RFID: More Than Just a Better Barcode

By Paul A. Myerson

Tags: Retail, Distribution, Lean, Logistics, Technology , Retail Logistics, Supply Chain

Paul A. Myerson is Professor of Practice in Supply Chain Management atLehigh University and author of books on Lean for McGraw-Hill, and supply chain for Pearson, 610-758-1576

Radio Frequency Identification Technology (RFID) offers a multitude of benefits that can significantly reduce and eliminate waste in the extended supply chain.

RFID, an automatic identification method using electronic tags that have a microchip and printed antenna, is a lot more than just a small improvement from barcode technology. Barcodes offer a status report at a certain point in time and are an automated form of data entry, whereas RFID, in the long term, will potentially offer complete and continuous visibility throughout manufacturing, shipping, warehousing, and sales.

The data RFID collects can be received faster than barcodes, gives more information about products, and uses less labor. As RFID chips become more sophisticated, less expensive, with more standardized data, they will bring even more efficiencies.

One decade ago, Walmart was one of the first businesses to implement RFID with its major vendors to track pallets of merchandise along its supply chain from vendor to distribution centers. In 2010, the giant retailer stated plans to place RFID tags on individual garments. Other retailers, such as Macy's, have since followed suit. The goal of implementing RFID is to track the exact location of a given item anywhere in its supply chain or in-store.

While this is promising, a Gartner 2010 survey found 51 percent of companies were not doing anything with RFID, which indicates the technology and its applications are still not widely understood.

RFID has many uses throughout the extended supply chain, including:

• It can track manufactured products through the factory and through shipping to the customer.
• Retail store operations can use item level tagging to count, track, and replenish inventory from stockroom to stores.
• RFID can track inventory through yard management, shipping, and distribution centers.
• It can track assets such as vehicles, tools, and equipment.

RFID also helps reduce and eliminate waste in a variety of functional areas, such as:

• Manufacturing. RFID improves accuracy, reduces labor and associated costs, and provides improved visibility as a result of real-time tracking of materials (especially raw and work-in-process inventory to support manufacturing).
• Distribution. RFID boosts efficiency, visibility, and accuracy in selection and distribution processes, and reduces distribution costs. It also has significant impact on crossdock warehouses, where products from a supplier or manufacturing plant are distributed directly to a customer or retail chain with minimal to no handling or storage time in a crossdocking facility.
• Retail. RFID aids in cycle counting and triggering replenishment from the store's back end to the front end, especially on expensive items and simultaneous "one shot" scanning of goods at checkout.
  While many segments of the business world use RFID, one reason for its relatively slow adoption rate is the cost of tags and related technologies, which has been steadily dropping. Considering the value RFID adds, its mass adoption isn't a question of if, but when.