The use of radio frequency identification (RFID) technology will be widespread in Australia by late 2004 with more than 15 local companies implementing pilots, according to IBM's worldwide director of e-business to smart machines (eb2SM), Dr Cheryl Shearer.
Claiming the value of the technology to the supply chain will overcome privacy concerns, Shearer said the floodgates have opened as chip prices continue to collapse and organisations are taking a keen interest in the tags and assessing the business case for implementations.
While retailers, transport companies and insurance firms are already trialling RFID, the technology has been stalled by privacy concerns, because the tracking technology can be used for data harvesting and act as an identifier for unsolicited advertising.
However, Shearer said RFID has the potential to change the dynamics of the supply chain through reduced inventory costs and retail theft and consumers can always use a tag blocker device to control its use.
She said insurance companies are using the technology to gain competitive advantage by having claimants have a tag in their car to follow driving habits; CD shops also using it as a buyer's research tool.
"Sure the tags can be used on a palette of flour, but organisations want customer insight; they can offer customers discounts for utilising the technology so it is an opt-in arrangement," Shearer said.
"While a dumb tag can be used for flour the customers I have met with in Australia are interested in more sophisticated tags to get a better understanding of their customers after the point of sale."
Shearer said tyre companies are trialling the tag to provide high-quality product alerts.
For example, if the wrong tyre is on a heavy truck the tag will record this information and be used in litigation or to verify how long the tyre was used.
While Shearer was unwilling to disclose local customer names, companies using the technology in the US include Delta Air Lines and American Express.
American Express is expanding a wireless payment scheme to 175 retail locations in a test designed to confirm whether the radio technology can pay off at the cash register.
The company's ExpressPay uses a radio frequency identification chip in a key-chain tab. Waving the tab at a distinctive scanner triggers the chip, which transmits encrypted credit card data. Initial beta tests by the card company last year showed that users could pay for a sandwich or milkshake up to 40 per cent faster than by using cash, says a spokesman for the credit card company.
Another key point for retailers is that the beta test found that users spent about 20 to 30 per cent more on average at each purchase than when using cash.