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RFID in supply chain: 6 examples in use today

RFID continues to have applicability for supply chain management. Here are six ways organizations can use it to support inventory management and logistics.

RFID has long been a useful tool for better supply chain management. It still is.

While RFID is a comparatively older technology, industry analysts predict RFID use in the supply chain will keep growing.

The global RFID market size was valued at $10.41 billion in 2020 and expected to hit $25.47 billion by 2030, according to the 2021 report "RFID Market: Global Opportunity Analysis and Industry Forecast, 2021-2030" by Allied Market Research, and its use in the supply chain is part of that market. The increase in RFID use in manufacturing is a major contributor to this growth, according to the same report.

As companies look to balance supply chain costs and efficiencies, RFID's price point can be attractive.

RFID's price decrease over the last several decades has sparked greater adoption, said Dan Luttner, supply chain managing partner at MorganFranklin Consulting, a management strategy consulting firm located in New York.

Here are some common examples of how companies use RFID in the supply chain.

1. Real-time inventory tracking

The speed and ease of RFID scanning enables employees to check inventory levels more frequently, which supports more accurate inventory counts, order forecasts and order amounts, resulting in decreased storage costs and overall costs. Ultra-high-frequency tags are often used for inventory tracking.

RFID technology also provides continuous location information about valuable assets.

"I've had hospitals tell me that they may lose a million dollars a year [in equipment]," said Tim Zimmerman, vice president at Gartner. "RFID provides the ability to know if a particular asset has been intentionally or unintentionally removed from a facility."

RFID tags can also help companies that ship sensitive materials, like drug manufacturers, because they can send an alert if someone tampers with packages. For example, some RFID tags are attached to an item by looping the tag's wire around the item, then inserting the end of the wire into an opening on the tag. Once a user has inserted the end of the wire into the opening, the tag will send an alert via an RFID reader if someone tampers with the tag.  

Other types of organizations can also benefit from RFID's real-time tracking capabilities.

Danone North America uses plastic pallets with embedded RFID tags from iGPS to track its Dannon yogurt shipments, said Bob DePouw, senior manager of upstream logistics at Danone North America, a food and beverage company located in Denver.

"Pallet management … is so key from an asset and financial perspective," he said.

2. Warehouse management

RFID technology can help automate some of the tasks that occur during the receiving and shipping processes, in turn increasing efficiency and reducing human error.

Using an RFID reader to scan a product's RFID tag saves warehouse employees time because they don't have to record it manually, Luttner said. RFID can improve the efficiency of the picking and packing process because the RFID tag on an item sends information, like the item's location, to a warehouse management system. An employee that is doing picking and packing can learn the item's location from the warehouse management system and go there directly rather than spending time searching for the product.

3. Customer service

The inventory accuracy boost RFID offers can also help improve customer service.

For example, if a company's inventory counts are out of date, a customer may order an item that is actually out of stock, which leads to a poor customer experience. Using RFID in warehouses can help avoid these types of order-inventory misalignments.

4. Distribution

RFID can also help companies improve delivery process efficiency.

For example, manufacturing employees can attach RFID tags to boxes before shipping the boxes to a warehouse. Warehouse employees can then use RFID readers to scan the tags and learn what's in the boxes, enabling them to put away the items efficiently.

5. Cold chain management

RFID tags can monitor refrigerated products' temperatures during distribution, which will help ensure workers store the products at the appropriate temperature and that the products are safe to use.

For example, warehouse employees at a milk company can receive an alert on their RFID reader if the air conditioning in part of the warehouse has mistakenly been turned off and the RFID-tagged milk is reaching unsafe temperatures.

6. Fashion inventory management

The fashion industry, in particular, turns to RFID for inventory tracking. Ultra-high-frequency tags are often selected for this purpose as well.

Apparel tagging is the most popular use for RFID overall, with companies using billions of RFID labels for this purpose, said David Simchi-Levi, a professor of civil and environmental engineering at MIT. Retail companies use RFID to get information on inventory and to attempt to thwart thefts, among other uses.

For example, RFID tags can help clothing store employees discover that a particular size of jeans is in stock, even though it's missing from the right shelf.

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