Abhishek Sujay-0505-RFID Advantage in Logistics Mgmt

8/8/2019 Abhishek Sujay-0505-RFID Advantage in Logistics Mgmt

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RFID ADVANTAGE IN LOGISTICS MANAGEMENT

M P BIRLA INSTITUTE OF MANAGEMENT 1

A STUDY ON RFID ADVANTAGE IN LOGISTICS

MANAGEMENT FOR RETAIL INDUSTRY

A DISSERTATION SUBMITTED IN PARTIAL FULFILLMENT OF

THE REQUIREMENTS FOR THE AWARD OF MBA DEGREE OF

BANGALORE UNIVERSITY.

Submitted By

Mr. Abhishek Sujay .N.

Registration Number

05XQCM6005

Under the guidance of

Prof. Sumithra Sreenath

M P Birla Institute of Management

Bangalore

M.P.BIRLA INSTITUTE OF MANAGEMENT

ASSOCIATE BHARTIYA VIDYA BHAVAN.

BANGALORE-560001

2005-2007


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DECLARATION

I hereby declare that this dissertation entitled A STUDY ON RFID

ADVANTAGE IN LOGISTICS MANAGEMENT FOR RETAIL INDUSTRY

is the result of my own research work carried out under the guidance and

supervision of Prof.Sumithra Sreenath, M P Birla Institute of

Management Bangalore.

I also declare that this dissertation has not been submitted earlier to any

Institute/organization for the award of any degree or diploma.

Place: Bangalore

Date: Abhishek

Sujay.N.


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PRINCIPALS CERTIFICATE

I hereby certify that this dissertation entitled A STUDY ON RFID

ADVANTAGE IN LOGISTICS MANAGEMENT FOR RETAILINDUSTRY is the result of research work carried out by Mr. Abhishek

sujay .N. under the guidance of Prof. Sumithra Sreenath, M P Birla

Institute of Management, Bangalore.

Place: Bangalore

Date: Dr N S Malavalli

Principal


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GUIDES CERTIFICATE

I hereby certify that this dissertation entitled A STUDY ON RFID

ADVANTAGE IN LOGISTICS MANAGEMENT FOR RETAILINDUSTRY is an offshoot of the research work carried out by

Mr.Abhishek Sujay.N. under my guidance and supervision.

Place: Bangalore

Date: Prof. Sumithra Sreenath


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ACKNOWLEDGEMENT

I would like to express my sincere gratitude to my research guide Prof.

Sumithra Sreenath, M. P. Birla Institute of Management, Bangalore for

her constant encouragement and guidance in the course of the research

investigation.

Further, I would also like to thank all the faculty members of MPBIM

who have helped me in completing my project. I have gained a lot of

knowledge throughout the course of carrying out this project.

I would like to sincerely thank all my friends and colleagues who have

helped me in completing this project by providing me with the academic

support.

Special thanks to the founders of GOOGLE, I really wonder how people

in early days used to do research projects. Finally, thankful to GOD for

obvious reasons.

ABHISHEK SUJAYN

INDEX


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SL.NO CONTENTS PAGE NO

1 Research Extract 1

2 Chapter 1: Introduction 3

3 Chapter 2: An overview of implementation of

RFID in retail stores for logistics management

6

4 Chapter 3: Profile of the Industry 13

5 Chapter 4: Profile of the respondents 35

6 Chapter 5: Literature survey 36

7 Chapter 6: Problem statement & Research

objectives

44

8 Chapter 7: Research design 45

9 Chapter 8: Research limitations 47

10 Chapter 9: Data analysis and inferences 48

11 Chapter 10: Summary of major findings of

research

55

12 Chapter 11: Recommendations 60

13 Chapter 12: Conclusion 61

14 Scope for further study 62

15 Bibliography 63


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RESEARCH EXTRACT

The future is far too important for the human species to be left

to fortune tellers using new versions of old crystal balls. It is time for the

oracle to move out and science to move in."

Radio Frequency Identification (RFID) is set to become the bedrock of

most supply chains over the next twenty years: however, at present it is

perceived to be an immature solution with significant barriers to overcome

before becoming a mainstream technology.

Indias organized retail is only 3 percent while 97 percent is

unorganized. India is the second largest growing economy in retail, after

China. Around 350 plus shopping malls are coming up in 2007 alone. As the

retail segment in India keeps growing exponentially, RFID and other retail

security products will play a more prominent role to control and combat retail

shrinkage.

Not being able to find tools and equipment when they are needed

costs more than inconvenience. Time spent searching for assets eats into

productivity, and hence profitability. Workers lose the equivalent of one full 40-

hour workweek per year if they spend only 10 minutes a day searching for

and gathering needed items. The inability to track equipment location, usage,

service, and maintenance causes companies to lose money on lease and

service agreements. Holding too many assets ties up capital, which every

business seeks to avoid. To improve competitiveness and profitability,

enterprises should manage assets with the same care and innovation they

have employed to drive excess inventory and costs out of their operations. A

good asset management program will improve return-on-assets (ROA) and

other metrics by helping to lower and control the enterprise cost structure.Automatic identification and data collection (AIDC) technologies

and techniques that have proven their value in the supply chain are readily

adaptable to help optimize asset levels. Bar code and smart label technology

can make it simple and convenient to gather and manage asset information in

a timely and efficient manner. These technologies can record asset


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movements automatically, and provide the data in real time to asset

management software applications. Computerized systems provide up-to-

date, accurate data that enables an organization to manage its assets with

information instead of physical inventory. The result is a lower overall asset

base, improved asset utilization, increased productivity and more efficient

purchasing and maintenance, which all contribute to bottom line improvement.

These outcomes provide a sustainable improvement in profitability without

burdening employees with excessive controls or reporting responsibilities.

Using RFID and logistics management strategies will serve to improve capital

utilization lower the total operational costs as well as improve the availability

of assets. The use of these asset management techniques has improved

customer retention significantly. This technique will help improve visibility ofassets in transit, availability management of much needed assets,

transportation management etc. these techniques have to be reviewed

periodically to ascertain if they have effected a significant change as also to

take necessary action where required.

This Research is an attempt to study the advantages and intricacies of

implementing RFID in logistics management for retail industry. The study aims

to find the strategic advantages that the companies will gain due the

implementation of RFID. The study also shows the various hurdles for

implementation of RFID. The study also helps organizations identify the

potential users for their RFID implementation and how they could further

leverage the implementation to achieve higher returns on investments and

ease of operation which ultimately lead to higher efficiency and better profits.


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Chapter 1: Introduction

Mandated use of Radio Frequency for automatic Identification (RFID) of

goods at the pallet, case and item level continues to churn the Consumer

Product Goods (CPG), Logistics and Retail industry. The statement Internet

of things is slowly becoming true; with concerted efforts from standard setting

bodies such as EPC Global, ISO, FMCG consumer goods companies like

Gillette, P&G and major retailers like Wal-Mart, TESCO, and the US DoD, to

replace barcodes with RFID tags.

Barcodes are factual with the existing automatic identification

systems. At the same time, RFID promises a smooth and accurate capture of

data and organizations are looking forward to relieve the existing bottlenecks

with systems which enable end-to-end tracking and monitoring of goods.

The early acceptance of RFID realizes the need for a good integration

fabric that can seamlessly allow data to flow from the devices (tags) through

the readers to the RFID middleware systems, and be utilized by the existing

or new applications to trigger meaningful transactions. The vision is to

combine the best of each into a smooth, tightly knit system, offering the end-

user more information in less time.

The Integration landscape that will evolve needs to address issues such as

device integration, data integration, presentation and management, ERP,

Warehouse Management Systems integration, work flow integration (with

partner systems) and concerns for security and privacy. The IT industry

comes into the picture while making data available through the artifacts on

integration in turn providing data for better decisions and driving towardsquantifiable benefits of the investments.


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A basic RFID system has three components:

FIG 1: RFID TAG

The tag, an RF transponder programmed with information unique to the

object being tracked

The reader, a transceiver that decodes the information stored on the tag

An antenna on either the tag or the reader

Tags that contain internal batteries are active tags. Tags

activated by a power source in the reader are passive. Because RFID

technology uses radio waves rather than light, readers need not be close

enough to see tags. Nor is human intervention necessary, because tags are

read automatically. The more powerful the tag, the farther away the reader

can be placed. However, a more powerful tag is also a more expensive one.

Thus, RFID tags are usually attached to cases of pallets of lower-value goods,

such as razor blades or Army boots, and individually to high-value objects,

such as cars and military equipment. Tags can be tiny enough to identify the

family cat or large enough to label railroad cars. The larger the tag, the more

information it can storesuch as when an object was moved, the

temperatures to which it was subjected, and how hard it was bumped.


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How RFID works

FIG 2 : RFID WORK CYCLE


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Chapter 2: An overview of implementation of RFID in retail

stores for logistics management

FIG 3: RFID IMPLEMENTATION HURDLES MATRIX

The above matrix plots the different implantation hurdles depending on the

various factors such as the degree of importance on x-axis starting from low

to high , Then plotting the degree of difficulty for implementation on the y-axis

starting from less of a concern to significant concern.

This matrix clearly places the various hurdles accordingly and helps the

implementation company to analyze and take further steps accordingly.


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INTEGRATION LAYERS

The success of RFID will depend a lot on the rollout plan of the

organization. The ideal way to do the same would be to divide the processes

and technologies into various layers to make the impact of adoption minimal.

We further take a look at these layers that make the integration complete.

DEVICE INTEGRATION

As organizations proceed to adapt themselves to the RFID technology, the

RF-enabled readers have to integrate with the existing auto-id technologies

for capturing the data. This drives the need for integration at the device level

that comprises devices-device integration, device computer integration and

data capturing technologies.

APPLICATION INTEGRATION

Application Integration is a part of the evolution of application delivery that

includes improved software componentization and the increasing acquisitions

of packaged software. In its simplest form, application integration is the

encapsulation of an existing application by software component that acts as a

functional interface to that application. The creation of an interface allows the

other applications in the portfolio to interoperate with the wrapped application,

increasing its value and long term usability. The existing applications, now, in

RF-enabled environment need to communicate in the EPC compatible

language. The data that is gathered at the middleware is converted to the

application compatible format and sent across to the legacy / enterprise

applications for further processing.

PROCESS INTEGRATION

Process integration tools provide a level of abstraction by letting users define

integration requirements through workflow and business process models. This

capability shields business analysts from the complexity of underlying

middleware. Using process modeling, business analysts focus on optimizing

processes and easily change or implement new processes with minimal

amount of coding. The models map the flow of business processes and

business rules across applications and people. When business processes


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change, the changes are made at the model level and even the on-going

processes are updated. After the application level integration, the

organizations move onto process integration to combine and automate the

processes, thus optimizing the data flow. The drivers for process integration in

RF-enabled systems are:

Existence of third-party process modeling tools

Workflow modeling

Process simulation

Process-based task monitoring and management

The need for runtime changes in processes.

BUSINESS INTEGRATION

The completely automated systems fall in place when the organizations inter-

operate on business transactions. This is possible by reducing the cost of

data ownership and reusing the information between vendors. Physical Mark

up Language (PML) plays a key role by enabling the business partners to

access the information about the object that is being read in RFID. Business

Integration depicts end-to-end business process flow across business units. It

ensures the management and reliability of processes on the path.

Organizations, with the help of business integration, are able to bridge the

application environments across composite applications, creating a networked

world.

PRESENTATION AND MANAGEMENT

While RFID automates the data capture and many of the business processes,

the simultaneous requirement is to monitor and manage the data that flows

from one process to another. This layer will help monitoring and managing the

data and view the state of the system at each level. It also can help in

generating various reports and analyze the information at various stages in

the entire value chain. The Graphical User Interface, if provided, can also help


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in managing the information and providing a manual means of manipulating

the information, when required.

INTEGRATION CHALLENGES

The adoption of RFID, along with an ease of management invites a series of

challenges for early adopters. The challenges start right from integrating the

readers for identifying the data, to monitoring the data in the ERP and SCM

systems, to later manage this data. The most likely areas where challenges

can be foreseen are:

INCOMPLETE PACKAGES AND INFLEXIBLE SOLUTIONS

Organizations having partial packages - supporting functionality in chunks

are likely to face a challenging stint with RFID. This is because of the fact

that lot of amendments may be required in order to leverage the

provisioning of RFID to the utmost.

NEED TO INTEGRATE LEGACY

While RFID is being integrated, organizations would want to re-use their

existing systems. This will not only save cost and time, but also require

less amount of familiarization time for in-house users.

NEED TO INCORPORATE NEW FUNCTIONS

Even while organizations are looking only at the identification aspect of

RFID, there are many areas where new functionalities would be requiredto automate the existing systems. Vendors providing integration packages

would be expected to develop their products/solutions in a way that

integration in such scenarios can be achieved with minimal

customizations.


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DIVERSITY IN TECHNOLOGICAL STANDARDS

The ERPs and SCMs within organizations can be proprietary as well as

vendor provided. However, in any case, with each ERP having different

standards in the technology aspects, Integration challenges are likely to

soar up in this arena.

INCOMPATIBILITY IN BUSINESS PROCESSES

The better you want, the tougher it is. Automation is to bring in series of

changes in the existing processes that may or may not be compatible with

each other. This puts up a challenge at the process integration level to

provide an oblivious means for optimized automation.

COMPLEX TECHNOLOGY WITH HETEROGENEOUS PLATFORMS,

N-TIER DISTRIBUTED COMPUTING AND THE WEB

Distributed computing environments and the advent of Internet brought in

a concept of Interorganization business communication through loosely

coupled systems. Extensible Markup language (XML) is accepted as a

standard for such communications. The combination of Internet and XML

gave birth to Web Services, which support multi-language and multi-

platform systems. Integration aspects of RFID will cover a lot in this area

with processes being automated and organizations reducing their cost of

ownerships.


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ROADMAP TO INTEGRATION

FIG 4: RFID INTEGRATION ROADMAP

While RFID is being promoted as an applied science to provide real-time

visibility of data pertaining to items, cases and pallets at all stages of the

automatic identification, organizations are researching continuously to

improvise their strategies for optimizing their efficiencies in terms of costs,timely deliveries, consumer satisfactions and above all managing the

complicated business rules using this tool.

Figure illustrates the roadmap for integrating RFID with existing processes.

The permeation through these stages can give: integrity, accuracy, unified

view of business information, infrastructure optimization, technological

flexibility, and above all, integrated real time data visibility. With individual

technologies rapidly becoming generic or obsolete, integration plays a vital

role for a smooth running system. The requisite of an integrated platform

envisages an approach to product development and opens the door to

intelligent systems.

Radio Frequency Identification promises an era of ubiquitous computing. The

Internet of Things is being realized as the means of low cost of ownership

and a substance for real time monitoring.


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RFID is moving forward with a thrust and, the need for Integration at various

stages with RFID becomes a crucial aspect for a smooth operation of the

system. What makes the integration aspect vital is the existence of diverse

applications in functional and technical aspects. Vendors across the

Information Technology spectrum are taking a plunge for providing solutions

that are extensible and robust to meet the challenging demands of every

vertical concentrating on RFID. And what is promised is a better management

of data and information for organizations, in turn, boosting efficiency and

optimization of the resources.


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Chapter 3: Profile of the Industry

FIG 5: RFID IMPLEMENTATION USERS

India is being touted as the land of opportunity for logistics service providers

all over the world. The demand for logistics services in India has been largely

driven by the remarkable growth of the economy, projected to grow at 9-10

per cent in next few years. The Indian logistics market, valued at $14 billion a

couple of years ago, is expected to grow at a CAGR (compounded annual

growth rate) of 7-8 per cent. It is felt that the growth will continue, and might

even scale newer heights, as the economy is experiencing a retail boom with

Western companies such as Metro, Wal-Mart planning to start operation in

this country, and large local retailers such as Shoppers Stop, Pantaloon, RPG

and Big Bazaar planning to expand their operations in smaller cities.

But, then, logistics management in India too is complex, with millions and

millions retailers catering to the requirements of more than one billion people

and the infrastructure yet to develop to cater properly to a growing economy.

The poor condition of roads translates directly to higher vehicle turnover,

which in turn pushes up the operating costs and reduces efficiency. The

reduced efficiency is passed on the logistics service providers, with

transportation costs accounting for nearly 40 per cent of the total logistics


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cost. The National Highways are being upgraded but these highways account

for a meager two per cent of the total road network in the country.

The Government of course is trying to execute a large number of road and

other infrastructure projects through PPP (public private partnerships)

initiatives to ease the pressure on the government coffers. However, the

experiences reveal that the PPP scheme, as it exists today, is not a foolproof

arrangement, with the several States complaining about its inadequacies.

There are other problems such as complex tax laws and insufficient

technological aids. The fragmented market increases costs due to huge

paperwork and the individual truck owners, dominating the market, are unable

to contract directly with customers, with the result freight consolidators and

brokers take a commission to generate business for the truck owners. Only

about a few thousand vehicles out of a total of several millions have tracking

system. The use of IT, thus, is limited.

Neglected modes

In India, the logistics costs are still higher than those in developed countries

an estimated 13-14 per cent of GDP compared to 8 per cent in the US. The

inventory costs are approximately 24 per cent of the logistics costs and the

order processing and administrative expenses account for another 10 per cent

or so. Warehouse management is often done manually, increasing

inefficiencies and adding to the cost.

A characteristic feature of the local express and logistics service providing

companies is that many players offer homogeneous services, with the result

there is near- commoditization of services where the demand is price

sensitive. The top-end of the market is controlled by a handful ofmultinationals and large domestic players.

Despite these challenges, the country's logistics industry is set to grow.

Industries such as chemicals and pharmaceuticals, metals, FMCG, cement,

textiles and capping it all the retail segment have been identified as the top


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contributors to the projected growth of the economy and therefore to logistics

revenues. The new generation corporates are looking to outsource non-

traditional logistics requirements such as reverse logistics, inventory

management, order processing, distribution, and labeling and packaging.

Radio Frequency Identification

61 companies intend to implement RFID. Ironically, the popularity of the

technology is not in the manufacturing or the FMCG segment as one would

expect. It is the services sector that's bitten. 7 percent of those who intend to

invest in RFID this fiscal already have fully operational implementations.

RFID as a technology has existed for over 30 years. The technology can

address tracking requirements of companies, and the mandate to put RFID

tags on products that get exported to giants such as Wal-Mart is spurring

interest in this technology.

An RFID standard is conspicuous by its absence and completed projects are

proprietary deployments in closed surroundings to track objects in storage. An

important factor that will contribute to exporters taking to RFID is that RFID

tags can be used to communicate information about a product to anyone in

the world over the Net.

According to Venture Development Corp. (VDC), the overall worldwide market

potential of RFID technology (including sales of tags, readers, software and

services) is expected to grow $4.7 billions in 2007 from $1.5 billions in 2004, a

compound annual growth rate of 45%. Market growth is broad based across

all industries with particular industries such as consumer, retail and life

sciences growing significantly faster than others


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FIG 6: SECTOR-WISE ESTIMATES FOR RFID

RFID system implementations are expected to increase significantly in thefuture due to several key factors that are driving growth and adoption:

Development of standards:

The new standards offer several performance benefits while ensuring global

readability throughout the supply chain. EPC global recently suggested that

HF become the global standard in item-level RFID applications, which should

help fuel adoption in the numerous markets such as tracking, consumer

goods and electronics. Companies such as Pfizer and the leading packager,

West Pharmaceutical Services, in the life sciences industry have already

begun implementing programs consistent with the proposed standards.

Reduction in product prices:

Given the improvements in chip design and manufacturing processes, certain

companies can now offer RFID solutions with compelling Return on

Investment (ROI) profiles. Companies have an active program to continuelowering production costs as it ramps production, leverages purchasing of

components and optimizes manufacturing processes.


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Maturity of RFID infrastructure products:

RFID companies can readily provide companies with a customized, turnkey

and fully integrated solution. A company designed and implemented and is

now integrating a complete solution for a global fashion retail company that

took 4 months and resulted in 99.95% read rates in a highly demanding end-

to-end supply chain and retail environment.

Strong endorsements from industry leaders and government

Many leading IT consulting firms such as Oracle, IBM, Accenture, Cap Gemini

and Siemens, along with companies such as Wal-Mart, Boeing-Airbus and

DHL have significant RFID initiatives underway. For example, Wal-Mart and

Metro have mandated that suppliers be RFID compliant by the end of 2005.

In government, the US Department of Defense (DOD) is requiring RFID

compliance by suppliers by the end of 2005 and the US Food and Drug

Administration (FDA) is recommending RFID usage by all pharmaceutical

companies on a unit level basis by 2007.

RFID markets cover two broadly different areas of application:

Pallet & Case Tracking:

Pallet and case tracking involves tagging bulk packaged items (i.e. a

box of goods, not the individual units of sale), usually at the manufacturing

source. The implementation of pallet and case RFID tracking is anticipated to

bring further efficiencies in the supply chain, from packaging, through shipping

and distribution, and into the back-end of the retail store or final distribution

point. Benefits are expected to arise from improved control, reduced touch

and reduced diversion. Pallet and case tracking is largely being driven by the

mandate of several large retailers such as Wal-Mart in the US and Tesco in

Europe, as well as by the US DoD. As noted above, UHF is the preferred

solution as it allows for longer read ranges.


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Item-level tracking:

Individual items are tagged at the manufacturing place, in a warehouse, or by

the operator of a closed loop system such as a library. Tags are read in bulk,

often through a container (box, bag, etc.), along a process line or in the supply

chain, and without a line of sight. Performance demand is very high (above

99.95% read rate in bulk), which presents significant technological barriers for

many competitors. Implementation is being driven by both value

considerations as well as by mandates from government agencies and

customers. Benefits are shared between the retailer, the wholesaler, the

manufacturer, and other participants in the supply chain

How Will RFID Affect the Apparel and Retail Supply Chain Industry?

RFID is expected to provide huge advantages to manufacturers by offering

the tools to better plan production and respond more quickly to market

demand. It will facilitate automation of inventory counts and speed shipping

and receiving at the distribution level. For retailers, it will help to reduce stock-

outs, enable product tracking and potentially reduce theft and streamline thePOS function. RFID will also open other merchandising opportunities and help

with the overall consumer buying experience. Due to the current cost of the

technology (both tags and infrastructure), the initial phase of adoption for most

retailers is at carton and pallet marking applications. The current technology

being adopted for carton and pallet labeling is passive UHF tags (850 MHz

950 MHz). As the cost of tags and readers comes down, a wider adoption at

the item marking level is developing.


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Open Loop versus Closed Loop Applications

Among the many applications for RFID technology, the solutions can be either

closed loop or open loop. In a closed loop application, the user has complete

control of the items to be tracked throughout the application. There is no need

to share data outside the user organization and users outside the organization

do not need to be able to read the RFID tags. In this case the chosen protocol

does not need to necessarily comply with an open standard. For many RFID

applications, the tagged items must be readable by many companies such as

manufacturers, logistics hubs, and retailers. In this case, it is essential to have

open loop standards for the tag protocol as well as the data being stored to

the tag.

The Electronic Product Code (EPC)

FIG 7: DESCRIPTION OF EPC

The EPC is a 96-bit number made up of a header and 3 sets of data. There

are several iterations of the EPC, depending upon the specific application. An

example of a typical EPC code is shown below. The header identifies the EPC

version number which identifies the type of EPC data to follow (for example

SSCC versus GTIN). The second part of the number identifies the EPC

manager typically this would be the manufacturer of the item the EPC is

attached to. The third part is called object class and refers to the exact type of

product most often the stock-keeping unit (SKU). The fourth series of

numbers is the serial number that is unique to the item. (The second and third

sets of data are similar in function to the numbers in UPC barcodes.)

A 96-bit EPC will allow sufficient capacity for 268 million companies. Each

manufacturer will have the ability to create up to 16 million object classes with


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68 billion serial numbers in each class. This should provide sufficient capacity

to cover all products manufactured in the world for many years to come.

ELECTRONIC PRODUCT CODE TYPE 1

Potential issues that need consideration when choosing the type of

RFID and method for application:

Although RFID technology promises great improvements in supply chain

visibility, it is important to embrace the technology with a bit of caution. The

following are some of the issues that require close scrutiny when investigating

RFID:

Tag Cost This should not to be confused with chip cost. Although the goal

is to bring the cost of the tag (chip and antenna) down to 5 cents, this goal is

in the future since it both assumes manufacturing breakthroughs and is

predicated on consumption in the billions of tags per year. Today, the cost is

closer to "less than 20 cents" for a read/write solution in high (millions)

volume. Ultimate tag cost will also be very much dependent on the type of

chip required (read only versus read/write), size of the antenna needed and

how it is packaged to meet a specific application.

Tag Size Tag size is dependent on the read range desired. Although the

chips are very tiny, they will not operate without being mounted to an antenna.

In general, the size of the antenna will determine the read distance

performance of the tag so understanding the size of the antenna needed for

the application is more important than the size of the chip alone. RFID

antenna design is becoming very specialized so that there are antennas being

designed to deal with specific applications such as the presence of liquid or

metal. An end user should be sure to work with a reputable supplier who willhelp them determine the best antenna design for the application.

Infrastructure Cost Much focus appears to be placed on the tag cost since

it is a recurring expenditure. Reader cost and infrastructure costs for

implementing RFID must also be looked at very closely as well. Both the


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software systems requirements and physical environment, in which RFID is

intended to be used, are critical to the ultimate performance of a system and

may require changes to accommodate using it effectively. As an example,

RFID chips cannot be read through metal objects. Other forms of

electromagnetic interference may also impede performance of the technology

and require changes to the physical environment where RFID will be used.

The number and types of readers will also be a major expenditure depending

on the application.

Read Distances Read distances for RFID are very much dependent on the

frequency chosen for the application. Tag orientation also affects the read

range as the range diminishes as the tag is rotated from being perpendicular

to the path to the reader. Reading reliability is quite good when labels are

alone in a reader field like cases on a conveyor line, but less certain when the

labels are randomly oriented as with labeled cases on a skid. The antenna

size (both on the tag and the readers) will also be a determining factor. Hand

held readers are not capable of using as much power as stationary readers

and as a result provide shorter read distances.

Government Regulation Governments around the world regulate the use

of the frequency spectrum. Different countries have already assigned certain

parts of the spectrum for other uses and as a result, there is virtually no part

of the spectrum that is available everywhere in the world for use by RFID.

This means that a RFID tag may not work in all countries. As an example if

you choose the Ultra High Frequency (UHF) frequency that operates at

915MHz in the U.S. and you ship your product to Europe, they may not be

able to read it as well since Europe operates in the UHF spectrum at 869 MHz

and with lower power. This is an important consideration when operating in a

global environment.

Anti-Collision This is an important feature of RFID chips/readers since it

will allow multiple tags to be read while grouped in one reader field. It is not

available on all RFID tags but is an important feature if you are planning to


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use RFID for inventory counts, shipping and receiving where multiple tags

need to be read at the same time.

Privacy Issues Consumer groups have expressed concern over the

potential (real or imagined) privacy invasion that might result with widespread

RFID item marking. These groups are pushing for legislation that will require

manufacturers to advise consumers that the products contain RFID devices

and must provide a means so that the devices can be disabled at point of

purchase. These issues are most prevalent at the item marking level and will

have little impact on the implementation of carton and pallet labeling.

RETAIL SECTOR IN INDIA

On a weekday, the DLF Mega Mall -- located in the IT and ITES hub of

Gurgaon on the outskirts of Delhi -- bears a deserted look. Of the few

operating shops in this large mall, most have nary a customer. The same

goes for several other retail outlets and many of the other malls in the vicinity.

True, a retail chain like Future Group's Big Bazaar may be clocking heady

sales (growing at 100% year-on-year), but the dozen-odd shops operating in

its proximity wear a deserted look, giving a somewhat hollow ring to the much-talked-about retail boom in the country.

In what seems like a quirk of circumstance, malls have sprung up all over

urban India in anticipation of a consumption boom that may itself prove to be

eventually truant.

Move to Mulund (West), a suburban locality of India's financial nerve, Mumbai.

Rajesh Parashar, a resident of the area has the option of shopping at Big

Bazaar, Apna Bazaar, Subhiksha, Spinach, Shoprite, Foodland or at the local

Sai Supermarket, all of which are within a two-kilometre radius of his

residence

This is paralleled by the developments happening in the Delhi suburb of

Ghaziabad, where the upcoming Shipra Mall at Indirapuram already has Big


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Bazaar operating out of its lower-ground floor, while Reliance is slated to open

shop on the third floor. Customer footfalls, however, are more in the

projections of the occupiers of the mall than real.

All this retail activity, and more, and the sheer gargantuan size of the

investments planned, beg the question -- does the consumer's wallet have

enough money in it for everyone?

"Only time will tell," is KPMG's executive director, Deepankar Sanwalka's

laconic answer. To a great extent the success or the failure of malls will hinge

on the consumer population of the area. "If the spending power of consumers

is high in a locality, it could sustain two-to-three large players." Not so,

elsewhere, he adds poignantly.

The significance of these remarks sinks in gradually. With planned

investments of $22 billion over the next five years -- excluding what might be

brought in by new global and large local players henceforth -- the retail sector

is expected to grow 40% to $427 billion by 2011.

Organised retail, which is 3% of the whole currently, is in turn pegged to grow

to $64 billion by 2015. And one consequence of all those investments will be

the fact that India's present two square-feet per capita retailing space will rise

15-20% by 2010.

To be viable, the huge investments made in the sector by India Inc would

have to be responded to by a corresponding massive surge in footfalls. And

for that to happen, a lot of links would have to fall in place.

Between the drawing board and the emerging market realities, the realisation

dawns that a lot of things can go wrong with India's much-heralded retail

revolution. The more visible among these loose ends: vexingly high real

estate prices, the loosely-knit distribution networks in India's hinterland, the

near-absence of any modern supply chain logistics, shortage of skilled

personnel, and a regulatory system that resembles a patchy quilt more than

anything else.


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Then there is the nature of the business itself. Retailing is a low-margin, high-

volume, commodity business where profitability gets strained as competition

intensifies. And if wrong choices are made regarding the location or the

formatting of the store, woe betide the retailer. The catches are many and to

make it big, a retailer would have to negotiate all the tricky turns most of the

time.

The big players are sanguine, however. "There is enough room for six-to-eight

players," says Reliance group chairman Mukesh Ambani, who recently kicked

off the first Reliance Fresh outlet in Hyderabad. There are reasons for his

optimism: the country's preponderantly young working population, disposable

incomes that are expected to increase at an average 8.5% per annum till

2015, and a steadily climbing per capita income (from $460 in 2002, it rose to$620 in 2005).

In fact, it is the expectation of a large working and earning population that has

attracted most global retailers to the country. But most analysts are agreed

that the Indian retail market could at best support 10 large players with

revenues in excess of $2 billion each by 2015.

Given the number of players getting into the fray today, this clearly means a

winnowing out of the weaker retail players. What's more, that time could be

sooner rather than later, maybe just three or four years down the line.

That's not so surprising, industry insiders even say, pointing out that a large

number of the new entrants may not be committed to retailing in the long

term. While some almost certainly are looking to act as silent partners for

foreign players, others may be more willing to look at an exit option a few

years down the line. Says Hemant Kalbag, principal, AT Kearney: "I see

consolidation happening in the next five years. That's when the shakeout will

happen and the successful retailers will look acquiring less profitable ones."

But that's still in the future. As of now, the retail turf is set for some frenetic

activity. Reliance has drawn up aRs 25,000-crore (Rs 250 billion) retail plan

that would see its outlets dotting 784 cities and small towns by 2010.


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Already it has 17 stores in Hyderabad alone (the number will go up to 40 by

end of the above period). More recently, Sunil Bharti Mittal made news when

he announced an alliance with the world's biggest retail chain Wal-Mart, for a

supply chain and cash-and-carry venture, besides a franchise agreement for

retail.

Seen as a coup of sorts, this could exert pressure on other retailers in the

country to explore similar collaborative opportunities.

Laying the Pipeline

Between them the likes of Reliance, the AV Birla Group, the Tatas, the

Godrejs, the Bhartis, the Mahindras, the ITC Group and the Wadias -- and a

horde of others -- will be sinking in close to Rs 1 lakh crore (Rs 1 trillion) in the

business of retail over the next five years.

In their crosshairs, are a host of retail-related activities such as cold chains,

retail supply logistics, warehousing, sourcing and merchandising

management. All of which are seen as absolutely essential if the front-end

retail business is to take off on a meaningful scale across the country.

The players have hit the ground running. Reliance is hiring overseas talent to

beef up its management capabilities -- it has roped in Peter Bracher from

Asda Wal-Mart as special adviser for Reliance Fresh stores and Kevin Pleass

from Tesco, UK, to help with store design and construction -- even as the AV

Birla group is on a talent hunt ahead of its Rs 15,000-crore (Rs q50 billion)

retail rollouts.

Retail icon Kishore Biyani is also stepping on the gas -- he has announced

plans to roll out 225 Big Bazaar stores and hundreds of other outlets in other

formats in the next four years.

The Tata group too earlier this year expanded its footprint (beyond the

formats rolled out by group company Trent of Westside fame) by entering the

durables segment, in a tie-up with Australian retailer Woolworths, with the

launch of its Croma store.


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"We plan to have a national presence with 30 stores by March 2008 and

double it to 60 by March 2009, with a capital of Rs 400 crore (Rs 4 billion),"

says RK Krishna Kumar, Director, Tata Sons, who is spearheading Tata's

retail venture.

He adds that the company zeroed in on the segment given the findings of an

internal study, which revealed that only 0.5% of Indians own air conditioners,

just 1% own computers, 3.5% washing machines and 11.7% telephones.

Other players like the Dubai-based Landmark group, with its Lifestyle and

Max branded outlets, are also keen to expand into the grocery segment.

Reports indicate the company is in talks for a tie-up with Carrefour. Then

there are players like the K Raheja group's Shopper's Stop and the Rajan

Raheja-controlled Globus that are expanding their reach in the apparel and

accessories segments. Others like ITC (a big player in its own right), the

Godrej group, Century Textiles and Raymond as well as mid-size players like

Vishal Megamart, Subhiksha and Sabka Bazaar are busy increasing their

footprint.

Taking a cue from the global leaders (whose eyes are also on India), India

Inc's retailers are thinking big. Reliance Retail, for instance, has chalked out a

plan to roll out about 5,500 stores of all kinds in 800 cities, 85 logistics centres

and 1,600 farm supply hubs. AV Birla Group is looking at pumping in Rs

15,000-20,000 crore (Rs 150-200 billion) -- with an initial investment of Rs

5,000 crore (Rs 50 billion) in the next few years.

Similarly, Bharti is expected to invest Rs 6,000 crore (Rs 60 billion) in the

initial phase. Biyani's Pantaloon is not far behind. The group plans to increase

its total retail space to 30 million sq ft from the current 3.2 million sq ft; and

take its turnover to Rs 2,500 crore (Rs 25 billion) by June 2010.

By global scales, the numbers are not out of the ordinary. The Bentonville,

Arkansas, based Wal-Mart -- the big brother of retailers -- operates 6,640

stores and wholesale clubs in 14 countries, while its counterpart in Europe (it

is based out of UK) Tesco runs 2,600 across 13 countries.


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The others have chains of comparable sizes and reach. To keep their stores

stocked with their myriad products, the global retailers have sophisticated

procurement strategies in place that hinge on sourcing products globally

based on prices, quality and timely delivery.

Not to mention deployment of cutting-edge technologies that enable real-time

inventory tracking and ordering mechanisms. "Tesco, for instance, can sell

jeans for 2 as bulk buying can help it source the same from its global

suppliers at far less than this," says KPMG's Sanwalka. Thus, globally, retail is

a business involving massive scales and deep pockets.

Climbing the Greased Pole

Moving up the evolutionary ladder won't be easy for India's retailers.

Especially given the large number of potential spoilers. Availability of quality

retail space will be a key determinant for the growth of the sector. With most

Indian cities undergoing rapid urbanisation, spiralling rental costs has most

retailers worried already.

Hitherto, most retailers have preferred to go in for long-term leases. But with

real estate prices in most top tier cities hitting the roof in the past two years,

lease rental increases are making business unviable for organised retail.

According to PricewaterhouseCoopers (PwC), the current average lease

rentals across some of the top cities range from Rs 88 per sq feet per month

to as high as Rs 120 per sq ft per month. On an average, lease rentals

account for 7-8% of the revenue and 40-45% of the non-material cost for

retailers. Unless these prices stabilise, most retail businesses could end up

taking much longer than originally planned to break even.

Not surprisingly then, within hours of making his deal with Wal-Mart public,

Sunil Mittal, the chairman of Bharti Group, said his top priority would be real

estate acquisition, whether through leasing or buying.

To that end, the newly-formed combine is roping in DLF, Emaar, MGF and

Ansals to act as partners and developers. Such an arrangement could prove


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to be a win-win solution: while it will ensure quick roll-outs and lower capex, it

could also improve asset utilisation of the developments. At the other end,

players like Reliance could set up hypermarkets in their own SEZs to meet the

needs of local residents.

Another way out of this problem, as some astute retailers have found out, is to

become an anchor tenant. According to PwC estimates, an anchor tenant

typically commands a discount of 30-45% on lease rentals and is responsible

for attracting footfalls into a mall.

Retail biggies like Pantaloon Retail, Shopper's Stop and McDonald's have

been quick to endorse this strategy. For instance, Pantaloon has signed up

with 100 of the 300-odd malls that will be developed over the next three years.

This, points out PwC, will enable the retailer to leverage its first-mover

advantage on a pan-India basis.

Pantaloon Retail currently has 3.2 million sq ft spread across several formats

and is expected to have 10 million sq ft of space in the country by 2010.

Again, in Tier-II cities, where lease rentals are 40-50% lower than those in top

tier cities, Pantaloon has been quick to establish its presence.

The retailer's real estate fund, Kshitij 1, which has a corpus of $80 million at

its disposal, is understood to have invested in projects in cities like

Ahmedabad, Baroda and Surat. Pantaloon expects to have nearly 400,000 sq

ft of retail space in these destinations by 2008.

The other determinant of success here is the location -- if the outlet is not

easily accessible by a large section of consumers due to distance or other

issues, viability could come in question.

Here the neighbourhood format has an edge. Sanwalka of KPMG is of the

view that smaller stores of 1,500-2,500 square feet (as against 150,000

square feet hypermarkets) in neighbourhoods might do better in India. The

verdict is still out on that one, and we won't know till one fails.


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Adds KPMG's associate director Kaushika Madhavan, "All new entrants are

planning rapid expansion and such a scale of ramp-up requires scalable

processes and systems, which retailers are yet to develop. So we would

witness mistakes being made as Indian retail evolves. Ability to learn from

mistakes will be a critical success factor." And here deep pockets will help.

While Biyani already has a successful retail model in place and Bharti will look

to cut corners with some help from Wal-Mart, players like Reliance and the AV

Birla group would have to go through a longer learning curve.

Grapevine has it that soon after the Bharti-Wal-Mart MoU, Reliance Retail's A-

team went into a huddle to discuss its response. The fact that the world's

biggest retailer will be pitted against them has not been lost on them: now,

Reliance has to worry about Wal-Mart's strength in the make-or-break area of

supply-chain management.

This will no doubt be factored into the retailer's own mammoth Rs 6,000-crore

drive to set up its own logistics, complete with its own airstrips and a fleet of

transport aircraft dedicated to airlifting supplies to key markets.

Indeed, the key imperative facing retailers in India is that of creating robust,

scalable supply chains that would facilitate their rapid spread across the

country. "India is a fragmented country and an absence of a strong

infrastructure and logistics system makes it all the more challenging to reach

consumers," says NV Sivakumar of PwC.

A vital logistical link in most retailers' plans happens to be the cold chain. And

many of them like Reliance Retail and Future Group are reported to be

investing Rs 6,000 crore and Rs 400-500 crore (Rs 4-5 billion), respectively,

on setting up logistics.

Another big player in the segment will be the Bharti Group. Overhauling this

part of the supply chain will be key to the success of any retail venture in food

and groceries segment. Currently in India, the wastage levels for perishables


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are as high as 40% because of a large number of intermediaries as well as

loss during transportation as well as through lack of storage.

Says KPMG's Madhavan: "The fact is that most retailers in India still don't

have a stronghold on operations -- be it merchandising, supply chain

management or procurement."

Clearly, while the players can build on the experiences of industry leaders in

other markets while developing their supply chain, the Indian market may

require them to improvise frequently.

Foreign retailers have shown that managing operations innovatively can

provide a significant competitive advantage to retailers. Wal-Mart, for

instance, leverages IT to track supply chain processes like cross-docking very

effectively. Similarly, Tesco requires lean production techniques of its

suppliers and has high-reliability delivery systems in place such as 'milk-runs'.

Most analysts agree that retailers would have put in place global operational

metrics.

One way to measure efficient operations is the inventory turns ratio. A

comparison of the US and India is revealing. Where, in the US, the retail

sector has an average inventory turns ratio of about 18 (some retailers like 7-

Eleven score over 50), most Indian retailers range between four and 10, says

KPMG.

The other key metric -- stock availability -- is telling too: Where global retailers

achieve more than 95% availability of all stock-keeping units on the retail

shelves, their Indian counterparts cut a rather poor figure at 5-15%.

There are other areas that retailers would have to master -- such as reaping

economies in procurement and transportation, bulk storage, trend forecasting

to minimise inventory levels -- before they can truly claim to have arrived.

Early entrants such as Shopper's Stop and RPG Group are acutely aware of

this truth: both took years to bring their supply-chain models to the present


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efficiency levels. Even a player like the Dubai-based Landmark Group --

which has been operating in India for eight years now -- insists it still needs to

bring their ERP solution system up to speed.

Others may face new, unexpected problems. Scalability is what the likes of

Kabir Lumba, Executive Director, Lifestyle International, is banking on for

growth. The group, which currently runs 12 stores, plans to open 45 more

stores at a cost of Rs 450 crore (Rs 4.50 billion) over three years. Lifestyle's

stores attract 40,000 customers every day, and are projected to close fiscal

2006-07 with a sales turnover of Rs 500 crore.

Again, when it comes to technology adoption and usage, there's a yawning

gap between the Indian retailers and those in the West.

According to a recent survey conducted among the country's top retailers by

KPMG, while retailers like Wal-Mart and Metro have started using RFID

technology (offering high inventory visibility), retailers in India are still to take

to bar coding. As systems grow in size and complexity, retailers would have

set aside increasing amounts as IT spend.

The challenge posed by the global retailers is clearly formidable. But local

retailers' more intimate understanding of their customer base will help them

survive.

Besides, even the world's largest retailers have slipped when it comes to the

emerging markets -- Wal-Mart was forced to rework its model in Mexico and a

similar thing happened to Carrefour in China, where it had to revise its

strategy. Also, Wal-Mart's track record in markets such as South Korea and

Germany has been nothing to write home about.

The other big issue for retailers is people. Analysts agree that the manpower

shortage will get acute as retail spreads beyond the metros. Says Sanjiv

Goenka, Chairman, RPG Group: "The biggest challenge for us and, for that

matter, any retailer will be getting trained personnel."


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The Manufacturing Angle

With Wal-Mart's advent in the US, the relationship of manufacturers with

consumers was drastically altered in the latter's favour. While the results in

the case of India's retailers may not be necessarily as dramatic, some major

changes would definitely be in order.

Strategic sourcing tie-ups between retailer and manufacturer will be the main

drivers in this respect. A few weeks after Reliance rolled out its retail plan, one

of the first things it did was to negotiate with leading FMCG companies,

including Dabur India and Nestle India, for a direct retail account for the

products they sold at its outlets. Earlier this year, Pantaloon did a similar

exercise and sought 5% higher margins for products sold at its Big Bazaar

and Food Bazaar outlets.

Says Atul Joshi, head of the no-frills chain Subhiksha's northern operations:

"For an FMCG manufacturer, the cost of dealing with us (modern retail) is

negligible. We were the first direct retail account with HLL about seven years

ago." The no-frills chain assures 8-10% discount to consumers on all products

it stocks.

While retailers like Reliance, Pantaloon or Subhiksha may be bringing a

change, the fact is that ordering or sourcing by retailers is still tactical than

strategic, points out a KPMG study. Not many retailers have long-term

agreements with suppliers.

Also, traditionally retailers have played a passive role in this relationship. In

contrast, Wal-Mart actively partners with manufacturers who supply it

products to ensure that consumers are offered prices at the lowest prices

possible. In fact, it was precisely the retailer's legendary aggression inbargaining that partly drove the massive wave of restructuring of the US

industry.


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Indian retailers have their work cut out in this regard, but it is far from clear

whether they would be able to emulate this dimension of Wal-Mart's success

story.

More likely, the retail chains coming up will be less combative in their

approach towards manufacturers. "We will have to have a collaborative

approach. But the threat from retail to packaged goods industry will prompt

companies to invest a lot in R&D," says Adi Godrej, chairman, Godrej

Industries.

The statement's import is not lost -- private labels have a big potential as

promotional costs are low for retailers and the margins fat (as much as 60%

against 35% for others). Also, these non-branded products can be offered at

far lower price points, generating volume sales.

Getting It Right

Organised retailers in India are trying out a variety of formats, ranging from

discount stores to supermarket to hypermarkets to specialty chains. However,

of late, most players appear to be gravitating towards the hypermarket format.

Retailers ranging from Pantaloon to RPG to Piramals or the Tatas are working

towards exploiting this model, perceived by consumers as more value-

enhancing. But in the long run, what is most likely to succeed is a more

balanced multi-format strategy.

This helps retailers adapt to the very different shopping patterns that can exist

within the country and even within regions. Here again, merely copying global

trends will not help. In a research conducted by KPMG International in

developed markets, it was found that single-format players generated higher

shareholder value than multi-format ones.

Some feel a combination of cash-and-carry and neighbourhood stores, as in a

hub-and-spokes model can be a good bet. Says one retail analyst, nascent

markets like India need a lot of room for experimentation on part of the


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retailers. Ergo, there are no cut-and-dried solutions when it comes to fixing on

the right retail format.

Finally, while in the first flush of the retail boom, the elimination of traditional

intermediaries may bring windfall gains (as well as bring welcome and much-

needed relief to the producers), this source will increasingly dry out as

competition intensifies and margins come under pressure a few years down

the line.

What would set the survivors apart from those who are forced to sell out (or

go belly-up) will be differentiators like location, value-added services

(convenience), private labels and customer loyalty programmes, other than

price. The last, a result of retailer-manufacturer tie-ups, state-of-the-art supply

chain infrastructure, global sourcing and scale will be a key factor. And, if

experience in other markets is anything to go by, an uncanny ability to read

shifting trends.


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Chapter 4: Profile of the respondents

The profile of respondents for this research project covers 10 leading IT

companies, providing RFID implementation solutions in India which

represents the whole of India geographically. Namely.

TESCO HSC

HEWLETT PACKARD

MOTOROLA

TATA CONSULTANCY SERVICES

MINDTREE CONSULTING

WIPRO

INFOSYS

COGNIZANT TECHNOLOGIES

SATYAM COMPUTERS

PATNI COMPUTERS

All the respondents of these 10 companies are the key persons who are

actively involved in either design or implementation of RFID solutions for

major retailers in India and across the world.


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Chapter 5: Literature survey

Pantaloons experiment with RFID

Much has been written about Radio Frequency Identification (RFID) and what

it can do for manufacturersimprove production operations, asset utilization,

forecasting, inventory accuracy and customer satisfaction by pinpointing the

location and status of products as they move through the manufacturing and

retail value chain. Taking a cue from this, Pantaloon Retail (India) has piloted

an RFID project at one its warehouses in Tarapur using 1,000 RFID tags. The

company is starting from where it matters the most by implementing the

technology at the warehouse.

Says Chinar Deshpande, CIO of Pantaloon, We want to use IT as a strategic

tool to differentiate ourselves in the market with new initiatives such as the

RFID project. While a SAP implementation is currently underway, the RFID

initiative was more to do with improving the efficiency of the entire supply

chain, and we wanted to be the first to execute it. We want to automate the

entire supply chain from suppliers to warehouses and stores, and make it

transparent.

Problems faced

The company began to focus more on IT to bring in more transparency in its

customer relationships and to streamline its supply chain. Says Deshpande,

Whenever we procure merchandise, the entire process had to undergo two to

three steps before it reached outlets.

At each step, human intervention was required and barcode readers were

installed at merchandising locations. Traceability and visibility of goods in thesupply chain, lack of a unique identity at each item level, and human

intervention leading to errors were some of the issues faced by the company.

Further, these challenges led to a lack of co-ordination with the backend at

the stores, hampering the companys production planning and inventory

management.


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Simplicity wins the day

Pantaloon went in for RFID for its simplicity of tagging, efficacy

of use, product buffering, ability to keep track of over-produced

items, and ability to monitor product-line lead time at the

warehouse and fast-moving product-lines. The company

selected a few lines of apparel, primarily shirts and trousers,

for its RFID pilot. The RFID application developed by Wipro

Infotech was tailored to the overall solution in line with

Pantaloons business processes and IT landscape (from the

factory outward to the warehouse inward and from the warehouse outward) in

order to capture real-time data. The application is integrated with Oracle

database 10g and middleware along with an implementation of the RFIDhardware. It integrates with the existing IT infrastructure, the in-house

developed Retail Enterprise Manager. The main objective was to smoothen

the entire product lifecycle, introduce item-level tagging for identification, and

track the entire RFID roadmap with Pantaloon. The piloting was also to do an

RFID feasibility study for additional uses.

At the factory outlet, RFID tags were attached to the merchandise and the

data written to them. When the RFID-tagged merchandise comes through the

inward gate, all related information such as purchase and delivery orders will

be fed in the inward terminals in real-time. After correlating the requirements

of specific outlets with the merchandise in the warehouse, the items allocated

for different outlets will be transported. The tags are removed once the RFID-

tagged goods pass through the outward terminal.

Getting to grips

There were a few hiccups related to integrating the RFID application with

Pantaloons legacy IT infrastructure. Since it was meant to be a pilot project,

the limitation was that only 1,000 tags were available. Initially, the application

was supposed to be only for home-made product lines. As the tagging offers

simplicity in goods tracking, re-allocation of manpower became an issue. The

inward numbers of a product had not to exceed 500 finished products on a

Chinar

Deshpande

CIO Pantaloon


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particular day in the warehouse. The selected product line had to be one that

had a constant movement and was not seasonal. Additionally, there were

operational challenges. Since RFID is a new concept, making factory workers

understand it posed a challenge. Handling of RFID tags was an issue

because the tags needed to be attached to items and data written to them.

Warehouse workers lacked an understanding of the need to pass material

through the RFID reader. Removal and return of RFID tags at the factory was

also difficult. Uploading files, and managing applications and devices, were

not easy through the new application. The RFID evaluation was done in

October 2004, and it took four months to implement the pilot project. The pilot

was implemented at a cost of Rs 30 lakh, which included the hardware cost (a

writer, 2 tag readers and 1,000 tags) and the cost of system integration.

Efficiency and accuracy

Although with a few hiccups, Pantaloon has enjoyed certain benefits.

Recording of data became smooth at the inward and outward terminals,

which helped us save time and gain accuracy. Earlier, the possibility of

scanning incorrect goods was much higher, affirms Deshpande. Before the

implementation, each item used to be scanned through the barcode recorder.

After the RFID implementation, the time saved on the same is about 80

percent in inward warehouse processing and 12 percent in outward. Real-time

visibility of items during all stages of the supply chain improved to 98 percent.

Pantaloon now aims to extend the application to production routing and

scheduling, product recall and returns, and real-time data for category

managers for effective forecasting. We expect that the RFID application will

further help us to improve the shopping experience, store layout and any

inventory situation. Going forward, we see the use of RFID technology to

improve collaboration across our supply chain right up to the point of sale,

remarks Deshpande.


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Wal-Mart Begins RFID Process Changes

Feb. 1, 2005Wal-Mart has begun rolling out the first applications

and process changes based on radio frequency identification data at the

original seven Wal-Mart stores in Texas that were outfitted with RFID readers.

The aim of the applications is to reduce out-of-stocks by providing visibility

into the location of goods with RFID tags.

"They've been live for [three] weeks now," Simon Langford, Wal-Mart's

manager of global RFID strategy, says of the applications in the seven stores.

"We'll roll them out to the other 140 RFID-enabled stores in February."

At each of the 104 Wal-Mart stores and 36 Sam's

Clubs, the company has installed RFID readers at the

receiving docks at the back of the building, near the trash

compactors and between the back room and the retail floor.

For the cases of goods that are shipped to the stores with

RFID tags, Wal-Mart records their arrival by reading the tag on

each case and then reads the tags again before the cases are

brought out to the sales floor.

By using sales data from its existing point-of-sales system, which is

not using RFID, Wal-Mart subtracts the number of cases of a particular item

that are sold to customers from the number of cases brought out to the sales

floor. Based on that information, software monitors which items will soon be

depleted from the shelves and automatically generates a list of items that

need to be picked from the back room in order to replenish the store shelves.

"By reading the tags on the cases that are brought out from the back

room, we're able to see what items have actually been replenished," saysLangford, instead of relying on people to record on a handheld computer what

has been picked in the back room. Wal-Mart has developed a handheld RFID

reader that acts like a kind of Geiger counter, beeping when an associate gets

close to the item he or she needs to pick. That reduces the amount of time

spent in the back room. The plan is to provide the handheld devices to

Simon

Langford


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associates in the original seven stores and then deploy them at the rest of the

140 stores during the course of the year. The retailer is also sharing data

from all its RFID read points with its suppliers through Wal-Mart's Retail Link

extranet. When a case is brought out to the sales floor, the system records

that it's being put out on the shelves. When the case is read at the trash

compactor, the status within the system is changed to "on shelf." Suppliers

can get updates on the location of their goods within 30 minutes of the goods

movement from one part of the store to another. Despite recent reports that

Wal-Mart's RFID deployment is behind schedule, Langford indicates that the

retailer is on track. Ninety-four suppliers shipped tagged product to Wal-Mart

as of Jan. 31, and more are expected to begin shipping tag pallets and cases

in February.

Wal-Mart plans to RFID-enable 600 Wal-Mart and Sam's Club stores and 12

distribution centers by the end of the year. In June 2004, the retailer met with

its "next 200" suppliers to discuss how they will use the technology, beginning

in January 2006. The company will carry out tagging reviews with them this

coming spring. Langford says that these suppliers will not be asked to tag

cases and pallets shipped to all 12 DCs and 600 stores at the start of next

year but instead to the three DCs and 140 stores that currently RFID-enabled.

"If a supplier wants to ship to all 600 stores, we won't hold

them back," Langford says. "Some are eager to move quickly. The perception

of RFID is changing. Certainly, the next 200 suppliers have more support and

are probably more educated and are in better shape that the first 100, who

were the trailblazers. The technology companies, integrators and consultants

have learned a lot and are in a better position to help the next 200 suppliers."

Langford says he's very pleased with the 98 percent read rate Wal-Mart

has been achieving as goods arrive at the store receiving docks and as they

are brought out to the retail floor. It's too early to say what impact RFID is

having on product availability for the tagged cases, but Langford says, "The

really exciting thing is we're starting to work more efficiently already.


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RFID AT PATNI COMPUTERS

Dilip Dhanuka, Vice-President and Head, Products and Technology Group,

Patni, tells ABOUT that Patni's RFID team engaged `Romeo and Juliet'

devices to track livestock.

How big is the RFID market and how is Patni targeting it?

In 2004, the RFID market was $1.49 billion and it is expected to reach $6

billion by 2007. Through automatic identification, RFID opens the doors to a

gamut of applications. Patni's SmartVISION for RFID adoption offers solutions

in verticals such as manufacturing, pharmaceuticals, retail, aerospace and

defence, healthcare, product engineering and software vendor solutions.

Our customers leverage our product to gauge the impact of RFID, measure

returns, evaluate the technology and deploy it in an end-to-end manner. We

also partner with organisations looking to deploy radio frequency

identification.

Our team provides solutions not only on RFID, but also on converging it with

other applications areas such as sensors and mobility, which we believe will

be the future.


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On the application of RFID in the context of mad cow disease...

The outbreak of mad cow and foot and mouth diseases have cost the US and

Europe livestock industry billions of dollars. India too was hit by the recent

outbreak of avian influenza. To provide reassurance on the safety of human

food, the unique identification of all animals intended for human consumption

has become very important. Patni has developed an RFID-based solution for

the traceability of meat from the farm to the plate. This solution was used

successfully during the mad cow scare in the US.

First of all, all animals in a farm were tagged with unique electronic-IDs, which

served as the unique identification purpose.

There is a hand-held device (Romeo), which can be used by the farmer to

capture the animal data in his farm. Using the Radio Frequency `read' feature

of the hand-held device, one can read the electronic-tag of a particular animal

and can register data for that animal - such as date of birth, breed specifics,

health records, treatment modes, etc. At regular intervals, the hand-held

device is docked on another desktop device (Juliet) for data synchronisation.

All new/modified data from Romeo is transferred to Juliet, and Juliet will

synchronise its data with a central server. The central server consists of

animal data from all farms across the country. Thus, from any part of the

country one can view animal data on the central server.

When animals move from one farm to another, or from farm to abattoir, data

such as the date of movement, vehicle-information carrying this animal batch,

etc, is recorded. At the abattoir, the RFID is converted to barcode

identification and put on the meat package, providing complete traceability of

the meat from the farm to the plate.

RFID experts suggest a solution that can allow the health department to

monitor the health of the flock and the flow of products from any part of the

country. Health officials can get alerts in real time, allowing for tracking of all

meat, from the livestock stage to the final frozen food stage, and can trace

irregularities at any point of time.


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Traceability has a host of applications. Where do you see it being

deployed?

Based on the costs, standards, and technology maturity, RFID can deliver

quick, reasonable return on investment (ROI) mainly in closed-loop

applications, such as manufacturing process control, especially for

configurable, high-value products such as automobile engines and bodies and

parts, and mobile asset management for assets such as trailers, containers,

pallets, and trolleys. It can also be used in security and access control and

distribution management of high-value items.

As standards evolve and the technology matures, RFID will start playing a key

role in open-loop applications too, in helping reduce costs and increasing

efficiencies. These include the complete distribution chain, right from the

manufacturing warehouse to the retail shelf. And in counterfeit prevention, by

creating a trail of product movement history with defined and recorded

handovers.

As RFID continues to evolve...

RFID is an evolving domain. Hardware quality is bound to undergo

improvisation and the cost of tags and readers is likely to come down over a

period of time. In short, RFID hardware is going to get better and cheaper.

Areas such as systems integration, process engineering and automation play

a very crucial role in deploying RFID and are also very complex.

Organisations should ensure that they provide equal attention to these areas

as ultimately it is the `Systems' and `Processes' that are impacted by RFID

application.


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Chapter 6: Problem statement & Research objectives

PROBLEM STATEMENT

To study about advantages and implementation intricacies of RFID

in logistics management for retail industry, is the problem statement of

this research project.

RESEARCH OBJECTIVES

The ultimate aim of carrying out this research project is to answer the

following research objectives which eventually give solutions to the project

problem statement.

Which strategies and best practices will lead to success in the RFID

market?

How can RFID technology help organizations improve their Logistics

management?

What are the challenges in implementing RFID and how can they be

overcome? Who are the RFID leading vendors?


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Chapter 7: Research design

Delphi may be characterized as a method for structuring a group

communication process so that the process is effective in allowing a group of

individuals, as a whole, to deal with a complex problem. To accomplish this

"structured communication" there is provided: some feedback of individual

contributions of information and knowledge; some assessment of t

Abhishek Sujay-0505-RFID Advantage in Logistics Mgmt

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