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By Andy McCue, 26 August 2003 12:09

NEWS Consumer privacy fears over the tracking of goods tagged with wireless chips could negate any cost savings gained from using the technology in the supply chain, according to a leading industry analyst. The controversial radio frequency identification (RFID) tags have attracted attention from privacy groups such as the Consumers Against Supermarket Invasion and Numbering (Caspian), who are worried firms will continue to track RFID products even after they have been bought. Tesco recently came under fire when it was revealed one of its stores in Cambridge had trialled a use of RFID to cut down on shoplifting by recording images on CCTV of shoppers who picked up tagged Gillette Mach 3 razor blades. Gillette subsequently distanced itself from the controversy by claiming it was only interested in using the tags on goods in the warehouse to improve stock control and had no intention of tracking consumers. Martin Butler, founder and president of the Butler Group, has now said businesses need to address the privacy concerns if the real benefits of RFID are to be realised. "RFID is an excellent idea. However, as soon as an RFID tagged product becomes the property of the consumer and has officially left the supply chain, that same tagging becomes a potential invasion of privacy," he wrote in his Opinionwire newsletter. "Companies rolling out RFID must have a clear and rigidly enforced policy on the deactivation of their tracking mechanisms, as having a cost effective supply chain will be pretty meaningless if nobody trusts you enough to buy from you." Smaller suppliers will be drawn into adopting RFID technology if use among the bigger retailers and manufacturers becomes more widespread, Butler predicted. "The influence of a major player such as Wal-Mart cannot be underestimated, and many suppliers could find themselves drawn into RFID frameworks in order to maintain their business relationships with powerful and influential trading partners – we have seen similar patterns with regard to Electronic Data Interchange (EDI), for example."