RFID … A larger audience of believers

Powerful and influential retailers like Wal-Mart, Target, Tesco, and Metro who began the implementation of the revolution, now insist that their business partners get on board with radio frequency identification (RFID). This suggests that a large number of suppliers will soon be competent in RFID According to a recent Accenture survey, 47 percent of North American manufacturing executives anticipate getting a high return on their RFID investments.(1)

Although companies may still be unclear about the long-term advantages, RFID appears to have been accepted. With more companies developing collaborative supply chain relationships, RFID is an excellent way to enhance the following:

Finished-goods inventory visibility: Enhanced performance levels in shipping and receiving, labor productivity, order accuracy, and returns processing.

Production visibility: Elevated visibility to the accuracy of raw material receipts, work-in-process inventory management, and receiving-labor productivity.

Asset visibility: Enhanced asset utilization through better tracking of vehicles, reusable containers, and other high-value assets.

Another reason for RFID’s ascension is its scope. Although many manufacturers are being forced to adopt this technology, RFID-related benefits to manufacturers themselves are real, with potential for improving the accuracy of supply chain processes such as forecasting for demand planning.

RFID will likely enhance retailers’ operating performance by making it possible to tag merchandise at various levels of aggregation, automate key distribution center processes, and reduce delivery lead times. Freight companies will become subsequent beneficiaries: They could save millions by identifying inefficiencies in delivery operations and by automatically tracking assets.

In addition to the retail industry, the pharmaceutical industry, which already uses Electronic Product Codes (EPCs) that are integrated across the supply chain have the potential to curtail counterfeiting, streamline reverse logistics, and reduce out-of-stocks and returns. Companies could benefit from increased labor productivity and reduced shrinkage, and reduce working and fixed capital —the result of optimized inventory levels and superior asset utilization (2).

The above examples are not just speculation. Here are three real-world examples of companies that are leveraging the power of RFID right now (1):

A leading manufacturer of construction equipment uses RFID to optimize its rental fleets. The system uses handheld computers, RFID tags, and next-generation dispatch and routing applications. Inventory is RFID tagged and yard employees have personal digital assistants (PDAs) with RFID readers and Wireless Fidelity (WiFi) cards. Employees conduct inventory in real time and are alerted via their PDAs when new inventory enters the yard. Delivery staff also use PDAs, which provide maps and real-time routing, serve as sign-off sheets for customers, and have a camera that employees use to capture images of damaged equipment. Benefits include streamlined rental-equipment check-in/check-out; more efficient equipment tracking; and the ability to connect inventory, service, and delivery functions in real time.

A large agricultural products company implemented RFID for lot tracking. It began by installing RFID on-site to track the filling of reusable containers, the subsequent movement of the containers, and the reintroduction of those containers into the manufacturing process to feed the production of finished goods. The company automated the capture of batch-production information, thus eliminating the manual scanning required with bar codes. Through the use of container- and location-based RFID tags that interact with readers on materials-handling equipment, the company has improved product quality and control of the manufacturing process by preventing the introduction of incorrect material.

A casino discovered a groundbreaking answer to its laundry-tracking problem by embedding RFID tags in the waistband, shirttail, or collar of its 80,000 uniforms. In this way, the casino is able to track uniforms from the point of issue to the cleaning machines. Unlike bar codes, which may need to be replaced every one to two years, RFID chips can last up to five years—often longer than the garment itself. This means that RFID chips can be reallocated to new replacement garments. The solution ensures an accurate inventory of all 80,000 garments at all times, while saving tens of thousands of dollars per year in bar-code-replacement and labor costs.

The common thread in all of these RFID implementations is that intelligence and Internet connectivity can be embedded wherever needed. In most cases, data capture and transfer are achieved automatically, instantaneously, and nearly for free once the required infrastructure is in place. RFID therefore presents an immense opportunity for almost any manufacturer, retailer, or distributor to manage virtually any supply chain operation more effectively. The more time that elapses, the more likely that RFID will be used as a tool for the enhancement of information gathering, identification and track / trace throughout the entirety of the supply chain.


(1) Logistics Management, Patrick M. Byrne, September 2004.

(2) “Thinking Outside the Closed Loop”, Stefan Stroh & Jurgen Ringbeck, Strategy+Business e-news, 10/28/04.