Monday, February 3, 2014

How RFID Technology assists in inventory management in an Internet of Things?

Last week we talked about how effective inventory management is so critical within a supply chain, which raises me curiosity in what new technology has been used to better estimate and manage inventory in a typical supply chain like UPS and Fedex. One mature and widely-used technology is RFID (Radio-frequency identification), which is the wireless non-contact use of radio-frequency electromagnetic fields to transfer data, for the purposes of automatically identifying and tracking tags attached to objects. Today I am going to discuss the application of RFID to modern supply chain management, as well as the benefits derived from this technology.

The graphic below shows a projected roadmap of The Internet of Things which fundamentally basic on RFID technology. Currently, a majority of business like Supermarkets, Retail Stores, Delivery Companies uses RFID primarily as a way to calculate sales and cost, manage inventory, insure against out-of-stocks.


But as the maturity of RFID tehnology, it will be gradually deployed to create an Internet of Things for surveillance, security, healthcare, transport, food safety, IT asset management and the like. To date, as the global recognition in the value of big data, RFID has done an impressive job not only in generating and collecting data, but also, by means of various of new data analysis methods, describing and predicting the business trend as well as the item-level tracking roadmap. 

After the ubiquity of RFID, NFC and other related technologies being widely adopted to every part of the objects in the physical world, it will become a world of Internet of Things. As more objects are encoded, they will be broadly trackable, In the near future, we can expect that every small component of the newest iphone has installed a tiny electric tag, and every lamppost along the road is able to record not just what vehicles have been passed but also the small goods those vehicle are delivering. The supply chain manager might be able to to use a tablet or smartphone instantly identifying the location of any supplied components sitting home. With instant data, it is possible to optimize the manufacturing process and delivery schedule, minizing the cost of inventory. From a supplier's aspect, it is able to collect information about the total consumption of a specific components within a specific time throught the data from compenents' operation condition, therefore they can adjust the production plan in advance. New application of RFID can also create benefit for customers. Once a sold product is broken, staff in the service department will be able to easily locate the failure component and prepare it even before the customer requests for replacement... The possibilities are endless.  

A current article from UPS demonstrates how RFID will inevitably "force enterprises to redesign their value chain processes as a result of RFID changing the storage, collection and use of data concerning goods in the supply chain." A current simplified RFID example is the Manufacturer-To-Retailer Supply Chain, which is depicted as follows:
  1. RFID tags is placed by manufacturer with Electronic Product Codes (EPCs) on products enabling item tracking, history file creation and future use
  2. EPCs will be refered by distribution center for packeting, shipment building, package sortation, and Advanced Shipment Notification.
  3. RFID readers will capture and publish time and location data to for their stakeholders, as well as the items model and revelant parameters。
  4. Advanced shipment notification is received by the retailers or wholesalers, then computers will double-check the EPCs information, and automatically printed the receipt upon goods arrival.
  5. EPC information will be used in automated inventory management, checkout, and replenishments
With RFID, Wal-Mart has decreased stock-outs through better visibility, Marks and Spencer has seen the improvement in tracking high-ticket merchandise and lowering the volume of theft, and Gap has improved customer service through better inventory management on shop floor as well as increased supply chain efficiency and data accuracy by tracking denim apparel through the supply chain and onto store shelves.

All in all, RFID helps manufacturers in:
  1. Reduced retial stock-outs, providing more volume and revenue
  2. Improved inventory visibility, leading to better asset utilization and working capital efficiency
  3. Enabled real-time decision making such as routing, tracking and recalls
  4. Enabled counterfeit and obsolescence prevention
Besides, RFID helps retailers in:
  1. Increased inventory accuracy, decreased inventory and reduced stock-outs
  2. Reduced labor costs in stores and warehouses
  3. Automated replenishment and real-time accounting
  4. Enabled counterfeit and obsolescence prevention
Lastly, RFID also benefits customers in:
  1. Improved service from faster product filting and checkout, especially for mobile shopping
  2. Improved availability of items by allowing for timely ordering and delivery
  3. Improved product and service quaility by quickly locating and recalling faulty products
I believe the the next big trend of technology will start in The Internet of Things, and RFID technology will not just simply being used as a way for inventory managemet, but will show off more advantages in a world of big data and connected objects. 

My insightful question: Can you things of what new technology related to physical objects will be developed and adpoted to future supply chain management, and what new application of RFID will be created to bettern manage current supply chain?



  1. I really appreciate for your brilliant Efforts on spending time to post this information in a simple and systematic manner.

  2. Hi! You have published a very useful and informative article here. However, can you provide some more insight into how RFID technology helps in tool inventory management?

  3. This comment has been removed by the author.

  4. thanks for sharing nice article posting. find rfid system at low price


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