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New Regulations Open The Way For RFID Tags For Tracing Food, Forrester Believes

Amsterdam, Netherlands, December 15, 2003 . . . Regulations that mandate the ability to trace the origins of food are being put in place to control the food chain, solve food scares quickly, and prevent bioterrorism. In Europe, The Health and Consumer Protection Directorate will come into law on 1 January 2005, and The Bioterrorism Act in the United States came into effect last week. According to a new brief by Forrester Research B.V. (Nasdaq: FORR), tagging food with RFID tags will help manufacturers and retailers comply.

"To address the problem of food traceability, retailers and consumer packaged goods firms should use RFID tags to: meet traceability compliance deadlines; integrate agricultural firms into the food chain; slash product recall costs with case-level RFID tags; and probe RFID tags benefits with a clear business case," said Forrester Senior Analyst Charles Homs. "Regulations don't specify the use of RFID tags to comply with food safety regulations, but using them to find goods in distribution centers, retail stores, and trucks in transit will help firms respond within the predefined time limits to any official inquiry."

Traditional tracing technologies, such as ear tags in animals and bar codes on packaged meat, provide data for one or two steps in the food business but don't connect up the entire food supply chain. To achieve multistep, forward-and-backward food traceability, Forrester advises firms to turn to vendors that offer RFID tags to link unprocessed agricultural products to retail-environment-ready consumer products.

Firms can use RFID in multiple strategies to get a better understanding of: how goods flow through the supply chain; stock control; anti-theft strategies; buying pattern analysis; and food tracking. But only 9 percent of all US retailers are experimenting with RFID tags, and the majority of CPG manufacturers have no plans to do so. Rather than using RFID tags for multiple purposes, food industry firms should focus on food tracking to better understand the business benefits of a limited deployment.

"While the need for more sophisticated food tracing regulations is generally accepted, some basic questions still need to be answered," Homs added. "For instance, EPCglobal, the retailers' organization that tries to standardize item numbering, specifies that RFID tags should only contain an electronic product code (EPC). While this will suffice in principle, it doesn't allow for complete traceability across firms that handled the food, as they probably run their operations on a range of different enterprise apps. Without consensus on the data model, regulators may get exactly what they are asking for -- traceability one level up or down the supply chain, and not a single step more.

"Also, RFID tags allow retailers to analyze in great detail which goods have been bought by which consumers. But while consumers worry about potential invasions of privacy, they should also consider the benefits of RFID-tagged food stuffs, such as greater confidence that genetically modified food or hormone-treated meat won't end up in their shopping basket unnoticed. To put consumers further at ease about privacy concerns, retailers in particular should provide an opt-in choice regarding the storage and analysis of the data collected and they should emphasize the advantages of food traceability."

Forrester is an independent technology research company that provides pragmatic and forward-thinking advice about technology's impact on business. Business, marketing, and IT professionals worldwide collaborate with Forrester to align their technology investments with their business goals. Forrester offers products and services in four major areas: Research, Data, Consulting, and Community. In February 2003, Forrester acquired Giga Information Group. Established in 1983, Forrester is headquartered in Cambridge, Mass. For additional information, visit www.forrester.com.

Contact:

Clive Savage
European PR Manager
Forrester Research B.V.
+31 20 305 4868
csavage@forrester.com