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The RFID vision gets scaled back

Radio frequency identification technology is out there, but the onslaught has been slowed by practical and economic considerations.

Remember a few years ago how Wal-Mart and other companies slapped mandates on their suppliers and told them that they'd have to begin to put standardized RFID (radio frequency identification) tags on stuff coming into the warehouse or else?

Still life with Alien RFID tag and finger. Michael Kanellos/CNET Networks

The idea was that the tags would let retailers and distributors track all of the products coming from various suppliers through a single, large database. Warehouse managers loved the idea because it simplified their jobs, but privacy advocates warned of Minority Report scenarios where corporations tracked your spending habits. Tagging would start with pallets, they noted, but move to individual products. (How come privacy advocates never make analogies to other Spielberg movies like The Color Purple or Hook? That's a story for another time.)

Well, the plans for an RFID planet are taking longer than expected, according to Scot Stelter, director of product marketing at Alien Technology, one of the old-guard companies in RFID. Instead, companies are mostly installing self-contained "closed loop" RFID deployments.

Some pharmaceutical companies, for instance, are putting tags into their products to guard against counterfeiting. Hospitals use tags to make it easier for orderlies and nurses to find equipment. Retail stores that mostly specialize in selling their own brands (Banana Republic) like it for checking inventory.

The mandates aren't completely dead. Wal-Mart is going to start charging fees to companies that ship non-tagged pallets of products to its Sam's Club stores, but it hasn't really cracked down on those not complying at the company's main Wal-Mart chain.

Why the switch? It's easier. Both the tagger and the ultimate party that needs to read information off of the tag are the same person. In turn, this makes the investment in RFID easier to justify. Procter & Gamble, after all, wouldn't have benefitted from the Wal-Mart mandates as much as Wal-Mart. Open systems also create technical complexity.

"The mandates accelerated the investment phase and tag development, but some of the early assumptions were off," Stelter said. "The mandates were more of a U.S. issue. Europe was looking at more closed-loop applications."

RFID tags, he added, tend to work best, from an operation standpoint, when you have high-value products, a lot of different models, and a high inventory turnover rate. Jeans are ideal. They can cost a lot. There are lots of different sizes and models, and inventory moves quick. If they are out of 32 x 32 in boot cut, a sales clerk with an RFID reader can find it in the stockroom.

What if Target is out of Crest Natural Mint with Tartar control? The customer just buys Colgate with a whiff of lemon.