The Hindu Business Line : `RFID has not changed the way BPOs do biz in retail'

Radio frequency identification (RFID) has still a long way to go in terms of being embraced universally since the pallet and chip design is not cost effective and is susceptible to inaccuracies owing to heat and moisture levels in external conditions.

RFID is an exciting concept, poised to transform and provide path-breaking changes the way firms manage their supply chain system. `Walmartization' of this concept, a coinage used to indicate the level of adoption by Wal-Mart, has urged many large retailers to re-look at their supply chain strategy and align with the mandate laid down by world's largest retail chain.

"But, the introduction of the technology has not significantly changed the way we do our business in the retail vertical," says Mr Sajan Pillai, President and COO of US Technology Resources, a California-based IT and BPO services provider.

Generic term

"Our Fortune 500 retail clients are in the nascent stages of validating RFID as a future platform. We currently support our clients in the areas of application production support and maintenance of critical systems," Mr Pillai told Business Line. "We, however, see the middleware space in the RFID environment as the most ideal segment to provide ROI to our clients," he added.

RFID is a generic term for technologies that use radio waves to automatically identify products. There are several methods of identification, but the most common is to store a serial number that identifies the product on a PCB (printed circuit board) attached to an antenna. The small circuit board and antenna together are called an RFID transponder or an RFID tag.

The antenna enables the PCB to transmit the identification information to a reader. The reader then converts the radio waves reflected back from the RFID tag into digital information that can be passed on to computers.

To a question on how BPO companies are coping given that major chains are expanding their presence across geographic regions, Mr Pillai said most retail companies use identical processes with adjustments for local/country specific factors.

This helps BPO companies deliver the same level of service to companies who have expanded across national boundaries to multiple centres.

The major challenges being faced pertain to language and time zones.

But retail firms such as Tesco of the UK have established a very successful back-end processing centre in Bangalore, paving the way for many larger retail firms to mirror the success by offshoring to India.

Retail being Wal-martised?

Retail giant Wal-Mart has led the charge on RFID, which is expected to dramatically change the industry's inventory management practices. Other major retailers are now making similar requests of their vendors.

The push from an increasing number of retailers is in fact rushing the RFID mandate along at a faster clip, with desired results likely to come sooner rather than later.

These innovative supply chain initiatives challenge manufacturers to deliver significant savings. Implementing RFID, however, is costly and complex for manufacturers. Companies are struggling with mastering the technology, synchronising the data, and connecting to legacy systems.

By one estimate, spending on RFID technology will be up from an estimated $1 billion in 2002 to $3 billion in 2007. Forrester Research estimates that a typical supplier attempting to comply with Wal-Mart's mandate will spend $9 million in implementation costs during the first two years.

According to Deloitte, the benefit to consumers from Wal-Mart's drive for low prices is obvious. Consumers are buying more with less.

Consumer goods manufacturers are under intense price pressure, as a result.

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