Supply chains today can be very fragmented, with each link operating as an individual entity. Absence of real-time data leads to poor visibility that can slow down the decision-making process. With radio frequency identification (RFID) technology, manufacturers and retailers can go beyond traditional barcode identification, fortifying visibility with better data granularity and more timely updates. An RFID-based supply chain can help in continuous monitoring, thus improving the whole system by using all the available data.
In the analysis of supply chain landscape attributes to identify a common thread, we can conclude there is a lack of real-time supply chain data for operational analytics. The SCM systems of today may depend on either scanned barcode data or manually entered data, both of which are tedious, slow, costly and error-prone. As a result, there are many instances of the system inventory not matching the physical inventory.
RFID offers a potential solution to the item/object transparency problems that have plagued supply chains in the past. RFID can address the challenge of real-time supply chain data by connecting the last mile between the physical object/item and the computer, thus enabling automatic physical identification of data and populating of the database.
Compared to discrete barcode scanning stations, which can provide data only for those stations, an RFID-enabled warehouse can provide continuous data on the entire length of the supply chain. A real-time SCM system will enable faster decision-making regarding stock tracking and replenishments, new product introduction, discontinuation of obsolete products and so on, thus providing a powerful lever to reduce inventory and the associated costs. To illustrate, a study conducted by the University of Arkansas on RFID-enabled Wal-Mart stores concluded that there was a 13% improvement in inventory management in the RFID-enabled stores as opposed to non-RFID ones.
RFID has the potential to create a truly adaptive supply chain, enabling all aspects of the business cycle (production, storage, distribution, retail and returns) to be monitored in real time, optimizing for present conditions and making predictive changes based on expected demands. RFID serves as the last-mile connector between the physical object and the IT system and provides the crucial real-time physical visibility of all the operations to a distant manager, enabling him or her to make informed decisions in a timely manner.
The adoption of any technology is gradual. Of course, compared to the transition from manual to automation, the transition from one automated system to the next generation is definitely faster. Thus, while the adoption of RFID in replacing barcodes might be faster compared to the introduction of barcodes, there are many challenges that face RFID at present, not the least of which is the cost of a tag for item-level tagging.
Global adoption of RFID product code, readers and tags, along with mandates from regulators, will drive faster adoption, benefiting supply chain managers globally. Reduction of waste is aligned with green environment objectives.
Efficiencies obtained through real-time visibility will benefit customers at large through on-demand/real-time availability of goods and services at lower prices. There are some privacy concerns, which can be easily addressed through proper solution design. Similarly, there are some physics-related issues (e.g., liquid and metal barriers for RFID data reads), which can also be solved through a combination of technologies.
RFID has found enormous favor from business users because they are able to directly relate to the benefits it provides. IT solution providers find that requests for RFID solutions are coming directly from the CEO instead of the CIO. As markets become more global and competition intensifies, IT has a key role to play in supporting supply chain competition. Consequently, the most effective supply chain networks are dynamic in nature, distributed in architecture and leverage sophisticated, real-time analytics.
T.S. Rangarajan (Ranga) is a principal consultant with Tata Consultancy Services Ltd., an India-based software services company. He previously led Tata's RFID Solutions practice, and has also served as head of Tata's Retail Practice, based in New York.