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The U.K. Chips In

The British government is spending EUR9 million on eight RFID field tests, which may give UK companies a competitive advantage.
Jul 29, 2002July 29, 2002 - Here in the United States, it's politically fashionable to argue that government knows nothing about business and should involve itself in economic matters as little as possible. Maybe so, but it seems to me that the U.K. Home Office is on to something. In May 2000, it initiated a "Chipping of Goods" initiative and came up with EUR9 million (US$8.95 million) to support about a dozen field trials using radio frequency identification technology. That relatively small investment could pay off handsomely for U.K. companies and consumers.

The Home Office is, in effect, subsidizing RFID pilots by big companies like Unilever and Woolworths. The Home Office says it wants to see if putting RFID tags on consumer goods can reduce crime. Theft of goods in transit from manufacturing facilities to stores is estimated to cost the European economy up to EUR16 billion annually.

RFID may well reduce supply chain theft and shoplifting. But if you talk to the companies involved in some of the Chipping of Goods projects, they will tell you their main interest in these pilots is to learn how RFID might be used to make the supply chain more efficient and to reduce inventory. That's the key reason that Unilever is tracking its Lynx deodorant (see Unilever Track Links Lynx with RFID).

Whether the Home Office understands this or not (and I suspect they understand it very well), the real benefit of the chipping of Goods program is that it is encouraging U.K.-based companies to launch pilots that will help them understand just where RFID can improve their business. Why should the government subsidize such projects? Because sometimes companies need a little encouragement to invest in projects that might never pay off, particularly when margins are getting squeezed.

If the government told me to invest in U.S. stocks now because they are cheap, I'd probably say: "Thanks, but no thanks." If the government offered to cough up half of the money, I'd be more than happy to invest. And I think it's the same with these RFID pilots. Unilever is involved with the Auto-ID Center and is working on other RFID projects. But getting close to US$500,000 for another project makes it worthwhile.

The benefits that the U.K. coud reap from its EUR9 million investment in the Chipping of Goods initiative go well beyond the millions that might be saved in reduced theft and law enforcement costs. The government is seeding the market, encouraging U.K. companies to be leaders in adopting RFID. That will make them more competitive. And perhaps, U.K. vendors will be among the key players in the emerging RFID market, the way U.S. companies led the Internet revolution.

Call me unfashionable, but in my view, the Home Office's money was well spent.

Mark Roberti is the Editor of RFID Journal. If you would like to comment on this article or submit your own, send e-mail to mroberti@rfidjournal.com.
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