From Technology Review‘s “Tracking Privacy“:
Technology Review: How would RFID work to track products?
Sandra Hughes [Global privacy executive, Procter and Gamble]: It’s a technology that involves a silicon chip and an antenna, which together we call a tag. The tags emit radio signals to devices that we call readers. One of the things that is important to know about is EPC. Some people use RFID and EPC interchangeably, but they are different. EPC stands for electronic product code; it’s really like an electronic bar code.
TR: So manufacturers and distributors would use EPCs encoded in RFID tags to mark and track products? Why’s that any better than using regular bar codes?
Hughes: Bar codes require a line of sight, so somebody with a bar code reader has to get right up on the bar code and scan it. When you’re thinking about the supply chain, somebody in the warehouse is having to look at every single case. With RFID, a reader should be able to pick up just by one swipe all of the cases on the pallet, even the ones stacked up in the middle that can’t be seen. So it’s much, much faster and more efficient and accurate.
TR: Why is that speed important?
Hughes: We want our product to be on the shelf for consumers when they want it. A recent study of retailers showed that the top 2,000 items in stores had a 12 percent out-of-stock rate on Saturday afternoons, the busiest shopping day. I think the industry average for inventory levels is 65 days, which means products sitting around, taking up space for that time, and that costs about $3 billion annually. Often a retail clerk can’t quickly find products in the crowded back room of a store to make sure that the shelves are filled for the consumer, or doesn’t know that a shelf is sitting empty because she hasn’t walked by lately. With RFID, the shelf can signal to the back room that it is empty, and the clerk can quickly find the product.