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Today SMEs tend to look at it being costly, and therefore, these questions are bound to arise before they adopt the technology. 

What exactly is RFID? How does it work? How much does it cost? What benefits can it bring to my business? Should I be evaluating it now?

EPC/RFID: A Revolution in the Making
A technology lying largely unused since the World War II, has suddenly caught the attention of the whole world. 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 and open exciting opportunities and business applications responsive to today's global needs.

The evolution of EPC based RFID, is the outcome of path breaking research undertaken by Auto-ID center, MIT in 1999, which was funded by over 100 of the world's leading organizations across industry sectors including such prestigious names as WalMart, Metro, US Department of Defense, Intel, Unilever, VeriSign, US Food & Drug Administration, US Postal Service, IBM, Microsoft, P&G, Philips, 3M, Coca-Cola, Deloitte, J & J, Abbott Labs, Tyco, Pfizer, etc. 

Today, seven Auto-ID labs located in the US, UK, Australia, Japan, Switzerland, Korea, and China are researching on over 100 projects
covering chip design, tag data standards, counterfeit detection, network security, middleware, RFID options for SME's, cost reduction components etc for wide range of business applications across industry sectors covering retail, healthcare, transport and logistics, defense, automotive, aerospace etc.

RFID is a system of small electronic tags (comprising a tiny chip plus an antenna) that transmit a radio signal, radio signal readers, and related hardware and software infrastructure. The transmitters can be placed anywhere for tracking the movement of goods that adds value to the commercial process: on containers, pallets, materials handling equipment, cases or even on individual products such as clothing or food packaging.

The tags are recognized when they pass by a radio signal reader and that movement is captured and managed by the infrastructure. Whatever actions are then triggered depends on the individual application, from basic stock replenishment at one end of the spectrum to facilitating the ultimate lean supply chain at the other.

A key value proposition of RFID technology is the ability to provide near real-time tracking of any RFID tagged item without human interaction. Turning this capability into a sustainable competitive advantage depends on how effectively all this RFID data can be translated into valuable operational intelligence, such as forecasting and inventory management, and made available to all enterprise systems, applications, and users. This capability can provide businesses with visibility in their whole supply chain and corporate assets with little or no human labor cost.

Of course, big companies have enough budget and resources to take a risk with RFID. Smaller businesses are naturally going to be more cautious. But with the likes of WalMart and UK retailer Tesco already starting to demand that their suppliers apply RFID tags at the pallet level-the so-called 'slap and ship' procedure-it will not be too many years before RFID tagging becomes standard practice at all levels in the value chain, at least in the retail sector.

This may not be a bad thing, as RFID promises to deliver massive supply chain improvements, such as better efficiency and visibility, lower costs, better asset utilization, higher quality goods, reduced shrinkage and counterfeiting, and increased sales by reducing out-of-stocks. It can even help improve the safety of food and pharmaceuticals. The potential applications are vast as the technology is relevant to any organization engaged in the production, movement or sale of physical goods-including retailers, distributors, logistics service providers, manufacturers, healthcare providers, and their entire supplier base.

Currently, the biggest barrier to entry for RFID, especially for SMEs, is cost. Industry is hoping that tag manufacturers can hit 5 cents per unit, which is widely seen as the 'tipping point' that will clear the field for widespread RFID adoption.

The ratification of UHF Generation 2 as a standard is an important step in the drive toward commercialization and mass adoption of EPC technology. While RFID technology has been in use since the early 1940's, its potential has remained largely untapped due to a lack of sufficient standardization and the overall expense of the technology.

With standards now in place and growing demand in the marketplace, the mass production of products built to EPCglobal standards is expected to decrease the overall cost of deploying the technology; thereby fueling large scale adoption and implementation and driving costs down.

For example, some industry analysts estimate that standards may reduce chip prices by as much as 80%. Other firms predict that the overall market opportunity posed by RFID will reach more than $4 bn by 2008 with estimated spending on the technology to range between $515 mn and $3.8 bn next year alone.

Gen 2 protocols offer significant performance enhancements over the first generation of EPCglobal UHF protocols, including superior tag throughput, improved accuracy, and compliance with global spectrum regulations.

Most SMEs today are probably only thinking about RFID in terms of a technology that they may be asked to deploy by their larger customers. However, it is important that any research and investment into RFID is not simply seen as a compliance issue. There are long-term rewards to be reaped from judicious and well planned investment in RFID that go way beyond simply ensuring compliance with customer mandates.

SMEs can implement RFID in highly diverse and customized ways. However, they have to consider in what areas of their company the technology can be used cost-effectively. A lot depends on how well a company's processes and IT are prepared for RFID.

It's also important to make a distinction between several different levels of competitive advantage that the organization will gain. Firstly, the best way for SMEs to gain competitive advantages through RFID is by enhancing their processes-by cutting throughput times, speeding up deliveries, and reducing warehousing. If this means an SME can deliver its goods faster, then it will definitely be one up on the competition. At present, this is true in particular for retailers, and transport and logistics service providers.

Secondly, if SMEs become 'early adopters' of the technology, it will at the very least have a psychological advantage over its competitors. Companies that start off with pilot projects early on will also be in a position to handle extensive RFID implementations faster in the future. This will give them another lead over businesses that have yet to consider the technology.

According to Martin Haas, consulting director at IDC Central Europe, “Bearing in mind the motto 'think big, start small', SMEs should begin with small, manageable pilot projects. This enables companies to start testing RFID on a limited basis and acquire technical knowledge gradually. What's required is really a symbiosis of technically feasibility and cost-effectiveness. This is by no means easy, but companies that heed this advice will benefit from more efficient processes and improved competitiveness in future.”

Several leading software/hardware/consulting companies are producing products catering specially for small and midsize businesses to comply with a variety of looming RFID mandates.

International Mandates
With increasing mandates from retail, health care, and the Government to begin RFID labeling, the technology is clearly on the fast track to being a required business tool. SMEs should get ready for RFID implementation and shouldn't wait to make their RFID moves. RFID has several profitable ways to benefit the enterprise internally and consideration should be given to the plusses and minuses of implementing it the right away.

EPCglobal India, a division of GS1 India, is a Member Organization of EPCglobal Inc, the not-for-profit organization set up to establish global standards regarding the development, implementation and adoption of EPC and RFID technology and the EPC Network.

GS1 India, affiliated to GS1, Brussels, which oversees a network of 101 GS1 Organizations across the world, represents a joint Industry-Government collaborative initiative at bringing global best practices and standards for enhancing efficiency in supply chain management into India.

Ravi Mathur, CEO, GSI India

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