RFID and its Effect on Supply Chain Management

by Jennifer Hart Yim | May 20, 2015 | Blog, Manufacturing & Distribution, Strategy, Supply Chain, Warehousing & Materials Handling

This article is part of a series of articles written by MBA students and graduates from the University of New Hampshire Peter T. Paul College of Business and Economics.

David Chadwick is an MBA student at the University of New Hampshire with a background in retail store management and electrical engineering.

If technology continues to advance, humans may be obsolete in the supply chain as a result of both automation and RFID utilization. Both technologies have been introduced into the supply chain over the past decade, resulting in a major shift in performance and costs. While automation is a process which can navigate product throughout facilities, RFID can improve efficiency dramatically as well as being the major driver for the elimination of human involvement in the supply chain.

RFID (Radio Frequency Identification) is a form of extremely low-power data communication between a RFID scanner and an RFID tag. The tags are placed on any number of items, ranging from individual parts to shipping labels. The RFID tag itself consists of a microchip and antennae, usually without a battery to power it. The tags can be printed using special printers, which wirelessly load the identifying information to the tags. The information on the tags can be used for a wide variety of tasks. When an item goes through the RFID scanners, information is read from the tag, which could include any amount of information, such as:

• Order ID number
• Product bin location
• Order status
• Serial numbers for individual product components
• Location logs

The information is not limited to just holding ID and serial numbers. Since the information can be updated and transferred through any RFID receiver when in range, it can be joined with other software to update databases, send information online, and more. The amount of information that RFID can provide can be matched with order management systems to track shipment and stock locations automatically as the products move through warehouses and trucks. Powerful receivers can also track the exact location of products within a warehouse in real time, instead of relying on time and location logs to determine the location. This has been a major benefit to UPS, who’ve had RFID tracking chips in their warehouses for over ten years.

The largest problem facing supply chain management today is the potential for the occurrence of devastating errors. These errors could lead to trucks leaving product behind, not stocking to capacity, losing product, or delivering to the wrong locations. There are numerous reasons for such errors to occur, but the most common factor in their inception is human error. Much of the errors faced result from manual inspection and control over product flow in warehouses by humans. Many systems still operate using written data tables and checklists, which can be written incorrectly. Despite major advancements in technology over the past decade, the digital world is being sourced by analog supply chains. This is an aspect which RFID control can create beneficial change.

RFID can lead to completely autonomous warehouses and distribution centers. This can be seen in current warehouses with high levels of automation, where picking machines transport bins of product to a central sorting area to be boxed, before returning to their location. Zebra uses this technique to ensure product location accuracy as a means of reducing lost merchandise. Zebra places a great deal of importance on product visibility and transparency as well as accuracy in locations. Implementation of RFID into this system can ensure that both the correct product and the correct quantities of product are collected at both points, thereby eliminating errors seen in traditional analog supply networks. Coupled with the potential for self-driving trucks and the ever expanding internet of things in the cloud, product information can be tracked at all stages of shipment and storage, increasing accuracy, efficiency, and accountability. Where warehouses and receiving departments had to endure a certain amount of shrinkage of products in the past, a fully utilized RFID-enabled supply network can determine exactly where product is at all times, ensuring that theft is discovered immediately and enforced.

While the reduction of human interaction in the supply chain and warehouses in general can be eliminated with enough technology, it is uncertain to what degree this technology will be implemented in all aspects of supply chain management. While there are huge benefits to operating in such a system, the major negatives include high initial costs and restructuring costs associated with implementing this network into existing, analog networks. Humanity may not be completely removed from the supply chain in the future, but this technology, as well as more advanced techniques for automation, will increase the efficiency and reduce the costs required to operate these newer supply chains dramatically while significantly reducing errors and inefficiencies.