Wednesday, October 1, 2014

RFID Technology: Potential Revolution or a Ticking Time Bomb?

When Walmart speaks, the business world takes notice. It did so in a little more than a decade ago, and that changed the perception of technology in the supply chain world. On June 11, 2003, Linda Dillman, the CIO of Wal-Mart announced that the retailer had asked all its major suppliers would require its top 100 suppliers to tag pallets and cases of goods with Radio Frequency Identification (RFID) tags.

RFID is a data carrier technology, which works in the radio spectrum. RFID tags are small, thin, and do not require a line of sight for communication. They can be read despite being hidden in garments or boxes. They work without the need for any external power or batteries.
Some of the major benefits of RFID include:
• Real-time decision making capabilities like routing, sorting and recalls
• Improved product returns management
·   A decrease of about 5% in the inventory
• Up to 7.5% reduction in labor costs in stores and warehouses
• Reduced stock-outs, as high as 7% of revenues
• Increased inventory accuracy
• Automated replenishment
• Counterfeit prevention
For consumers as well, advantages like improved service, improved availability of items and improved product quality were prevalent due to the advent of RFID technology.

Apart from Walmart, other organizations have adopted RFID technology as well:

What a brilliant concept! A small tag could really track details about inventories and help organization quickly quantify and identify merchandise and help drive revenues.
Not really. RFID comes with its share of pitfalls, of which high adoption costs and data security are the prominent ones.

The cost of the tags range from $0.20 to $50 and tag readers cost between $500 and $3,000. Setting up and installing the computer software necessary to run an entire system effectively costs about $300,000. Other costs include testing the tags, readers and the systems, the cost of data misinterpretations and the cost of training employees. All these factors  

Data Privacy:
A study in 2007 revealed that customer data could be transferred through the use of RFID. Retailers can store consumer movements, purchases, preferences and buying habits and profile them according to these. The threat of linking consumer profiles to their credit cards and personal IDs looms large. The subject of privacy is a sensitive one and is here to stay in the near future. Firms must adhere to strict internal policies as well as involuntary government regulations.

Other issues with RFID  include tag readability, data management and business process changes.

Walmart failed with its demand and led to suppliers quitting on the organization. You can read why here:

However, it has reinvented the use of RFID technology in the last few years. Will it succeed this time? What must be done to overcome the challenges of RFID technology to successfully leverage this avenue that has the potential to transform the manufacturing industry?

4: Fink et al, 2007

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