Today’s supply chain and logistics management executives are tasked with managing multiple supply chain configurations, maximizing flexibility and incorporating complex technology systems into the mix. Shining a light in the world of visibility, asset management and inventory tracking, is that of radio frequency identification (RFID).
RFID 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.
RFID is used to identify pallets or individual items. They are much easier and faster to use than bar codes, since they can be read through materials such as ice or paint, and in conditions such as fog. When a tagged shipment is scanned, the information from that shipment can be automatically captured and entered into various software applications (TMS, WMS, POS, etc.).
Beyond traditional barcode identification, RFID is removing the hurdle of working with poor (or lack of) real-time data – accelerating the supply chain and reducing costs. Today, RFID is building a new era for process automation and supply chain transparency.
Supply chains without RFID & supporting technologies
To highlight the scale of the issue in the retail sector without a suite of statistical decision and visibility tools offered with RFID, the Grocery Manufacturers Association (GMA) suggests average losses incurred through inefficient supply chains stand at:
• Out-of-stocks = 4% loss of sales (approximately $17.5 billion to retailers)
• Loss to manufacturers = $7.5 billion (mainly due to customer substitution choices)
• Cost of unsaleables = $2.5 billion (approximately 1.14% of sales)
So it’s comprehendible as to why the world’s largest retailers now depend on RFID for healthy business operation.
Since the first expansion in wide-scale use of RFID by Walmart in its supply chain at the turn of the century, cost and access barriers have dropped significantly. Businesses, no longer limited to the rich and powerful, are now appreciating the value of RFID, the repeated cases of high return on investment (ROI), and its process acceleration benefits.
A long line of case study success
According to a recent study by PriceWaterhouseCoopers, interest in next-generation technologies and sustainable supply chain solutions is on the rise. More than half of the survey respondents said they are implementing, or plan to implement, new digital tools to improve process automation and visibility. Leading the way in this adoption are the industries of Pharmaceuticals and Life Sciences, Technology and Telecom, and Retail and Consumer Goods, with significant investments planned in the next two years.
Data from research by Motorola illustrates the global success story of the technology and its rate of return. The research reveals that warehouse and distribution productivity can increase by as much as 40% by implementing RFID, while retail and point of sale productivity can improve by up to 20%, out-of-stock items can be reduced by up to 50%, and inventory shrinkage can be reduced by 18% or more.
At the end of the chain, this can translate to a supply of goods to the customer 40% faster than your competitor, a 20% rise in sales capacity, and “out of stock” becoming a thing of the past.
Case study examples to support these statistics aren’t hard to come by either. The new Hazira Container Terminal at Adani Port, in Gujarat, India, reported that in the six months since opening in January 2013, it achieved approximately 50% greater cargo-management efficiency than other terminals of the same size: attributed to its new RFID system.
Similarly, Carrier Corp, the largest HVAC manufacturer in the world, reported 33% improvement in shipping productivity and 80% reduction in shipping errors after deploying RFID into its warehouse operation.
In the aerospace industry, where RFID adoption is high, Bell Helicopter uses RFID for warehouse management, tracking containers and parts. The company achieved an ROI for the RFID system within one year of implementation – saving approximately $300,000 after an initial total investment of $250,000.
Happy clients, supply chain execs and business managers
Trends in mobile and information technologies are naturally pushing the logistics and supply chain sector forward. As consumers and business customers become wiser and more demanding of the speed, quality and range of services available to them – RFID and other enabling technologies might just be the solution to long-term success – both internally and externally.
About the Author
Beth Nicholas is a professional technology writer for Waer Systems – Warehouse management systems, RFID asset tracking & supply chain software specialists.