Technology in retail :RFID

Wednesday, August 22, 2007

A very good article by Ravi Mathur on RFID...

rfid - transforming the supply chain in retail

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Radio Frequency Identification
(RFID) technology has been in
use for decades, initially in
military applications, such as
tracking material in rugged and
fast-moving situations, where
barcodes could not be used. Only
within the past few years has this
technology been considered
as a complement for barcode
technology in the retail industry.
What does its evolution mean for
the Indian retail industry?

The RFID tag consists of a tiny chip, approximately of 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).

Three aspects of RFID that make it a particularly attractive alternative to barcode are:

• 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.

EPC / RFID Network

A typical RFID system uses RFID tags attached to objects, which identify
themselves when detecting a signal from an RFID reader by emitting radio waves / signals transmission.

This identification of the object takes place through the EPC, captured within
an RFID tag. The EPC contains an array of product information that can
uniquely identify an individual item,

whether that object is a consumer item, case, pallet, logistic asset or virtually
anything else. This provides the ability to locate or track a product through
the supply chain, and to read these EPCs at a distance and out of the direct
line of sight.

The EPC tags contain RFID antennas that communicate the EPC numbers
to the EPC readers within the EPCglobal Network.

The evolution of EPC-based RFID is the outcome of the path-breaking research undertaken by
Auto-ID Center, MIT which was funded by over 100 of the world's
leading organisations including Wal-Mart, Metro, US Department
of Defence, US Food & Drug Administration, US Postal Service,
IBM Consulting, Microsoft, P&G, Philips, 3M, Coca-Cola, Manhattan
Associates, NTT, Abbott Labs, NCR, Pfizer, Symbol Technologies, Intel,
Unilever, VeriSign, etc - spanning across industry sectors. Today, six
Auto ID labs located in the US, UK, Australia, Japan, Switzerland and
China undertake research on EPC / RFID.

For retail, the real power of this technology results from associating
unique identifiers with other information of interest from fields in a
database that pertains to the item. Just a few examples
as per retail application are:

• Date of manufacture
• Time spent in transit
• Location of distribution centre holding the item
• Name of the last person to handle the item
• Amount for which the item was sold
• Payment method used in buying the item
• Expiration date
• Last date of service
• Warranty period

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 the tag itself as well as to be removed from it.

Tag Pricing

Currently the cost of the tags, readers and business process changes
(for instance, integrating RFID codes, associated data fields and
existing database systems) are some of the challenges
to adoption of RFID.

RFID-based technologies are being used primarily at pallet / case
levels to help optimise the goods receipt and hand-over processes.
This achievement provides inventory visibility between receiving
dock to the shop floor.

However, like most things, as a critical mass is reached, many costs
tend to will drop. In 2000, most basic tags cost approximately USD 1
each. In 2003, they ranged from about USD 0.25 to
USD 0.40, and today they have dropped to USD 0.20. As adoption
increases and refinements in manufacturing technology come about,
the prices are bound to fall to USD0.05.

The Potential Benefits Are Enormous

Think of a customer evaluating the purchase of a pair of pants
and either receiving a recommendation on complimentary shirts,
socks and shoes via an interactive kiosk or a knowledgeable store
sales clerk. Further, imagine this sales clerk being able to check
inventory, back stock or even sales trends on a real-tim

The same scenario will play out in other retail environments around
the country, starting with stores where consumers rely heavily on
in-store information to determine purchasing habits; the examples
include consumer electronics building materials and wine (depicted
in the picture above, with a consumer utilising an RFID-enabled
in-store kiosk to gather information).

Just as important, the same RFID-enabled systems providing inventory
data to the sales clerk can provide replenishment and throughput data
to store managers, buyers and supply chain specialists. Tighter visibility
into store inventory should result in fewer inventory write-offs (outdated,
seasonal or discontinued merchandise), and enable store managers
to potentially shift inventory to stores where products are selling
more quickly. In the apparel industry, where buyers make decisions
as much as six months prior to the selling season, adjustments
to inventory and stocking can make the difference between a profit
and loss on a product category.

Another area of concern for retailer is shrinkage (theft), which costs
retailers an estimated 2 per cent of sales on an annuals basis –
over USD30 billion annually in the US alone.
Roughly 50 per cent of this number is due to internal / employee theft.
A 2003 report by Ernst & Young estimates an even higher amount of
USD 46 billion annually. And these figures do not include losses
due to spoilage / expiration, obsolescence, misplacement and
markdowns caused by poor merchandise management, all of
which could be reduced by the better monitoring of objects and
their handlers through RFID.

International Mandates

Retail worldwide is a key driver to adoption of EPC-based RFID
technology. According to a survey, 70 per cent of retailers with
annual sales above USD 5 billion are investing in RFID and
will implement some form of the technology in the next six to twelve months.

International buyers and retailers like Wal-Mart, Tesco, Metro,
Albertsons, Marks & Spencer etc. have already directed their top
global suppliers to commence-affixing EPC-enabled RFID
tags on their consignments at the case / pallet levels with effect
from 1st January 2005. Top 100 suppliers of Wal-Mart have
already complied by affixing EPC-based RFID tags since then,
with additional 27 suppliers doing it voluntarily. The next 200
suppliers will comply by January 1 next year.

RFID is already installed in 104 Wal-Mart stores and 36 Sam's Clubs.
It plans to have RFID in another 600 stores and 12 distribution centres
by end-2005. Tesco will have RFID deployed at approximately
1,300 stores and 35 distribution centers in the UK in 2005 as well.
The US Department of Defence (DOD) has also decided to mandate
its 43000 plus suppliers to start affixing RFID tags by 2005.

Indian Scenario

With the textile quota phase-out, Indian textile / garment exporters
will emerge with a significant presence on the sourcing plans of major
retailers in the US and the European Union. Wal-Mart,
for example, plans to source USD11-billion worth of textile merchandise
out of India alone, while JC Penney, plans to jack it up to USD2 billion.
Marks & Spencer, Tommy Hilfiger, Carrefour and GAP are also
looking at increased sourcing from India.
Other leading apparel retailers like Benetton, Esquel, Zara, Sears, Target,
etc are already implementing RFID technology for quality assurance, stock management, returnables management, etc.

Supplying to these companies would thereby mean that Indian exporters
would need to comply with their recent mandates. International buyers
and retailers like Wal-Mart, Tesco, Metro, Albertsons, Marks & Spencer
etc. have already directed their top global suppliers to commence-affixing
EPC-enabled RFID tags on their consignments at the case / pallet
levels from 1st January 2005. It is clear that all Indian suppliers would
need to fall in line shortly.

RFID deployment in the country has also started. Pantaloon is piloting
an RFID solution at its Tarapur warehouse and factory. Wipro Infotech
is the implementation partner and has been involved in designing the
architecture. The RFID system has been integrated with Pantaloon's
existing infrastructure and the company expects the RFID solution
to help it improve collaboration across the supply chain from the point
of sale onwards.

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, track & trace of
equipments & spares, etc.

To name a few, EPC-based RFID technology provides solutions
for just-in-time (JIT) manufacturing, mass customisation,
“zero error production”, reduced cycle time, stock
management of raw-materials / finished goods, warehouse
management, sourcing & procurement, assembly, order processing,
distribution and transportation, et al.

With it's varied usage across sectors, RFID can be termed as one
of the most promisingand anticipated technologies in recent
years poised for nothing less than complete transformation
in the supply chain.

Role of EPC Global India

EPCglobal India, a division of EAN India, is a regional member
organisation of EPCglobal Inc , the not-for-profit body set up to
establish global standards regarding the development,
implementation and adoption of Electronic Product Code
(EPC) and Radio Frequency Identification (RFID) technology, and
support of the EPCglobal Network.

EAN India is a registered society, promoted by the Ministry of
Commerce, Government of India. It is a joint Government-Industry
initiative at promoting use of international identification and
communication standards and best practices within the industry,
which can further enhance efficiency of their supply and
demand chains through use of business-led EAN.UCC standards.

1 comment

peter said...

The survey which is done by AMR research institute is very informative, now a days Supply Chain Management Services includes the other fields of the organization such as logistics and outsourcing for good control on the organization.

February 21, 2008 at 4:10 PM