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Applied Research
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Applied Research
RFID Technology Sure to Revolutionize Business Practices, But Privacy Advocates Warn of Hazards
In Brief: Talk of radio frequency identification (RFID) broke into the mainstream in 2005, most likely thanks to increased usage and mention in the national bestseller “The World is Flat” by Thomas Friedman. Millions of Americans got a quick lesson in the technology, learning the capabilities of these tiny information transmitters as applied to inventory management and globalization. Little did they know that behind the scenes, privacy advocates are voicing serious concerns that RFID technology could trample the federal government’s principles of Fair Information Practices.
The benefits of RFID are unmatched when it comes to supply chain optimization strategies and demand management. The bottom line is not only efficiency, but also access to data.
At issue is the very nature of RFID technology. Designed to be discreet, capable of transmitting great quantities of information invisibly, and relatively inexpensive, these microchip-antennae combinations could, at first blush, appear to walk a thin line between "information technology" and "Big Brother".
The concept and technology behind RFID manages to simultaneously be easy-to-understand and also mysterious. Consumers understand the implications of the tool–electronic devices that transmit information back and forth are nothing new. Still, RFID is ubiquitous. The technology is everywhere, but nowhere to be seen.
The benefits of RFID are unmatched when it comes to supply chain optimization strategies and demand management. The bottom line is not only efficiency, but also access to data with the potential for foundation-shaking improvements and innovation in business intelligence. Ultimately, RFID has a starring role as companies compete more effectively and creatively in today’s complex global markets.
However, it will first have to overcome the concerns of privacy advocates and a privacy-sensitive America, worn out by Internet "cookies" and identity theft. The combination of RFID capabilities with existing information technologies for collecting and connecting personal data could in some circumstances represent a perfect convergence of technologies designed to abuse personal information and privacy. A study of RFID in the context of the government’s Fair Information Practices uncovers a list of potential privacy issues, summarized in Figure 1.
| FIP Principles |
Potential Privacy Issues |
| Notice/Awareness |
- Consumers may not be aware that their product or its packaging are tagged, or of the locations of RFID readers
- Item-level tags may be used to establish an individual’s presence at a specific place and time, or track a person’s movements
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| Choice/Consent |
- Tags, even if disclosed, may be non-removable
- Combinations of tags could be used to uniquely identify individuals
- Tags and loyalty programs could be combined to embed personal identify information in tags
- Marketers may target individuals based on tagged items unnecessarily
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| Access/Participation |
- Tags may be read by those other than intended, i.e. hackers
- Tags and loyalty programs could be combined to embed personal identify information in tags
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| Integrity/Security |
- Tags may be read by those other than intended, i.e. hackers
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| Enforcement/Redress |
- There are no privacy regulations in place to guide RFID tag use
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Figure 1: Fair information practice principles and potential privacy issues
For example, the FIP principle of Notice/Awareness holds that consumers should be notified of an entity’s information practices before any personal information is collected. Hidden RFID tags could fly in the face of this principle. That’s in theory. In reality, today’s corporate applications are primarily geared specifically to improve supply chain management and logistics, not customer information mining. And while it’s important to be vigilant, those who find RFID questionable from the perspective of privacy need to examine the details in the technology.
References: (Selected citations only)
- Byrnes, J. (2004, May 3). Are You Aiming Too Low With RFID? Harvard Business School Working Knowledge. Retrieved September 14, 2004 from Harvard Business School.
- Frazelle, E. (2002). Supply Chain Strategy: The Logistics of Supply Chain Management. New York: McGraw-Hill.
- U.S. Federal Trade Commission (FTC). (1998, June.) Privacy Online: A Report to Congress. Retrieved September 28, 2004 from Federal Trade Commission.
Research Paper Author: Tim Convery—2004 AIM Graduate, Vice President, Technology and Operations, Northwest Pump & Equipment Company, Portland, Oregon
Abstract: This study explores the benefits and liabilities of using radio frequency identification (RFID) technology in supply chain management (SCM) operations to support optimization as suggested by Byrnes (2004). A review of RFID technology benefits is centered on goals relative to the optimization of logistics activities, specifically inventory management (Frazelle, 2002). The examination of liabilities focuses on the privacy framework described as the principles of Fair Information Practices (FIP) (FTC, 1998).
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