When it was introduced, bar coding revolutionized supply chain management and today is used on most products sold in stores. Now a new technology, call Radio Frequency Identification (RFID), promises to further automate inventory tracking and even replace bar coding, according to the PricewaterhouseCoopers Technology Forecast.
RFID systems are comprised of two basic components: an RFID tag placed on a product that emits a wireless radio signal and Radio Frequency (RF) reader systems. RF reader systems receive and send signals to and from the RFID tag.
How is RFID technology different from bar coding?
Bar codes need to be placed over a card reader to identify products and carry pricing information. RFID tags, on the other hand, simply need to be within a certain range to communicate with the RF reader. The ability to track tagged products through the supply chain automatically and transparently is how RFID systems can add enormous value.
With the use of RFID, retailers can track the amount of inventory on shelves at all times, rather than having to physically inspect and read bar codes. This real-time information can prevent stock-outs while reducing inventory levels and provide valuable information on buying trends. The information can also be used to track inventory movements and prevent theft.
Because of these advantages, RFID systems are beginning to be used by major retailers and consumer product companies in large pilot projects. Retailers such as Wal-Mart, fashion retailer Prada and consumer product companies such as Gillette and Proctor and Gamble have announced major RFID pilot projects.
RFID technology also holds great promise for manufacturers. RFID systems automatically provide valuable information about a product as it moves through the manufacturing facility. The technology can also be used to capture information after the product leaves the plant.
Ford has started placing RFID tags on major vehicle components such as engines to track their progress through the assembly line and monitor time and date of manufacture.
However, there are disadvantages to the new technology.
Cost remains one of the major reasons why RFID systems are not in greater use. Unlike bar codes that can be printed on product packaging for a very nominal cost, RFID tags were priced at between US$1 and US$20 at the beginning of 2003. Significant additional investments for readers and upgrades to data collection systems are also required.
These cost issues are being addressed with ongoing improvements in RFID technology by vendors such as Alien Technology, Hitachi, Philips Semiconductors and Texas Instruments that promise to reduce the cost to as little as five cents a tag by 2004.
Some critics of RFID technology also point out numerous privacy issues including the possible use of tags to track people and the unauthorized use of personal information. Retailers are attempting to address these concerns by deactivating tags during checkout, but there are still lingering suspicions about the technology's potential misuse.
The PricewaterhouseCoopers Technology Forecast predicts that the broadest adoption of RFID in 2004 will be the tagging of transportation assets such as trucks, containers and pallets. By 2005, RFID technology will be used to track cases of products. Beyond 2008, when RFID tags are expected to fall to less than a penny, Forrester Research estimates that two percent of consumer packaged goods will be outfitted with RFID tags.
In the foreseeable future, RFID technology promises to greatly improve an organization's ability to track products, parts or shipping containers and provide an unprecedented view into product life cycles. Over time, the technology may provide companies with the ability to follow a product from the factory floor, to the store, into consumers' homes, and eventually to their ultimate disposal.
This article was first published in the London Free Press.
