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RFID in the Supply Chain: Fizzling Technology or the Future of Effective SCM?

In 2003, Walmart announced that all of its suppliers would need to have Radio frequency identification (RFID) tags on all pallets and cases by 2006. For many reasons, that transformation did not happen and RFID was put on the industry’s back-burner. More recently, with the rise of interconnected systems, the analytics to derive value from those systems seems, and decreased costs, RFID is resurrecting as a solution for increasing supply chain management (SCM), visibility into processes, and reducing inventory tracking costs. Historically, the cost of RFID implementation and difficulty to utilize RFID in conjunction with other supply chain systems has hindered mass adoption by supply chain managers. RFID in the supply chain is shaping up to make new waves in the industry as retailers and technology push the supply chain technology forward.

Two Specific Examples of RFID in the Supply Chain?

As explained by Supply Chain Digest, RFID in supply chain implementations did not stand out until the dawn of the 21st century. Wal-Mart CIO Linda Dillman oversaw the implementation of the retailer’s first electronic product code (EPC) compliance program in 2003, and by the end of 2006, Wal-Mart had deployed RFID chips on pallets for its top 100 vendors and suppliers. Over time, Wal-Mart used supplier-reseller relationships and business intelligence tools to evaluate the performance and returns of RFID implementation. However, the inability to act on information gathered in advertising and merchandising efforts in Wal-Mart led some companies, including Procter and Gamble, to rescind use of RFID tags.

Another company, Levi Strauss & Co. has taken RFID applications to new heights in the 21st century, using RFID to denote location and movements of all items within its stores. Processed by Intel gateways, Intel-powered sensors, and cloud-based analytics, RFID technologies are delivering on better shopping experience for customers, ensuring the right fit, at the right price, at the right location, and at the right time.

Active Versus Passive RFID Tags in SCM

Both passive and active tags have been a subject of debate in SCM. Active RFID tags have higher implementation costs and need the use of modern technologies to automate identification and data capture (AIDC), but passive RFID tags use existing technologies to “read” an RFID tag. According to Atlas RFID, Active RFID tags require a power source and therefore can initiate communication with a reader (beacon). They can also contain sensors to monitor temperature, humidity, motion, and other conditions. Passive RFID tags, on the other hand, rely on power sources within external RFID tag readers. As a result, passive RFID tags are read when a product is sold, leaves or enters a store, or moves through other connected “read points.” In the proper controlled situation, like a distribution center or store, passive RFID can increase visibility without the expensive costs of active RFID tags.

Retailers See Value in Product Tracking on a by Item-Level and Within Returns Processes

A big part of the push toward RFID tags in retail derives from the ongoing blend of traditional and online shopping experiences, integral to omnichannel shopping strategies. As noted by RFID Arena, RFID tags produce verifiable benefits to entire supply chains, reducing manual work and inconsistencies. Other key benefits of RFID implementation include:

  • Reduces risk to businesses, including reducing lost product and theft.
  • Identification of Gray market returns of counterfeit products.
  • Serialization to track introduction of counterfeit products.
  • Instantaneous inventory cycling reduces delays and speeds SCM.
  • Eliminates manual “connecting of dots” in opportunities and risks in SCM.
  • Enhances compliance with regulatory measures, especially with lot and serial tracked products.

With typical online return rates approaching 30-percent, insight into returns management through RFID can help retailers gain visibility into the relationship between consumers and the products they return, when/why/how they return them, and their quality upon return. This allows for the continuous reshaping of research and development, marketing and re-selling strategies, and more.

RFID Tags Are Resurging in the Supply Chain

Additional driving forces behind the resurgence of interest in RFID boils down to two primary factors: decreased RFID sensor costs, and increased technology in retail stores. As the omnichannel supply chain has risen, more stores are actively connecting consumers to the supply chain through rewards programs, online orders, and storefront-as-a-distribution center shipping options. Thus, the demand for RFID tags will likely grow, and according to Supply Chain Digital, faster speed of delivery resulting from RFID use will drive sales 40-percent higher.

Levy the Power of RFID in Your Supply Chain by Integrating Your Systems Now

The opportunities for growth of online and brick-and-mortar sales are clear, and RFID in the supply chain is a mere fraction of the ways the modern world is becoming more connected and reliant on technology. Click the button below to schedule some time to begin a supply chain systems conversation with Veridian. Or learn more by checking out on of our other recent blog posts.

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