The Retail Frequency

Radio Frequency Identification (RFID) technology has been
in use for decades. Initially, it was used in the military, for tracking
material in rugged and fast-moving situations, in which barcodes could not be
used. The emergence of an industry-led global RFID standard-the electronic
product code (EPC)-has accelerated the adoption of this new technology across
sectors. It has helped to fully unlock exciting opportunities and business
applications responsive to today's global needs.

Only within the past few years has this technology been
considered as a complement and an eventual replacement for barcode technology in
the retail industry.

The Nitty-Gritty

An RFID tag consists of a tiny chip, approximately the size of a pinhead, on
which the RFID code resides, and a small antenna. RFID tags can be manufactured
with a variety of chip architectures and code formats. One code format that
enjoys substantial support in the retail industry is the electronic product code
(EPC). The EPC uses a 96-bit scheme advocated by EPCglobal (previously known as
the Auto-ID Center).

The evolution of EPC based RFID is the outcome of a path
breaking research undertaken by Auto-ID Center, MIT. The research was funded by
over 100 leading organizations cutting across sectors, and included the likes of
Wal-Mart, US Department of Defence, US Food and Drug Administration, US Postal
Service, IBM Consulting, Microsoft, Philips, Coca-Cola, and Pfizer. Today, seven
Auto ID labs located in the US, UK, Australia, Japan, Korea, Switzerland and
China undertake research on EPC/RFID.

RFID Vs Baarcode
Why RFID is an attractive alternative to barcode: It allows information to be read by radio waves from a tag without requiring line of sight scanning It allows virtually simultaneous and instantaneous reading of multiple tags in the vicinity of the reader Each tag can have a unique code that ultimately allows every tagged item to be individually accounted for

The real power of this technology for retail industry
results from associating these unique identifiers with other information of
interest from fields in a database that pertain to the item. Just a few examples
with retail application are: date of manufacture; time spent in transit;
location of distribution center holding the item; name of the last person to
handle the item; and the amount for which the item was sold, among others. While
most of these fields will be stored in a computer system that is detached from
the tag, some RFID tag technologies permit additional information to be written
to tag itself as well as being removed from it.

Tag Pricing

At present, the cost of the tags, readers, and business process changes
(such as integrating RFID codes, associated data fields, and existing database
systems) are some of the challenges related to adoption of RFID.

RFID based technologies are being used primarily at
pallet/case levels to help optimise the goods receipt and handover processes.
This achievement provides inventory visibility between receiving dock to shop
floor. However, like most things, as a critical mass is reached, many costs will
drop. In 2000, the most basic tags were priced at approximately $1 each. In
2003, they ranged from about $0.25 to $0.40, and today they have dropped to
$0.15. As adoption increases and refinements in manufacturing technology come
about, the prices are bound to fall to $0.05.

Inventory Management

RFID facilitates quick and accurate counts of store inventory, giving stores
reliable information for deciding when to reorder and how much to reorder. This
can substantially improve a retailer's revenue picture. RFID tags on
individual items in the stock room and on store shelves could be monitored on a
regular basis by RFID readers, thereby providing “real time” visibility into
current inventory levels and making employees aware when inventory of a
particular item runs low.

Out-of-Stocks

On an average, roughly 8% of the retailer's inventory is out of stock ie
unavailable on the retail store shelf. According to the Grocery Manufacturers
Association, approximately 75% of the time, out-of-stock is a situation when the
product is actually there in back-room inventory. This problem costs US
retailers and consumer goods companies over $50 bn per year. Use of passive RFID
technology at the item level would help solve the out-of-stock problem, as well
as potentially improve customer interaction, decrease shrinkage (theft),
decrease POS costs and supply chain labor costs. To this end, global retailers
Tesco and Wal-Mart have both announced out-of-stocks as their primary target in
deploying passive RFID technology.

International Mandates

Worldwide, Retail is a key driver in adoption of EPC based RFID technology.
According to a recent survey, 70% of retailers with annual sales above $5 bn are
investing in RFID and will implement some form of RFID in the next six to twelve
months. International buyers and retailers such as Wal-Mart, Tesco, Metro,
Albertsons, and Marks&Spencer have already directed their top global
suppliers to commence affixing EPC enabled RFID tags on their consignments at
the case/pallet levels.

The Indian Scenario

With the textile quota phase out, Indian textile/garment exporters will have
a significant presence on the sourcing plans of major retailers in the US and
the European Union. Wal-Mart for example plans to source $11 bn worth of textile
merchandise out of India alone while JC Penney, plans to jack it up to $2 bn.
Marks&Spencer, Tommy Hilfiger, Carrefour and GAP are also looking at
increased sourcing from India.

Other leading apparel retailers such as Benetton, Esquel,
Zara, Sears, and Target are already implementing RFID technology for quality
assurance, stock management, and returnables management. Supplying to these
companies would mean that Indian exporters comply to their recent mandates.

RFID deployment in India has begun. Pantaloon is piloting
an RFID solution at its Tarapur warehouse and factory. The company expects the
RFID solution to help it improve collaboration across the supply chain. Madura
Garments is planning to tag all the garments going to Planet Fashion, its
exclusive outlet in Bangalore, from its central warehouse. Arvind Mills'
apparel store at Wipro's Electronic City campus sells RFID tagged products.
There is also a great interest in India on RFID adoption amongst Defence, FMCG,
Manufacturing, Retail, Logistics  and
Oil & Gas sectors. The Government is also likely to be a large potential end
user of EPC/RFID technology for asset management and track and trace equipment.

To name a few, EPC based RFID technology provides solutions
for just-in-time (JIT) manufacturing, mass customization, 'zero error
production', reduced cycle time, stock management of raw-materials/finished
goods, warehouse management, sourcing and procurement, assembly, order
processing, distribution and transportation. With it's varied usage across
sectors, RFID can be termed as one of the most promising and anticipated
technologies in recent years poised for nothing less than complete
transformation in the supply chain.

Ravi Mathur,
CEO, EPCglobal India