The role of RFID technology in inventory management

Kevin Beasley is the CIO at VAI.

After barcodes were put into use more than 50 years ago, technology revolutionized the grocery industry. The technology has also revolutionized almost everything else in supply chain and logistics, and distributors have started using them to track inventory in the warehouse.

In the wake of barcodes came a whole group of ideas that fell under the umbrella of automatic identification (AutoID), including radio frequency identification (RFID).

Interest in RFID has waxed and waned over the years. Recently, it has been on a big rise. Distributors have shown renewed interest in RFIDrestarting projects that were shelved during the Covid-19 pandemic to take advantage of the price of this technology compared to rising labor costs.

RFID and other AutoID technologies are key components of many warehouse management systems and are important extensions of ERP systems, which serve as the backbone of many businesses. From an inventory management perspective, the benefits of RFID can be enormous.

In this article, I’ll explore the benefits as well as some potential challenges facing RFID technology before diving into what it takes to make the implementation successful.

Advantages of RFID technology

With RFID, I’ve seen customers go from an annual inventory variance of $170,000 to $5,000 in one year and improve inventory accuracy by 300%. Perhaps most importantly, RFID systems, whether passive or active, integrate well with other advanced technologies, forming a solid foundation for continuous improvement.

Distributors and manufacturers in various industries rely on RFID technology to comply with customer mandates and regulations to leverage advanced technologies that will become industry standards in the coming years. Here are some of the benefits of RFID and what businesses are trying to achieve with it:

• RFID goes beyond inventory to improve product security and authenticity. Consumers want to know where their food comes from. Regulators want to be able to monitoring of food and pharmaceutical products throughout the supply chain in case of recalls. RFID enables end-to-end traceability in supply chains, especially when combined with other technologies such as blockchain. It is even used to ensure the authenticity of expensive, fake items such as Kobe beef, olive oil and mislabeled fish.

• RFID integrates with other technologies, such as IoT systems, to unlock different applications and more powerful analytics capabilities. With IoT devices and RFID technology—used from the point of manufacture through the supply and distribution chain to, ultimately, retail—users can obtain important detailed information beyond inventory measurements, such as storage conditions such as humidity and temperature .

• RFID reduces staff time and increases automation. Barcode scanners are not dead, but RFID systems have distinct advantages. RFID receivers can recognize tags that are not a location bar and can be carried by workers, fixed readers and mobile readers. For example, warehouses commonly use them to measure pallets and boxes throughout the warehouse as they enter and exit the facility and also into delivery vehicles. Mainly, RFID scanners can scale the capabilities and measure many items at the same time.

• RFID combined with artificial intelligence can facilitate improved data analysis. Data is the soul of artificial intelligence. AutoID and IoT devices create many of these. By capturing and delivering this digital gold, AI can bring new insights to businesses.

Headwinds Facing RFID Technology

Despite the renewed interest in RFID technology, it faces some headwinds.

First, implementing an RFID tracking system requires some additional redundancies. With a handheld scanner, a worker receives an audio signal for each measurement. RFID, on the other hand, does not have this kind of instant confirmation of accuracy.

This can be overcome with backup systems. For example, a warehouse can install an RFID system at the entrance of the facility, combined with an optical light stop meter. This will ensure that if the system reads 19 frames when they reach 20, someone will be notified. What is missing may be the result of interference. Businesses should also place RFID readers in multiple locations to ensure redundancy.

Another headwind is cost. Costs are coming down and the technology has been commercialized for decades, but RFID systems still cost more to implement than barcodes. To mitigate costs, RFID is commonly used to align with impact and risk. Cost may not make RFID suitable for inexpensive products like generic Ibuprofen, but it may be a regulatory necessity for controlled substances and high-value items prone to diversion.

Keys to implementation

Implementing a new RFID or AutoID system always starts with a long planning process. Organizations need to map existing processes and factor in how RFID technology will be integrated into those processes, where it will send information, and how the information will be stored.

Many organizations also start with a pilot program to evaluate the technology. By starting small and scaling quickly, they’ll be better able to recognize what works and what doesn’t.

Businesses should also pay attention to the underlying technology infrastructure with which RFID will be integrated. Modern ERP systems and warehouse management systems (WMS) form the IT backbone of many businesses, helping them manage inventory, logistics and analytics. It is essential to have an ERP system that can integrate RFID use cases and that can scale and adapt to your evolving business needs.

conclusion

RFID technology continues to be at the forefront of innovation in inventory and supply chain management, offering unparalleled accuracy, security and efficiency. However, successful implementation requires a careful process and understanding of some critical challenges.

By successfully overcoming these obstacles, businesses can not only meet current regulatory requirements but also prepare for future industry standards, ensuring they remain competitive and compliant. As we look ahead, the integration of RFID with emerging technologies such as AI and IoT promises to further revolutionize the way inventory is managed and tracked, which can help businesses optimize their operations and improve decision-making processes.

Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Am I eligible?