3 reasons why you need RFID in supply chain management


Supply chain management involves many steps from raw materials and production to an end-consumer of goods and services. Since there are so many moving parts, one would expect that manual work is being replaced by automation, yet 45% percent of companies still rely on manual processes to manage their supply chain.

Replacing manual labor with RFID technology in supply chain management could vastly improve your efficiency. In this article, we’ll explore the benefits of using RFID in the supply chain.

Barcode vs RFID in supply chain 

The dominant technology used for tracking goods are barcode systems. While they certainly allow for better inventory tracking compared to manual processes, they are not enough in the digital age where speed matters.

Barcode technology requires a line of sight and coming close to the item to scan it. You have to either scan each item individually or inefficiently track items on a pallet or carton level.

RFID technology reads information faster and in real time, automatically, and at a larger distance, thus increasing the overall productivity in factories and distribution centers, as well as in retail stores.

RFID and efficiency of distribution centers

Studies have shown that RFID increases the efficiency of distribution centers. With RFID systems in place, distribution centers can process products faster and fill out many orders at once, while reducing the percentage of human error.

Manually scanning pallets and cartons of products results often in shrinkage or overstockage. With RFID, you can count hundreds of items at once and aggregate the data in the central system.

Automated RFID tunnels, readers and different conveyor systems track, count and divert products back to additional checks and replacements or sign them off and ship them to the store.

Since the RFID technology is actually a part of your IoT system (connected to your company’s network and devices), you gather a lot of valuable information in real time that you can use to improve every link in the chain. 

Every link in the supply chain knows the level of inventory and can react accordingly. This speeds up the communication between the factory, distribution center and the store.

Besides, returns are quite frequent in retail so tracking down the item to the beginning of the supply chain can help replace the product faster (and increase customer satisfaction along the way) or help you dispute claims and prevent fraud.

RFID increases the accuracy of your inventory tracking

One of the greatest benefits of RFID for SCM is its ability to count the items on an item-level instead of the SKU (Stock Keeping Unit) level. Because of individual item tracking, accuracy is improved drastically. You reduce the percentage of human error caused by manual scanning and avoid bad data about your inventory.

In companies that use barcodes, items usually have their SKU label. Let’s say you have 10 T-shirts. They all fall into the same SKU category. However, you have no data where and when the particular T-shirt was sold.

Item-level tracking means that, instead of tagging a pallet or a carton, every product has an individual Electronic Product Code (EPC) that allows for gathering so much more information.

In warehouses where SKUs are used, workers need to open up the boxes and scan every item (time-consuming!) and thus risk counting some items twice. With EPCs, items get automatically scanned and counted.

RFID prevents fraud, theft and loss

Companies lose $62 per annum on theft because they’re not tracking their items efficiently. Since RFID tracks the items on a granular level, to the single item, this discourages theft.

RFID tags set out alerts when people try to leave the store with an item. Internal equipment stays safer because it’s tracked in real time.

Reduce manual labor with RFID and improve the efficiency of your SCM

Adopting new technology is never an easy task in big chains with tight procedures. Management usually postpones it because of potential downtime and workers need time to adjust to new Standard Operating Procedures.

When we go past the initial period of adjustments to the new technology, benefits are vast. Keep in mind that more than 50% of companies with supply chain management processes still rely on manual labor to operate. Technology is your competitive advantage.

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