May (SN May 28).
This test pilot has two objectives, Ashton said.
The first will be to test the effectiveness of the technology, to ensure that it works in a real-world application.
The second objective will be to help understand what the value of the technology in terms of cost will be for the program's sponsors, Ashton said.