White Paper

A Basic Introduction To RFID Technology And Its Use In The Supply Chain


In 2003 RFID seemed to have appeared from nowhere, and into the spot light as one of the hottest technologies around. Everyone from journalists, analysts, VC's, technology companies and retail giants like Wal-Mart were making public statements, mandates, predications and investments, based on the promise that RFID was set to revolutionize the global supply chain on a scale not seen since the internet revolution in the 1990's.

Equally surprising is that RFID is not new, its been around for well over 10 years, and is already in use in applications like access control and transport. Whilst there have been many false starts and promises in the past, what has made the difference this time around, is the creation of the EPC (electronic product code) coupled with lower tag costs, and the mandated adoption of RFID by Wal-Mart and Tesco for all their suppliers by 2005-6. Furthermore, the European Parliament has announced legislation which obliges all goods to be traceable throughout the supply chain by 2005. These initiatives, and others like the recent US-DOD announcements are now driving the market and inciting many companies to develop strategies for RFID compliance.

The use of RFID combined with the EPC promises to provide data about products never available before. Many items produced will eventually have their own unique ID numbers. All parts of the supply chain including manufactures, distributors and retailers will be able to have instant access to information about an individual product. RFID is not expected to replace bar codes simply because tags are still too expensive even though their prices have fallen to around 20 cents in volume versus 0.2 cents for a bar code label. Adoption is therefore likely to happen first at the Palette and Crate level, then as technology advances and costs reduce further, we can expect to see tags on more and more high value items.

The wide adoption of RFID across the supply chain will bring significant benefits leading to reduced operational costs and hence increased profits. Many analysts suggest that this will happen in three primary areas.

  • Reduced inventory and shrinkage
  • Benefit from a reduction in store and warehouse labor expenses
  • A reduction in out-of-stock items

With so much high profile backing, momentum and indisputable benefits, can RFID fail? Most analysts think not, but are aware of the many obstacles, misconceptions and issues to be resolved on the way including:

  • Tag prices and efficiencies
  • Harmonization of RFID standards,
  • Interoperability throughout the supply chain
  • IT infrastructure to handle large volumes of data
  • Change of work and labor practices
  • Shared cost of deployment
  • Privacy issues

This paper is aimed at both technical and business professionals who want to understand how RFID basically works, the various building blocks and the potential the technology has for the supply chain.

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