RFID implementation will shrink local retailers' margins
23 May '05
3 min read
indian companies may bleed to make their foreign
associates richer. suppliers to retail majors such as wal-mart, metro, target and tesco fear a hit on their bottomline as their foreign partners have issued directives to their suppliers to replace bar codes with radio frequency identification (rfid) technology.
the retail bigwigs' diktat is giving sleepless nights to domestic companies. indian suppliers' worst fear is that the cost of rfid labels will squeeze their margins. “the cost of one rfid tag results in a loss of about 30 us cents.
we may be able to add it as an input cost to some of our buyers, but the same is not possible from major retail chains such as wal-mart, whose business model is based on cheap sourcing. they will insist on our absorbing the cost of the 'smart tag' or snap the tie,” an apparel manufacturer said.
for big retailers, rfid is fast emerging as the best route for keeping costs low. embedded in plastic product tags, rfid chips can track goods and signal the need for restocking, thus boosting supply efficiency.
“exporters accept that there is a paradigm shift in terms of logistics. rfid is the future and the future is not far away. but this will add to our cost. the margins in apparel export business are already shrinking due to chinese competition. but those who intend to remain in the business will devise strategies to remain afloat,” says ak jain, general manager of orient craft.
while most of theindian exporters are still waiting for a formal specification from their buyers in this regard, there are some who have accepted the inevitable. ranbaxy laboratories is one of the first domestic pharma companies to apply the electronic product code (epc)-based rfid tags on cases to be supplied to wal-mart.
marketing@alchempro.com
