Even if you have never heard of radio frequency identification (RFID) tracking technology before, chances are you have encountered it in your day-to-day activities, possibly without even realizing.
For RFID tagging is being increasingly used across the realms of fashion, retail and pharmaceuticals supply, changing not only the way companies do business but also the way that they interact with their consumers.
Some common uses include tracking shipments or accessing buildings, with RFID technology helping to enhance operational efficiency, slash costs and boost sales performance. It can increase inventory accuracy to between 93 to 99 percent, helping retailers fulfill orders and process sales more efficiently.
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But according to KC Lau, CEO of SML Group, the potential of RFID technology as a method of collecting data and tracking movements extends far beyond current applications, with possible applications across all industries and sectors.
The far-reaching possibilities of RFID technology were recognized by SML Group some time ago, and the company swiftly seized the opportunity at hand. Indeed, since The CEO Magazine’s last conversation with Lau in 2017, the group has enjoyed double-digit compound annual growth rate (CAGR) every year – increases that have been driven primarily by the rising adoption of RFID technology.
While a significant chunk of that period was blighted by the uncertainty of the COVID-19 pandemic, the upheavals have actually sent demand for RFID technology soaring, according to Lau. In 2020, the pandemic’s first year, the company sold a staggering 2.3 billion RFID tags.
“A lot of R&D needs to be done and so we put a lot of investment in that area.”
“People’s shopping behaviors have changed, with more online business and more demands on not only the inventory accuracy and how effectively they deal with that kind of situation, but also with growing focus on buying online and pickup in store,” he explains.
“In return, the shopping behavior in the online store also creates some extra work when dealing with all those returned products. Our RFID technology is able to help them to quickly see which goods that they could resell back on the floor, for example.”
Despite this uptick, only around one-fifth of retailers and brand owners have deployed RFID to date, according to Lau, which points to the significant potential for growth.
Leader in the Field
In terms of its R&D work on the tagging technology itself, SML Group is now in the upper echelon for approved inlay in the United States, where it is considered one of the biggest players in the RFID market, according to Lau.
“We are positioned well in the market,” he says. “A lot of R&D needs to be done and so we put a lot of investment in that area.”
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Among its product offerings are SML RFID TotalCare – an “end-to-end solution” for all item-level RFID needs for the retail sector. This is designed to assist companies with “item-level” inventory management that delivers both financial impact and return on investment.
Its Inspire RFID technology ranges from fully integrated labels to tags which are supported by SML’s Clarity Software, an RFID inventory and operations software platform.
Adding to this are the different ways SML’s customers are harnessing RFID technology. These include customization and creating more value in terms of operations, sales lift and efficiency.
RFID on the Rise
Valued at US$11.8 billion in 2021, the global RFID market is projected to reach US$31.5 billion by 2031, with a CAGR projected to reach 10.2 percent from 2022 to 2031.
The results speak for themselves. In 2022, 3 billion RFID tags were shipped, and SML deployed its proprietary software Clarity® to more than 5,000 stores.
Entering New Markets
After beginning its life as a label and accessories provider in 1985, SML Group has naturally gravitated towards the apparel and footwear market as it moved into the area of RFID technology. Over the last decade, the company has succeeded in making itself known in those sectors.
SML Group is the number two RFID player in the footwear and apparel sectors, but it is the number one solution provider in those markets, counting on the number of stores or distribution centers adopting RFIDs.
There has been significant growth in other areas, including pharmaceutical, cosmetics and packaging.
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Lau also sees great potential in the food sector.
“A big wave is coming because we see a lot of QSR initiatives coming in and more use around tracking readiness or inference levels as well as the ‘first-in, first-out’ concept,” he says. “We are happy to create a very good pipeline and are very excited to see how that will be growing in the next two to three years.”
Global expansion is also a priority, with SML announcing the launch of its Middle East business operations earlier in 2023. With a new base in Dubai, the firm will cater to the growing demand across the region, while at the same time supporting its further expansion across the globe. According to Seed Group, the United Arab Emirates’ flourishing retail market is expected to grow to US$70.5 billion by the end of 2027.
Pandemic Learnings
This broadening reach is more important than ever in today’s changing world. The paralysis imposed on various countries by the pandemic is still a problem, stalling the delivery of goods and affecting supply chains.
“We still see a lot of countries being knocked down suddenly and for three months, they’re not able to work,” Lau says. “But because of the global concern that we have, we are able to manage that situation, rerouting to other locations.”
“Day by day, week by week, we worked with the team to understand where the problems were or what things they needed.”
SML has also ensured its employees have access to vaccines, as well as continuing to implement improved safety measures, including better hygiene in its factories and enhanced provisions for its people and their families. All these elements combine to help create a welcoming and safe atmosphere for the whole workforce, he explains.
Because of this, the overall feeling is that the company has emerged from the challenges of the last few years in a strong position, despite the occasional scheduling delay. He credits this impressive performance of the team to the prioritization of communication.
“Day by day, week by week, we worked with the team to understand where the problems were or what things they needed,” he expands.
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This was not only from a financial perspective, but also from a wellbeing standpoint, he clarifies.
“At that time I think 60 to 70 percent of the world was living in real fear,” he says.
But by engaging in a number of activities to keep employees engaged and feeling part of something, SML helped to assuage such sentiments, using technology to keep teams connected, even when meeting in-person was difficult.
A Space for Experimentation
At SML’s three Retail Ideation Spaces which launched in 2019, thousands of tagged items are tested for a broad range of scenarios that might arise at distribution centers and in-store.
The facilities also incorporate technology from SML’s partner ecosystem, as well as a packaging and trim ideation studio that aims to foster a more hands-on collaboration around design, packaging and trim options.
“In the past three years, we continued hosting our annual awards events for all our employees across the world,” Lau says. Although they couldn’t all be physically present, the company held a virtual awards dinner which he describes as very successful.
“Sometimes we have to change the way we do things because the world is changing and so we have to try to adapt,” he says. “But I’m very happy to be a part of it and lead the teams to be make changes.”
Shifting Vision
The circular economy forms a crucial pillar of this approach, as a growing number of brands take their sustainability responsibilities more seriously.
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He sees support for this sort of product life cycle as a highly important aspect of SML’s business.
And it is clear that their commitment to sustainability is steadfast. Lau explains that SML has put sophisticated reporting practices in place to show the sincerity of its commitment.
“We have set up ESG teams in the company, and every year we have an annual report coming from the ESG group, where we set our targets for the next seven years,” he explains. “I strongly support this because I believe this is one of the core values for keeping the company moving forward, as well as attracting more talent to work in this company.”
A Holistic Approach
It’s not the only transition sweeping across SML. Over the last few years, the company has also repositioned itself to focus on the R&D and retail applications of the RFID technology.
“We set up a Technology Innovation Development Center in Hong Kong in 2022, mainly focusing not only on the manufacturing of RFID inlays, but also looking at how we could expand on R&D moving forward, as we all know that more and more products will be tagged using this technology,” Lau says.
The center, which opened in May 2022, aims to help SML customers transition to a digital-first future, while empowering the company to grow its business operations globally.
“We set up a Technology Innovation Development Center in Hong Kong last year, mainly focusing not only on the manufacturing of RFID inlays, but also looking at how we could do a lot of R&D moving forward.”
“The development center also has a sizable laboratory to test the performance of the inlays on different circumstances. For example. how they react to food, to different environments,” he continues. “We are very happy that this center has been established.
“We’re able to thoroughly test the latest chip technology before it hits the market, thus ensuring the performance of the RFID transponders is reliable and will deliver value to businesses. That’s how we can continuously improve.”
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In line with this vision, SML has also established three major retail ideation spaces across its global network: Dallas (United States), Corby (United Kingdom) and Shanghai (China).
“There, we simulate the retail store, convenience store, logistics center and so on,” he explains. “We are very excited about those, and I think this creates a very good platform to showcase some of our talented players’ products, as well as working with them to collaborate on what exactly the customer needs at this point.”
Leadership Values
Lau’s own role in this ever-evolving picture cannot be understated, with his responsibilities accentuated during the upheaval of the pandemic period.
“I think the things that I learned as a leader in the past six years are that, as a leader, you also have to be stepping up and taking responsibility for all the decisions that you have to make, trying to work with your teams and being open, listening to them and being transparent,” he says.
“The other side when I’m looking at my leadership is to always keep the team staying focused because when we work on too many things at the same time, it can have a big impact.”
“The development center also has a sizable laboratory to test the performance of the inlays on different circumstances.”
For him, staying focused means finding the right balance between his professional and personal life, something he does by prioritizing relaxation and ensuring he has time away from his desk and his many responsibilities.
“When I’m not working, I walk a lot,” he says. “Usually over the weekend, I walk more than five or six hours a day and I do a lot of exercise to try to relax my mindset and not think about the business.
“Sometimes you have to find some time to do something that you like, to work off some of the pressure that builds up, not only on the business side. Even during the pandemic situation, I continued these habits all the time. So I’m happy that I’m still very healthy, and building a very trusted company in the market at the same time.”
Spotlight on Quality
Quality control takes center stage at SML’s Technology Innovation Development Center (TIDC), where the company is striving to standardize performance and enhance reliability, which is in line with its ambition to enhance standards across the RFID industry.
The state-of-the-art center uses the latest technology from Germany and Finland to produce RFID inlays more efficiently, ultimately boosting SML’s annual production levels.
Its multiple-point performance checking system will also ensure the inlays’ performance meets enhanced quality standards.
“TIDC takes part in accelerating the adoption of automated industrialization in Hong Kong. We have implemented AGVs [Automated Guided Vehicles] to transport goods, ranging from raw material to finished goods, to maximize manufacturing efficiency,” Lau says.
“We are determined that the center will serve as an incubator for aspiring RFID talent who will represent Hong Kong among the global growing workforce within the Digital ID industry.”
