Ready for RFID?

March 2006 Asset Management

"Radio frequency identification (RFID) of South African consumer goods - much talked about for years - is now 'here to stay'," says Ernst Maritz, a partner at PricewaterhouseCoopers in Cape Town.

"Retailers will lead the way in implementing RFID technology as it offers considerable advantages in cutting distribution costs," says Maritz.

"For manufacturers, it will provide real 'visibility' in production processes and logistic management," he adds.

Although there are still a few impediments to RFID rollout, many leading businesses in South Africa are already developing systems and acquiring the equipment to make them early adopters.

South African mines have started using RFID tagging to allow workers to locate lamps, gas detection equipment and rescue packs.

In October 2005, Toyota South Africa awarded a contract to a South African company to supply RFID systems for vehicle tracking.

And the International Air Transport Association (IATA) recently introduced a standard for baggage tags, which could see South Africa's transport authorities implement the technology to help them keep track of passengers' possessions.

RFID enables the transfer of data between two peripheral computer devices using low-power radio frequency. The most common configuration is a tag, or transponder, attached to a product and containing codes identifying that particular product. A reader device - for example at a checkout counter or in a stock control centre - is able to decipher the information in the tag and relay it to the operator.

Tags can be 'active' or 'passive'. Passive tags can only be read within a five-millimetre range, and function much as bar codes do. Active tags contain tiny batteries and can be read from a distance of 15 metres.

Current applications of RFID include warehousing, banking, citizen identification, library systems, supply chain and, of course, wholesale and retail payment calculation.

PricewaterhouseCoopers has identified the advantages of the technology as: labour efficiencies, inventory optimisation, asset tracking and security, and product or materials traceability.

Remaining problem areas include: data collision (multiple data reads), radio interference, signal loss (for example, through thick cardboard boxes), lack of interoperability due to regulations and standards not being fixed, the necessity for all suppliers to be compliant, and cost.

RFID industry principals estimate the price of tags will drop to five US cents by 2008, making them almost universally affordable in manufacture and retail.

"Although there is much scepticism over this prediction, companies throughout the world are nonetheless looking to implement the technology as there are clear benefits and they see it as the future," observes Maritz.

At present, active tags range between $1 and $10, and passive tags between 30 cents and $1.

The issue of privacy has also been raised as a stumbling block to RFID. Readers other than those of the actual product owner can conceivably pick up radio frequencies of tags and discover commercially sensitive information, such as what types of products are in storage, and where they come from. And readers could possibly even track movements of individuals by following signals emitted by items they carry, thereby raising 'Big Brother' surveillance fears.

But Maritz believes this problem can be overcome by the industry taking steps towards sensible regulation.

He also believes technical problems with reading are surmountable and that costs will drop as adoption becomes widespread.

"Implementation risks are falling, and first movers stand to reap substantial rewards. Those who remain on the sidelines may face a costly catch-up exercise and potential barriers to entry," says Maritz.

Adoption will dramatically increase the amount of data for retailers and suppliers to deal with, and controlling this will become a key factor in effective implementation, he concludes.

For more information contact Lloyd Marlowe, PricewaterhouseCoopers, 011 797 4373, [email protected] or visit

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