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RFID in the Supply Chain

RFIDAs companies expand their operations, their supply chains grow with the company.  The processes become more complex, which stresses the importance of accuracy at each link in the supply chain.

Restricted visibility along with inaccuracies can halt production and limit a company’s overall efficiency, so companies are looking for solutions to avoid any additional supply chain headaches.  One solution that is gaining momentum is radio frequency identification (RFID).

According to TechTarget, RFID is a form of wireless communication that incorporates the use of electromagnetic or electrostatic coupling in the radio frequency portion of the electromagnetic spectrum to uniquely identify an object.  The most common RFID application is for tracking and management. This includes inventory management, asset tracking, cargo and supply chain logistics and vehicle tracking. RFID can also be used in the supply chain for improved visibility and distribution.

RFID has been around since the 1940’s, but its technology could never quite find a practical application over time, so it’s usage tapered off.  RFID is making a comeback because of the expanded technology around it.  With companies using interconnected systems and pulling valuable information from those systems using analytics, RFID is coming back from the dead within supply chains because it improves visibility and inventory tracking.

In this article, we’ll take a look at how RFID is being used and how it is improving supply chains.

RFID Improves Visibility

RFID allows companies to track their supply chain workflow, which will provide more usable data with manufacturing equipment, inventory, asset management and company processes.  When used properly, the data generated can help streamline these areas of the supply chain through automation.  RFID can be integrated into company processes and be a major time saver.  Instead of a certain process taking two hours, it may only take a matter of minutes.

Having the information generated from RFID integration at your fingertips allows for quicker, more informed decision making.  This type of visibility allows processes to be fully automated, which will remove the element of human error.  Warehouses and distribution centers who implement RFID systems into their processes take their inventory visibility and availability from 2 percent to 20 percent, according to Cybra.com.

Provides Real-Time Inventory Tracking

RFIDOne of the greatest benefits of increased visibility is using the data generated with the help of RFID to cut costs.  One example is real-time tracking that shows the most accurate inventory levels.  With RFID, companies can see exactly how much of their products they have on hand.  This type of real-time tracking gives them a better timeline of when to reorder to bolster inventory.  It also helps them find the optimal inventory level so there is no excess product sitting on the shelves, wasting money for storage.  While adjusting inventory levels may not seem like a profit driver, keeping proper inventory levels can help a company save between 20-30 percent on their warehousing and storage costs.

Retailers who have already implemented RFID into their processes are already seeing benefits.  They are running into fewer issues of out-of-stock products and increasing the on-shelf availability of their products.  RFID is able to scan each unique SKU number and identify differences in products, such as size, color, and style.  With merchandise tagged with RFID, manufacturers can increase inventory count rates from 200 to 12,000+ items per hour.  This type of visibility is giving retailers information on what is selling and what is sitting on their shelves for too long within minutes as opposed to days or weeks without RFID.

Higher Accuracy

When RFID is implemented into warehousing and storage systems, it usually results in a major improvement in product picking.  According to Cybra.com, manufacturers and distributors who implemented RFID technology into their supply chain saw an 80 percent improvement in shipping and picking accuracy.  This type of improvement saves companies a good amount of money as a result of fewer shipping and packing errors.

According to Bill Hardgrave, Dean of Auburn University’s Harbert College of Business and founder of the RFID Lab: “RFID increases inventory accuracy, from an average of 65 percent to more than 95 percent. And high inventory accuracy can lead to increased sales—but only if retailers use the data to improve their operations and processes. This is an important distinction and its key to the success of any RFID deployment.”

As supply chains are evolving, RFID is making waves by helping solve some supply chain issues while improving efficiency at the same time.  RFID is improving visibility while generating more useful information, it is providing real-time inventory tracking and it is more accurate throughout multiple supply chain processes.

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