Radio Frequency Identification, or RFID, can help make global supply chains more accurate while reducing costs and opening up many new applications.
RFID uses electronic tags attached to products to wirelessly identify them so they can be read by scanners at any point in global supply chains. The system updates the Universal Product Code (UPC) system that manufacturers, distributors and retailers around the globe use to identify specific products with printed barcodes.
RFID takes UPC barcodes further by serializing data so that an individual item—such as a single black, large-sized man's shirt—can be tracked as accurately as a lot of 100 such shirts.
RFID's breakout in global supply chains has been forecast for decades. But the relatively high cost of tags and technical limitations of scanners has kept its promise unfulfilled.
Now, however, the technology's potential for revolutionizing global supply chains appears ready to be realized. Market research firm IDTechEx forecast in a November 2018 report that 16.4 billion tags would be sold in 2018, up from 15 billion in 2017.
In dollar terms sales of tags, scanners and other RFID gear will reach $11 billion in 2018, and $13.4 billion by 2022, IDTechEx forecast.
A number of factors are behind that growth, according to Justin Patton, director of Auburn University's RFID Lab.
“The big driver is inventory accuracy, the way consumers expect orders to be filled and the speed that they expect it requires a new technology to push the accuracy up so that those orders can be quickly filled," he says.
RFID is well suited for industries that have high-value products, such as retailers selling designer apparel.
Businesses appreciate how tracing individual items by serial number helps issues related to product recalls, counterfeits and more, adds Michelle Covey. Covey is the vice president of retail apparel and general merchandise with GS1 US, the domestic arm of the global standards organization that administers UPC and RFID standards.
“They can feel confident using RFID that they can track that serialized item," she says.
Near-Zero Error Rates in Global Supply Chains
The RFID Lab and GS1 US collaborated on a 2018 study called Project Zipper that over a year compared barcode scans by eight brand owners and five retailers at various points in the global supply chain with data captured by RFID tags.
In the study, RFID tracking achieved 99.9 percent order accuracy. Meanwhile 69 percent of orders shipped and received without RFID had errors.
This improvement in accuracy, coupled with the ease and speed and flexibility of capturing data using up-to-date scanners and readers, gives factories, warehouses and retailers confidence that they know exactly where individual items are at any point, Covey says.
According to Covey, the benefits include:
● avoided over-orders
● the ability to accurately tell customers where they can purchase specific items and
● reduce overstock discounting.
And it can all be done at lower cost, she adds.
“Those benefits can save brand owners from thousands into the millions of dollars each year depending on the size of the brand," Covey says.
Best Cases for RFID Applications
RFID is well suited for industries that have high-value products, such as retailers selling designer apparel. (They have been some of the earliest adopters.)
"Another ready set of adopters is found in aviation, where airlines may begin using RFID tags on all passenger luggage by 2020," Patton says.
The food service industry places RFID tags on cartons of perishables, where key data such as sell-buy dates can be easily incorporated and transmitted by RFID tags. Healthcare is also finding applications for the technology to reduce pharmaceutical counterfeiting.
Where RFID makes less sense is in fields where individual products are low in value, such as grocery stores.
“RFID has a per item cost of 5 to 10 cents per item," Patton says. “Which is typically OK when you're talking about a $40 pair of jeans, but is too expensive when it comes to some grocery items like eggs."
The technology also needs to improve to allow for more accurate data collection in some environments.
“There are also some physics limitations of radio waves with metal and water," Patton explains.
Costs for RFID tags are expected to keep declining, perhaps until they are at or near the UPC costs of a couple of cents per item. Scanners and other technology are expected to continue their decades-long track of improvements in accuracy, speed, range and reliability.
Meanwhile, external changes will likely drive greater interest in improving RFID technology. For instance, Internet of Things (IoT) applications call for inexpensive, data-intensive identifiers to be available for many more items.
Covey cites an IoT-enabled refrigerator that senses when a carton of milk has expired by reading its RFID tag, then re-orders the appropriate item automatically from an online retailer.
“You'll start seeing the tie-in with RFID and some other technology apps," she says.
Ultimately, Patton forecasts, the vision for an always-on, instantly-available consumer culture may depend on broad rollout of RFID tracking.
“Our children will expect product availability in terms of hours, not days," he says. “And they will expect a level of quality and accountability in those products we can't currently attain with non-serialized item tracking."
Read more articles on operations.
Photo: Getty Images