Confined to libraries and rental shops?

Asia - Justifying ROI may not be the only thing hindering the adoption of RFID in supply chains in Asia.

The adoption of RFID is more prevalent in the closed supply chain like in libraries or rental stores, says Arthur Pok, regional marketing director for identification at NXP semiconductors.

According to him, the adoption of RFID in open supply chains like in the retail industry is slow because of a lack of buy-in at the different stages of the supply chain. One reason for this may still be because of the high investment needed to implement the system.

Another reason for the slow adoption is the amount of capital already invested in the barcode system that rule supply chains in Asia today.

Pok believes the existing barcode infrastructure in supply chains especially in the more mature markets of Singapore, Japan and South Korea may hinder a company in implementing a full rollout of the technology.

"There needs to be a re-engineering process of the supply chain. This will take time, money and significant education of all parties involved in the chain," he says.

Chindia the first to adopt RFID?

In this respect, emerging markets like China and India may lead Asia in RFID adoption in their end-to-end supply chains, having comparatively less investment in barcodes as the rest of Asia.

"When a government body decides to adopt a new technology, they usually adopt the latest. As such, there is a possibility for emerging markets like India and China to adopt RFID earlier than more mature markets in the region," says Ang Chip Hong, director of technology at Smart ID.

Ang maintained that while RFID adoption in supply chains is slow, the pickup is satisfactory.

He projected that an intermediate step in the transition from barcode to RFID is the adoption of RFID together with barcodes or other sensors.

"The next step could be the adoption of RFID with temperature sensors in container systems in the cold chain. This way, companies will know when the temperature rises above the acceptable level in the cold chain," he said.

It is in the interest of the supplier and insurance companies who have to qualify faults in the event of a mishandling to push for this combined system, Ang said.

The global RFID hardware market is estimated at US$5.8 billion in 2007, reveals a study by Frost & Sullivan. This figure is expected to more than double in the years to 2010, driven by growths in supply chain management and security applications, and faster deployments in Chindia.

The study also found that China, Korea and Japan are spearheading the growth of RFID in Asia, backed by government support. The study projects China to be a major for the growth of RFID in Asia, as long as it is able to develop a set of interoperable national RFID standards.

Conversely, India has been relatively slow in catching up to RFID deployments, but continues to be a market with significant potential in this area.

There is a continued decrease of the cost of tags at the range of 5-15% annually, says research from Frost and Sullivan. In spite of the falling prices of tags, infrastructure costs, including the cost of readers, services, technical support and getting every member of the supply chain to adopt the technology will hinder adoption, the research company said.

Challenges to adoption

One of the major other challenges involved in the adoption of RFID in open supply chains is a lack of standards, the research company says.

Although ISO standards exist for tags and readers, manufacturers incorporate their own implementations of these standards in their products, disallowing interoperability across products from different manufacturers, the study said.

While EPC Gen 2 standards helped alleviate this problem to a certain extent, the drive toward market-wide compatibility is still slow, and there remains a large gap of standards for active tags as opposed to passive tags.

A second challenge to a widespread adoption of RFID is the lack of distribution networks and support systems. According to the study, the Asian market is still lacking in value-added retailers (VARs) who are experienced enough to write the middleware between the RFID equipment and applications, conduct installations and deploy support systems.

Third, the Asian "wait and see" mentality has always been a stumbling block in the adoption of RFID across the supply chain. According to the study, Asians are different from their European and American counterparts who often have a first-to-market approach to new technology. A flurry of RFID is likely to increase the "wait and see" option, resulting in sluggish adoption rates already slower than what was widely predicted by the market.

Business intelligence

 

US$3- US$18

Cost of active tags

Source: Frost & Sullivan

What it means: The prices of tags are decreasing, but active tags are still significantly pricier than passive tags, which have been valued at about US$0.2 - US$2.

 

35%

CAGR of RFID market in Asia

Source: Frost & Sullivan

What it means: The RFID market in Asia is projected to grow at a double digit rate annually and expected to reach over US$2 billion by 2010, driven by a wave of deployment in Chindia.

 

US$3.5 billion

Global RFID revenue by 2012

Source: Gartner

Gartner believes worldwide revenues to 2012 will escalate to US$3.5 from a 2007 revenue of US$917.3 million, after mandates from US retailer Wal-Mart and the US Department of Defense (DoD).