RFID advances put businesses in the fast lane

PUBLISHED : Thursday, 30 March, 2006, 12:00am
UPDATED : Thursday, 30 March, 2006, 12:00am

By 2010, thousands of products will have chips to enable suppliers and customers to keep track of their products

A CHIP THE size of a grain of sand that can transmit large amounts of information when it activates an electronic reader - that could be the next big thing as manufacturers and distributors look for new ways to boost the efficiency of their supply chain and logistics activities.

Radio Frequency Identification (RFID) technology is a wireless system that allows a product of any size to be tracked using a small chip attached or incorporated into a product and read by a remote antenna.

Although RFID technology has been around for more than 50 years, the cost of developing and implementing it has limited its use.

But with recent advances in technology, business experts predict that, by 2010, RFID chips will be found in thousands of products, ranging from clothes to laundry powder, and that the technology will revolutionise supply chain, manufacturing and retail efficiency.

GS1 Hong Kong, through EPCglobal Hong Kong, has launched a government-backed pilot programme involving the manufacture of garments and consumer electronics to promote the system in Hong Kong.

The organisation has also set up training courses and organises seminars to help businesses learn more about the system. Next month GS1 and EPCglobal will co-host a conference aimed at generating increased RFID awareness.

GS1 Hong Kong (formerly the Hong Kong Article Numbering Association), founded in 1989, is a not-for-profit membership-based industry support organisation committed to optimising the efficiency of supply chains through global standards and enabling technologies.

EPCglobal Hong Kong operates under the umbrella of GS1 to provide a range of services, including article numbering and bar-coding, B2B e-commerce, training and education, Electronic Product Code (EPC), RFID and Global Data Synchronisation (GDS).

Anna Lin, GS1 Hong Kong and EPCglobal Hong Kong chief executive, said that after years of intensive research and development RFID technology was ready to take off as the next-generation global standard in supply chain management.

Ms Lin said a survey of EPCglobal members revealed that 50 per cent were in the process of gathering RFID information, 21 per cent were carrying out feasibility studies while 9 per cent were testing RFID technology.

'Manufacturers and third-party logistics providers are curious about the impact RFID will have on supply chains in their operations,' Ms Lin said.

'They want to know whether investing in the technology would provide a return for their business and add value to their supply chain systems,' Ms Lin said.

Information technology has exploded across the supply chain function in the past 20 years. Initial computerisation of basic warehouse stock control was followed by bar-code identification, electronic data interchange, real time instruction and confirmation and, most recently, voice-directed task management.

RFID offers the potential to replace some earlier technologies and add value to others by providing additional sophistication to supply chain information.

Ms Lin said prospective users should prepare a business case for implementation just as they would for any other new technology.

Where an RFID application focuses on tracking and identifying high-value items, the cost of installing RFID technology could be immediately viable.

Increased benefits could be made in the warehouse and in situations when tags can be applied to single items with relatively low value.

While the potential gains may be significant, businesses must compare the costs of new equipment, infrastructure and processes with their present systems.

Installing a warehouse RFID system costs about $600,000, including readers and software. The cost of each tag or chip, which can be attached to items such as pallets and storage boxes, has dropped from about $8 per chip three or four years ago to about $2.

As more businesses adopted the system, implant costs could drop even further, Ms Lin said.

One reason more businesses might be persuaded to implement RFID was that customers were demanding it and competitors were offering it.

Wal-Mart recently asked its top 100 suppliers to start using RFID for security and identification purposes, and clothing giant Benetton plans to weave RFID chips into its clothing to track items worldwide.

If businesses realised their customers had a clear need for RFID, and benefited from using it, RFID could be worth the investment now, Ms Lin said.

Alternatively, if customers were considering implementing RFID, the best approach might be to defer implementation to match their time scales.