According to an expert cited by the Federal Trade Commission, "every year, American merchants lose as much as $300 billion (US) in revenues because they’ve lost track of goods somewhere on the journey between factory and store shelf.” Lost revenues are not the only concern in the supply chain; improving the productivity in transporting goods and securing the source of goods are equally important for people managing the supply chain. All these problems can be tackled effectively by RFID technology. An important decision that suppliers and manufacturers need to make while considering using RFID is the level of implementation i.e. pallets or individual items. True benefits of RFID like preventing counterfeiting and theft can be obtained by item level tagging . But that involves high cost and hence, item level is currently used only for high value items.
Conceptually RFID technology is much better than some other technologies like barcodes being used in the supply chain management. Simply put, 'with a barcode scan you can have a one-to-one relationship but with RFID you can have a many-to-one relationship.' So instead of having to touch each item one at a time in a particular orientation, RFID uses radio frequency for non line of sight scanning and has the ability to scan multiple items simultaneously. In today’s logistics industry, RFID can be used in multiple roles i.e. for shipment and asset tracking, warehouse and distribution management, package and product tracking etc. Wal-Mart introduced RFID technology in January 2005 and mandated its use to its suppliers. Within two years the company saw a return on investment, such as RFID tagged out-of-stock items being replenished three times faster and the amount of out-of-stock items that have to be manually filled cut by 10 percent.
There is no doubt that RFID is a revolutionary technology that will have a significant impact on how the supply chain is managed. RFID tags will not only replace the current favorite bar codes but will allow real time tracking of products. This in turn will help companies to largely reduce lost sales and lead to greater efficiency. Dubai-based Hexomatrixx has taken the technology forward by integrating the RFID reader to smart phones. However all this depends on the successful acceptance and deployment of RFID. Still several barriers to full-scale, widespread deployment of RFID in the supply chain remain. These include the cost of RFID tags, lack of standardization of networks and tag data, moving tag data from the pallet level to the item level and integrating RFID networks into existing systems. So far the cost of acquiring, installing, and maintaining an RFID system has been a major and often determining factor in the deployment of RFID in the commercial sector. After weighing both, its benefits and the problems(cost involved), the question that one needs to think about is, will RFID become an industry standard in the coming future or will it be restricted to only the big players?
Book Chapter: Designing and Managing The Supply Chain (Levi, Kaminsky, Shanker), third edition.