Feature

RFID’s still too expensive

Though RFID tags are still quite expensive, companies are busy piloting the technology, anticipating a decline in tag pricing in the near to medium term, says Sushma Naik

RFID may not be the stuff of science fiction, but it’s not the kind of technology that you will find in the neighbourhood supermarket either. Somewhere in between, Indian companies are trying to find the Holy Grail of cost-effectiveness and business utility. Retailers and manufacturers can use RFID to make their supply chains run much smoother. Experts say that some percentage of sales is lost as products move from the assembly line through the supply chain to the end-customer. Half of this loss results from failure to re-stock popular items, while the rest is due to shrinkage (lost or stolen items).

RFID can improve production efficiencies, asset utilisation, forecasting, inventory accuracy and customer satisfaction by pinpointing the location and status of products as they move through the supply chain. Inventories can be updated in seconds by tapping into this technology. It can release people who would otherwise be involved in scanning merchandise.

Is anybody out there?

According to the March 2005 IMRB-Express Computer survey, nearly 28 percent of large businesses plan to implement RFID. Of the respondents who are not implementing RFID, about 55 percent say that it does not suit their business requirements due to the high costs of deployment.

Says Pranesh Deshpande, IT Manager at Raymond, “We are still understanding RFID and the value it can bring to our business. It will improve stocktaking and help track finished goods, but cost is the limiting factor.” Agrees GTC’s Deputy General Manager, V K Singhal, “We did some groundwork in setting up RFID, and found that it would cost us between Rs 15 lakh to Rs 20 lakh at our factories in Baroda and Mumbai. RFID makes sense if businesses have high-value products.”

However, there are some instances of RFID pilot projects underway in India. Pantaloon did a pilot with Wipro, tagging one of its product lines in the retail business. To automate its supply chain, Pantaloon treated its manufacturing plant as a supplier, and deployed RFID tags in its warehouse using 1,000 tags and two tag readers to do away with manual tracking of goods. Though the company found the experiment beneficial, Pantaloon is planning to use tags only for management of assets such as laptops. It also intends to attach RFID tags to shopping carts for tracking the movement of customers at its malls to help it redesign the malls’ layout.

Active technology

“The advantage of RFID is that it is active as opposed to barcoding, and the tag need not be in the line of sight to be read. The reader can read tags at an individual component level, and in our case every garment can be tracked,” states Chinar Deshpande, CIO, Pantaloon Retail India.

Says Arun Gupta, Senior Director, Business Technology, Pfizer India, “Depending on the type of RFID tag used, the advantages are many. The primary benefit is the amount of information stored and the ability to read many tags within a short time. Active tags offer many possibilities over passive ones.” The company has not yet deployed RFID as costs make it unviable, but it doesn’t rule out the possibility of deployment in the near future either.

The biggest advantage of RFID is that a particular item can be tracked right from the warehouse to the retailer. Many think that a technology such as RFID is helpful in only one section, i.e. merchandising. But Unni Krishnan, CTO at Shopper’s Stop, asserts, “RFID can be used in tracking consumer preferences, customer loyalty programmes, assets and much more.” He elaborates that an RFID card can help track the preferences of customers, and in turn help retailers provide better services.

In a business-to-business scenario, tagging can be a viable tool. Verticals such as the fashion industry, manufacturing and pharmaceuticals have a lot of potential for RFID deployment. Opines R Ramaseshan, Managing Director, Karnataka State Beverages Corporation (KSBC), “It is a promising technology, and can be useful for our organisation too. However, the concern is cost. Once the price (of a tag) comes down, we will certainly look at it.” RFID can be useful as each liquor bottle needs identification. By using RFID, it becomes easier to get brand details of the manufacturer, label numbers, manufacturing details, etc. Besides, keeping records is easy as whatever goes in and out of the store can be logged. The other advantage is that it simplifies stock control. KSBC has barcoding for tracking on a bulk basis and not at the individual level. Since it manufactures a huge number of bottles everyday, it is working out the modalities of RFID deployment in terms of cost and stock control.

Kvaerner Powergas has not yet used RFID, but it plans to use it for employee identity management. One more aspect of deploying RFID is having a support system for it. “RFID tags can store huge amounts of data, but the right use of the data collected is important. Merely tagging will not solve business problems. The technology is mature and what we need to see is how other systems such as CRM can be used to leverage this data,” says Ashok Adhikary, Associate Director of Systems at Kvaerner.

Community and standards

Companies are looking at RFID technology to gain competitive advantage. The RFID Association of India has been formed as a not-for-profit society under the Companies Act to promote the adoption of this technology, and develop standards and applications across industry, government and academia. The association’s goals include positioning India as a country of pre-eminence in RFID technology applications and use across industry, government and society. It will encourage the Indian RFID industry to establish itself in the emerging global RFID market, and will collaborate with like-minded international associations. Membership is open to industry, government and academic institutions.

Vendors and implementation partners should work together to formulate standards for information interchange Arun Gupta Senior Director Business Technology Pfizer India

Another issue that is being addressed is with respect to standards. The Wireless Planning and Development Authority of the Government of India has freed up radio frequency in the UHF 865-867 MHz band. EPCglobal India, a joint industry-government initiative, is spearheading the development of industry-driven standards in India for electronic product code to support RFID use.

The notification takes cognisance of international developments, wherein radio frequency is being allocated within 860-960 MHz for operating mission-critical supply chain applications across industry segments such as defence, pharmaceuticals, retail, aerospace, FMCG and automotive. Arun Gupta says, “This step will definitely improve adoption in the country.”

According to Ravi Mathur, CEO, EPCglobal India, “Indian exports can now greatly benefit from the proactive adoption of Electronic Product Code-based RFID technology, and thus comply with the mandates of global buyers such as Wal-Mart, Metro and Tesco. Indian consumers can also look at benefiting through the ready availability of consumer products on retail shelves and counterfeit detection across all product lines.”

The road to RFID

Companies are waiting for RFID to become affordable. A single RFID card costs between Rs 25 to 30 for a passive tag, and Rs 65 for an active tag. For the technology to become widely-used, the prices need to drop to Rs 5-10, according to the IMRB survey findings. Companies expect that this will happen with economies of scale.

But this presents a chicken-and-egg situation. How can economies of scale be achieved without greater deployment? The answer might lie in incremental deployment and tag recycling. “Vendors and implementation partners, along with customers, should work together to formulate standards for information interchange. This will create an infrastructure that can leverage costs as well as drive down the overall investments required across the supply chain,” comments Gupta. Even modest deployments by several players should, for a start, put India Inc on the track to RFID.

sushma@expresscomputeronline.com