Is RFID just another buzz-word, or does it have a genuine business case in South Africa, and how is the channel going to derive benefit out of this hype?
Those are the questions we asked about the technology that, many would agree, has come of age, but is still perceived as being the domain of large enterprises.
Undoubtedly, the decision as to whether to invest in an emerging technology undoubtedly carries with it a certain degree of risk, but companies that figure out how to successfully turn an emergent technology into a competitive advantage will stand out as the most successful in the long term.
The recent move by Wal-Mart Stores Inc., the world?s biggest retail operation, to have its top 100 suppliers shipping RFID-tagged goods by January 2005, and the next 200 tagging cases and pallets by January 2006, is causing retailers and suppliers worldwide to look more seriously at the benefits of RFID technology.
Passive RFID (or radio frequency identification) makes use of tags (or chips) placed on an item, which can be powered up and identified by radio waves that are bounced off these chips. This has often been referred to the replacement of barcode, but has, until recently, been prohibitively expensive to roll out.
According to Sun Microsystems Inc. solutions architect, Lodewyk de Beer, the technology has dramatically reduced in price, and has more or less come of age (seeing wide adoption throughout SA), but the channel needs to understand that it is a bit more complex than sticking tags on everything.
?Because we are working with radio waves, there are many physical challenges that need to be overcome in order to implement RFID effectively,? he says. Challenges such as radio wave cancellation (or the ?cheese effect? as they call it in the industry), wave absorption and physical wave obstructions all contribute to the need to plan the environment very carefully, which can become an expensive exercise.
?But if the environment is set up correctly,? De Beer says, ?RFID will work like a charm.?
RFID has taken a big turn in recent days, however, with the launch of active RFID (sometimes called RFID over WiFi). This, says Sadiq Malik, director for business development at BCT Global, is the next evolutionary step in supply chain automation and stock control, because the system works in real time.
?Obviously, this technology will have its niche applications within very specific verticals, but the value-add for the channel will be the ability to sell an RFID solution that acts like a GPS, telling users where a specific stock item is within a two-metre accuracy,? Malik says.
Active RFID is still way up on the hype cycle, and carries a huge price premium over its passive RFID counterpart, which is why it may take some time to get down to ?carton level? in the retail sector for example.
?But hospitals have already been talking about implementing active RFID tagging for new-born babies as a measure against baby-snatching. Also, the ports authority could benefit from active RFID tagging on huge container ships where shipments can be made up of thousands of multi-ton containers,? Malik comments.
?In Venice,? he adds, ?active RFID has already been rolled out by the ports authority to keep track of automobile and boat traffic, yielding huge benefits.? Passive RFID would merely have given entry and exit details of the vehicles, but active RFID was able to give specific location details of each vehicle.
?RFID enables the gathering of more information than ever before,? says Paul Whalley, MD of IFS SA. ?The question is, can the current business application manage all this data, and what will be done with it? The ability to use this new information to make strategic business decisions will be vital in an RFID-dominated business environment.
?As yet, no universal standard has been developed for RFID, so companies need to decide whether they should move forward with the implementation, or wait until a standard is developed and risk losing their competitive edge,? he adds. ?Work is being done on an initiative called Electronic Product Code (EPC), which will standardise the technology for a variety of applications, and hopefully speed the adoption of RFID.?
Andrew Fosbrook, MD of Proscan, says that that ratification of RFID Gen II and its integration into the ISO standards will see newer standardised tags rolled out throughout this year.
The challenge, he says, is the lack of backwards compatibility to Gen I. ?The main benefits of Gen II tags,? Fosbrook says, ?will be that they will be read- and write-capable, while Gen I tags are read only.?
This has huge implications across the entire supply chain, because total cost of ownership can now be shared across the whole lifecycle, rather than within a closed loop, ?which is where most of the local RFID implementations are at present,? he adds.
However, Fosbrook says that Wal-Mart-type compliance will further drive the need to implement RFID on a much wider scale.
Fosbrook says that there is a fair amount of margin in selling RFID equipment, but channel partners must get certified to ensure that they know how to implement the technology properly.
De Beer adds that huge opportunity lies in wait for young entrepreneurs to build intelligence around the technology, giving the channel many other opportunities to sell services, limited only by its ability to think out of the box.
For example, RFID used at toll gates could serve more purposes than counting cars or debiting petrol cards. If two toll gates are 100km apart and a car makes it between the gates in 35 minutes, it was obviously speeding, and a traffic fine could automatically be generated.
RFID certainly seems to be a force to be reckoned with and, the industry believes, is currently where barcodes where in the 80s. According to the Meta Group Inc., 2005 will still only be the year of pilots, but the technology will see major adoption around 2008, after extensive back-end upgrades.
In any case, it does provide the channel with ample opportunity to be innovative and develop new and potentially sustainable business models.