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Wednesday, Sep 08, 2004

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Corporates take to `radio frequency identification'

Our Bureau

Chennai , Sept. 7

TRUE, Indian consumers will have to wait a good seven to eight years to enjoy the benefits of Radio Frequency Identification (RFID) technology. But the corporate world may taste the fruits earlier.

Already there is evidence that the corporate sector is smacking its lips at what RFID could do to its supply chain management.

Ashok Leyland is one example and L&T is another. Both these companies are examining RFID pilot projects.

RFID, which uses radio signals to identify a product, is often associated with picking and billing in a supermarket, because its most visible use is as an improvement over barcoding.

Indeed, when RFID tags are attached to products such as shirts and milk bottles, the result is a dramatic reduction in wait-in-the-line time, not to speak of anti-theft and product stock-out benefits.

For the tags — devices with chips, that tell a reader device `this is me' in radio language — to be clipped on to millions of low-value products, they have to be suitably low priced too.

Tag costs have been coming down from around 25 cents a few years ago towards a 5-cent target, but prices would have to come down further for a much larger scale of use.

But then, RFID technology (outside military space) is still very young. It is estimated that globally some 2,000 pilot projects are going on, the biggest being the one in Wal-Mart.

Soon many of them will evolve into full-fledged adoptions.

It is estimated that by 2008, the RFID market (tags, readers, interface software and service providing) would be as big as $4.2 billion.

When large-scale adoption happens, tag prices will come down and presumably that will be when RFID will get into retailing in India.

By that time, EPC Global, the non-profit organisation that is evolving standards for giving every item an `electronic product code' would have also long completed its job.

EPC standards are expected to be in place early next year.

But Indian companies may not wait that long. At a seminar on the subject, organised here by the Confederation of Indian Industry (CII) on Tuesday, it was evident that a number of companies are eyeing RFID keenly. An obvious area of application is supply chain management.

Ashok Leyland, for example, has started experimenting with the technology at one of its engine plants. Brig. K.S. Bhoon, Director, Management Development Centre, Ashok Leyland, noted that at present the unit has about 600 engines as its finished inventory, or four days' supplies. This, he said, could be easily be cut by half.

Benefits of RFID in supply chain management are many, ranging from quick and proper recording of a component's receipt to prevention of theft to locating the product without having to search for it.

Meanwhile, IT majors such as Wipro, TCS and Patni Computers have set up RFID divisions and a number of them have bagged pilot projects abroad.

Wipro, which has set up a dedicated lab in Bangalore, has bagged three overseas pilot projects, according to Mr Sundar Srinivasan, Practice Head - RFID Solutions, Wipro Technologies.

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