Know how many bags get lost at airports? Last year, the number hit a staggering 34 million globally, according to numbers from international transport association IATA.
This cost the aviation industry $3.6 billion. One way to reduce the amount of mishandled luggage could be to switch from today's widespread bar-code tagging system to more sensitive radio frequency identification (RFID) tags. The IATA estimates that $200 million could be saved each year by such a swap at the world's top 80 airports.
That is exactly what RFID manufacturers like Alien Technology are dreaming about. With updated chip technology announced Monday, the Morgan Hill, Calif.-based company is targeting the aviation and pharmaceutical industries. But it will take a while before we see the tags in chewing gum packages and soda cans.
Alien says its new H3 integrated circuit (a more advanced version of the H2) boasts heightened reader sensitivity and improved security features, making it possible for third parties to read the tag's data, but not to change it. This could prove a blow to the counterfeit drug industry if the technology gets widely adopted. Currently, counterfeit drugs trade to the tune of $75 billion per year, according to the International Anticounterfeiting Coalition, a nonprofit based in Washington D.C.
Alien, of course, hopes its tags can prevent other types of counterfeit trade, as well. According to IACC estimates, 5 percent to 7 percent of the world trade is counterfeit, accounting to $600 billion.
The reader sensitivity of the H3 chip is up 25 percent from the H2, which is already 25 percent above other tags on the market, according to Alien. The H3 is expected to hit the market by July.
RFID tags are read using radio waves. Some can be read from several meters away and beyond the line of sight of the reader. They are used in passports, and can also help, for instance, to track runners during a race.
Last year the number of ultra-high-frequency RFID tags sold doubled to 370 million, and the total market for RFID products is expected to reach $4.5 billion by 2010.
Wal-Mart, a customer of Alien's, says it aims to switch from bar codes to RFID technology in its Sam's Club stores. One third of Wal-Mart stores in the U.S have already adapted to the technology to various degrees, as have the retail giant's 600 top suppliers.
These RFID numbers are still small though, compared with the bar-code market. Last year, 10 trillion bar-code products were sold, according to Alien.
Wal-Mart doesn't view RFID technology as a competitor to bar codes, but as a successor. "The capability of the RFID technology far exceeds what a bar code can do," said Wal-Mart's John Simley, vice president of communication.
RFID tags can store more information than bar codes, and are less labor-intensive, since they don't require the reader to be aligned with the tag. But so far, the tags have been too costly for a wider adoption. Since 2005, however, the prices have fallen by 70 percent, Alien says. Today, a reader typically costs $500 to $3,500, and the tags are 10 cents to 15 cents.
"Our tags are no longer about the supply chain," said Ronny Haraldsvik, vice president of marketing at Alien. "Last year, RFID shifted to being used for tracking computers, printers, and wine."
Among other applications, Alien says the H3 could be well-suited for the ePedigree, an electronic document with information on a product and its order that's used for drug authentication. It goes with the drug and tracks the change of custody as the medicine passes through the supply chain.
"The RFID technology ensures that you have products on the shelf when and where the customers want them," said Simley of Wal-Mart. "It enables us to lower cost. And then there's the whole sustainability benefit: the technology eliminates wasted energy, such as when trucks and ships are not fully loaded. It is reducing waste, cost, and prices."