Using microprocessors and sensors to make ordinary
objects both intelligent and interactive, silent commerce opens up business
opportunities and the possibility of new business models. By Glover T. Ferguson Outlook Journal, January 2002
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PDF Help When the subject is eCommerce, the talk is likely to be about,
well, talk—about how people communicate. That might mean
using computers or PDAs or mobile phones. Whatever the means of communication,
a person is doing the communicating.
But now another form of communication is quietly taking
hold. This time objects are doing the talking—to people and even to other
objects. This is the basis of the silent commerce that takes place
without human intervention. By making objects of all sorts both intelligent and
interactive, silent commerce opens up business opportunities and the
possibility of new business models.
Is this just another channel? Not at all. Silent commerce is
a key aspect of the larger phenomenon we call uCommerce—commerce that is
ubiquitous, untethered by hard wires and unbounded by traditional definitions
of commercial exchange (see “Cutting Loose,” Outlook, January
2001). uCommerce
encompasses the entire flow of information between a business and its
employees, supply chain partners and customers, as well as all the objects and
components that are involved in that flow. It’s about the “always on, always
aware” exchange of information.
Of course, people
aren’t always on the job or aware of everything going on around them. But
“smart” objects that have been embedded with microprocessors and sensors can
be. Indeed, almost any tangible item can provide a wealth of information, have
a unique, verifiable identity, and sense and respond to needs within context,
around the clock. Smart objects, in other words, can communicate and then take
action based on the information that’s communicated. Imagine what this could
mean for your business.
- Need to manage a complex inventory or an extended supply
chain? Imagine that you could track each individual item, ensuring it is in the
right place or being deployed most efficiently.
- Responsible for sensitive materials? Consider the value of
being able to precisely locate every canister of hazardous material, every
vital or confidential file.
- Concerned about safety? What if you had the technology to
verify that your employees are properly trained and equipped before starting a
complex job?
- Worried about counterfeiting or shrinkage? Smart devices
exist that can authenticate your product with 100 percent accuracy and protect
against its diversion or misuse.
- Want to enhance revenues? You can create a new service or
product feature that makes life more convenient for your customers or helps
them do their jobs better.
- Want to get or maintain a competitive advantage? Silent
commerce can help you leapfrog competitors by using a new business model.
Here’s how it works. A radio frequency identification (RFID) device
can be attached to or embedded into almost any object at any time. This
tag can link to a wealth of information about the product, including where and
how it was made. These tags could replace the relatively crude bar-coding
system in use today, since every item would have a unique identity, and
information could be shared without needing a line of sight to scan the
contents. (For a more detailed description, see
sidebar.)
When you combine RFIDs with microsensors or microelectro-
mechanical systems (MEMS) that can actively sense, record and transmit
information about an object, you make it possible to confirm the conditions
under which an object has been handled or stored. So you can tell whether the
fish is fresh, the beer has ever been warmed or the equipment has been exposed
to moisture.
It’s only a small leap to imagine these smart objects
everywhere, actively transmitting data, recording and responding to the
environment, even taking action on their own. Homes, offices and factories
could be monitored remotely or programmed to make changes as needed or desired.
Major appliances and manufacturing equipment—even your family car—could
schedule their own maintenance or call for repairs before they actually break
down.
Smaller, Smarter, Cheaper
Smart tags and
sensors per se are nothing new. RFIDs have been around since World War II, and
sensors even longer. So why is silent commerce taking off now?
For one thing, the technology is
advancing, which means that smart tags and sensors are capable of doing more
than ever before. RFIDs and MEMS are becoming smaller and more sophisticated.
Access to technologies such as the global positioning system make it possible
to locate and track smart objects. The advent of the Internet and cellular
communication can put these objects in continuous communication.
In addition, the demand is growing. Enterprise resource
planning and supply chain systems have matured, making it possible at last to
use information generated by RFID readers to manage and improve operations. And
as supply chain partners become better integrated, the requirements for greater
product and supply chain information increase.
Finally, costs are falling. A simple RFID, for example, now
costs only about 50 cents, and that price is expected to drop to pennies in a
few years. MEMS and sensors are also coming down in price. As the cost of a
device declines relative to the cost of an object, smart-tagging becomes
economically feasible for more and more products.
So the sky is the limit? Yes—but not quite yet. Some of the
more spectacular or sweeping applications of silent commerce technology—like
being able to roll your cart out of the grocery store without stopping to
pay—will not be fully possible until there are broadly accepted standards and a
more extensive global infrastructure in place.
Nevertheless, real value is possible today, particularly
through so-called four-wall applications that can be implemented within a given
department or company. Several companies are already reaping gains in a number
of areas.
Improving Operational Efficiency
Consider Star City Casino, a fixture on the nightlife scene in Sydney,
Australia. Star City includes a round-the-clock gaming floor, a theater, a
showroom, a nightclub, more than 350 guest rooms, plus related support
facilities. Managing its inventory of some 80,000 themed uniforms was a major
logistical challenge.
Working with Accenture, Star City designed a first-ever
wardrobe control system. By embedding smart tags in the waistband, shirttail or
collar of each uniform, the casino can track each garment from point of issue
through the laundry process and back to the wearer. The result is fewer lost
garments, reduced labor costs and lower cleaning bills—plus the assurance that
each garment will be in the right place and ready to wear at each shift change.
A number of major retailers have
already begun using silent commerce technology to control the flow of products
along their supply or delivery chains. Procter & Gamble is testing RFID
technology to replace bar codes for tracking goods, with remarkable early
results: The company achieved 99.8 percent accuracy in tracking and was able to
scan the contents of a carton in the same few seconds it normally takes to scan
a single bar-coded item. Gap, a US manufacturer and retailer of leisure
clothing, is attaching intelligent tags to garments during their manufacture so
that the company can obtain dynamic information about each item all along the
supply chain.
Airlines, too, have discovered the virtue of smart tags,
which they are using to manage the flow of baggage and cargo. In 1999 British
Airways, in conjunction with Philips Semiconductors, tested smart tags
sandwiched inside baggage tags, which could be scanned several at a time from a
few feet away. The system speeded baggage handling, reduced lost luggage and
ensured that each checked bag was matched with an on-board passenger. Airports
such as San Francisco International are following suit. Singapore Airlines is
using silent commerce technology to track commercial cargo.
This technology can also improve efficiency by optimizing
the use of expensive equipment and infrastructure. The Swiss Federal Railway
has implemented an RFID-based Automatic Vehicle Identification system that
tracks all rolling stock as it passes key checkpoints. Vehicle utilization is
up, the amount of time trains spend in stations has been reduced and the need
for weekly physical inventories at local stations has been all but eliminated.
In Scotland, the city of Edinburgh is using technology that automatically gives
buses a green light. This reduces the time it takes, depending on traffic, for
a bus to complete its route by up to 10 percent, thereby encouraging the use of
public transportation.
The use of staff time can also be optimized. A community
library outside Detroit has smart-tagged all its books: Checkout is up to 40
percent faster, and conducting an inventory is as simple as walking down the
aisles with an RFID wand. In Barcelona trashcans are embedded with tiny chips
that communicate how full the can is; sanitation workers stop only for cans
that need to be emptied, saving time and money.
Increasing Security
More than
ever, security is an issue. Silent commerce technology can help.
Smart ID can verify personal identity. The government of
Malaysia has already introduced a multipurpose smart card that serves as an
identity card, a driver’s license, a passport and eCash; Hong Kong has plans
for a similar program. In the private sector, FedEx couriers wear Velcro wrist-
bands embedded with RFID transponders; these confirm the couriers’ identities
as they approach their vehicles and allow them to operate the trucks without
keys, which can be lost or stolen.
Manufacturers can protect themselves by using silent
commerce technology to authenticate their products. Tire manufacturers are
experimenting with embedded RFIDs to ensure that tires put on vehicles are
genuine and that they meet automaker specifications. Smart chips may soon be
embedded in currency or official documents, helping to foil counterfeiters.
The technology can also be used to help prevent product
theft or diversion. In the United Kingdom, for example, a distributor of
expensive single malt whiskeys is using RFID readers as part of a new warehouse
security system designed to prevent the product from being accidentally or
deliberately misrouted. Other retail companies are looking at ways to use tags
to reduce shrinkage, which is estimated at $32 billion annually in the US
retail sector alone.
Generating Additional Revenue
These same technologies are also helping companies expand their market
share and generate additional revenues by offering new customer services. For
example, one upscale luggage maker is embedding smart tags during
manufacturing. When a bag is purchased, the customer can register it with a
unique ID so that it can be tracked and recovered if it’s ever lost.
Companies can also offer customers the added convenience of
cash-free transactions. Mobil’s Speedpass is a smart keychain that customers
can wave in front of the pump for gas or related purchases. According to Mobil,
it has proved especially popular with many of the company’s female customers,
who appreciate not having to grope through their purses for a credit card.
Speedpass offers additional convenience—it works not only at participating
Mobil and Exxon stations but at selected other retailers as well, including
participating McDonald’s—thereby encouraging customer loyalty.
All these examples have this in common: They take place
“inside the box.” That’s where we believe most companies should start. These
four-wall solutions can pay for themselves within a short period of time by
reducing costs.
Just as important, these inside-the-box applications
position a company advantageously for the future by moving its employees along
the learning curve. Having people inside the company working with silent
commerce applications, even in their simpler forms, gives them hands-on
familiarity with the technology, helps them envision its possibilities, and
prepares the company to move quickly as standards are established,
infrastructure is created and even more dramatic opportunities arise.
But four-wall applications have to be done right. They need
to be integrated into existing processes and legacy systems. Some overall
planning or control is important to prevent a plethora of individual
applications based on different systems and technologies.
If silent commerce is valuable today, it will be vital
tomorrow. The improvements it makes possible in operational efficiency and
increased security will be taken for granted. In the future, its real power
will lie in the creation of new ways of doing business that can generate
additional revenue.
Prototypes are being developed, for example, to enable very
different ways to price products and services, offer them for sale or control
their optimum usage after sale (see
sidebar). The global infrastructure and standards that
will make silent commerce an underpinning of the economy will soon be in place.
Already, companies are working together to create regional systems and
applications.
In Tulsa, Oklahoma, participating companies are being wired
with analog RFID equipment for tracking microchipped packages. The work is
being done by Auto-ID Center, an industry-funded research program based at
Massachusetts Institute of Technology and the Institute for Manufacturing in
Cambridge, England. The 36 corporate sponsors and participants include
Wal-Mart, Gillette, Philip Morris, Procter & Gamble, International Paper
and Accenture. Tulsa is a key element of a test bed for a system that will be
able to track goods from plant to store shelf, without human intervention.
How fast will a global standard and infrastructure be
developed? No one knows for sure. Leaders of larger companies, though, may want
to move toward this broader future immediately, even while continuing to apply
inside-the-box solutions that offer immediate payoffs. They might want to take
part in consortium research or in projects to install regional infrastructures,
like the one in Tulsa. And leaders of all businesses will want to listen
closely for news of silent commerce.
The promise of silent commerce is all but unlimited. Sooner
or later—probably sooner—the infrastructure will be in place and the standards
developed. It’s inevitable. Silent commerce is not a stand-alone
development—it’s an integral part of the unifying future called uCommerce,
which will bring everyone and everything together.
Glover Ferguson retired as Accenture's Chief Scientist in 2005.
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