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The Ripple Effect

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CIOL Bureau
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Moving from awareness to experience sharing— the focus at this year's saw a

shift from last year. The message was loud and clear—getting market started on

the RFID technology as opposed to educating on the concept, which was the

underlying objective at last year's conference. The second EPC global India

Conference saw the participation of 16 international speakers and over 300

delegates from across the industry, enterprise and the government.

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Even while RFID case studies made the business case for RFID adoption, the

paramount question of pricing was not lost. Sylvie Pheulpin, marketing manager,

RFID and RF Memory Business Unit, Memory Product at STMicroelectronics, was

hopeful of the 5 cent tag becoming a reality by 2009, with chip prices likely to

be brought down by vendors such as her own company. If aided with cost

reductions from others involved in the value chain like the inlay vendors, the 5

cent tag could become a possibility in the next 4-5 years. Pheulpin, however,

added that other factors such as huge volumes could come into play.

Learning from Experience



With organizations such as Asian Paints, New Holland Tractors, Ashok

Leyland, Center for Railway Information Systems (CRIS) having reportedly shown

interest in RFID, the big challenge now is how to get started. The agenda was

targeted to be in line with this current market reality and to answer some of

the important questions that face the market during this early adoption phase,

including RoI, key business applications, standards, building the business case,

infrastructure components, implementation issues, integrating RFID with other

business solutions, managing RFID data, etc. And, thereby providing the momentum

for early adoption. Experiences in RFID rollout were shared by DHL and Hong Kong

Airport Authority to provide some real world examples to the issues being

discussed.

The conference came close on the heels of the results of a recent study

conducted by the University of Arkansas and commissioned by Wal-Mart evaluating

the impact of RFID roll-out at Wal-Mart's stores, which point towards some clear

benefits in terms of RoI and operational efficiencies. Experts feel that this

conclusive evidence of the business impact of RFID will help break some ice in

the Indian market with respect to technology and help in building a strong

business case for its deployment.

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The study shows that RFID-equipped stores were 63% more effective in

replenishing out-of-stock merchandise compared to stores without the technology

and also found a 16% reduction in out-of-stock merchandise. Also that,

out-of-stock items with RFID were replenished three times faster. Wal-Mart also

experienced a reduction in manual orders resulting in a reduction of excess

inventory, according to the report. The analysis consistently found that RFID-enabled

pilot stores statistically outperformed the control stores without RFID

technology in terms of providing improved on-shelf availability of items for

customers.

The Wal-Mart mandate has been the primary driver for worldwide RFID adoption

so far and, therefore, its positive results are likely to have an impact on the

uptake of the technology among other enterprises.

International Regulatory Requirements: An Emerging Driver



One key area of focus during last year's conference was the issue of getting

the government to free up the radio frequency in the UHF 865—867 MHz band,

which was subsequently accepted by the government earlier this year. According

to Ravi Mathur, CEO, GS1 India, there are no impending major regulatory hurdles

that are looming currently. However, he added, there has been a focus on

building awareness relating to requirements that some of the regulatory bodies

across the world are asking for or are going to ask in the future, and some

regulatory issues in those markets that can possibly have a ripple effect on the

Indian market in terms of RFID adoption.

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The growing concerns relating to container security by the US Customs and

Homeland Security is one such area. The Container Security Initiative (CSI) is

part of the US government's efforts to ensure safety of shipments arriving at US

ports. Through CSI, which was announced in January 2002, high-risk maritime

cargo containers are identified and examined for weapons of mass destruction (WMD)

at foreign ports before they are shipped to the US. One of the four core

elements of CSI is developing secure and smart containers and this is where RFID

comes into play and is considered to be one of the enabling technologies.

While the traditional container seals only provide evidence of unauthorized

entry when they are physically inspected, RFID container seals provide automatic

notification of tampering by going silent. Smart tags can also be equipped with

sensors to monitor environmental conditions within the container. The containers

with RFID seals enable shippers and carriers to consistently monitor container

security, speed shipments through the supply chain, verify that a container was

loaded at a secure loading point, significantly reduce the likelihood of

tampering.

According to Mathur, this is becoming very important and will have an impact

on the Indian exporters in terms of meeting regulatory requirements on container

security. And this will have a possible impact on RFID adoption among Indian

exporters. Though the usage of RFID has not been mandated as yet, there is a

possibility that a mandate could come in the future.

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Opportunity for Indian IT companies



A huge market opportunity has been thrown open for Indian IT industry for

providing RFID solutions. According to Mathur, some areas such as data

synchronization, middleware, chip design, network security and applications

development are bold opportunities for the Indian IT industry.

According to a report from Research and Markets, the RFID applications market

could reach more than $6 bn worldwide by 2010. A report on "RFID in

Manufacturing Sector" estimates that the market could reach $3 bn, as early

as 2006 with more companies expanding their initial pilots. There is already a

lot of interest being generated among the software community, which can

especially leverage its prowess in the area of application development to its

market potential. A majority of the business is expected to come from the US

market.

The Indian companies are already investing in setting up RFID Centers of

Excellence and Labs and have dedicated RFID practice heads. Mathur explains that

testing centers could provide a simulation of the different environments where

tags and the readers are going to be used. There are a lot of environmental

factors and physics involved for the tags to work successfully and it is,

therefore, essential to check before the tags are being actually used to see how

well they are working.

Presently there are some testing centers based in markets like Europe, US and

APAC countries like Taiwan. An RFID testing facility warrants high investments

and, as a result, many companies are waiting for the demand to accelerate before

putting in their investments. According to Mathur, "It is an issue of

timeline but it is inevitable that the Indian companies would ultimately get

into this. There is an opportunity for Indian IT companies and research

institutes to offer such testing facilities in India. This will greatly help

Indian Industry, particularly exporters in ensuring readability of their EPC/RFID

tagged products and ready acceptance by international buyers like Wal-Mart,

Metro, Tesco etc," he added.

Shipra Arora

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