The Growing Role of RFID Technology in Supply Chain Management

02.01.2021

rfid-technology-in-supply-chain

RFID technology has existed since World War II, but wasn’t until the early 70’s that it began to develop into what we know it as today. It’s now starting to gain a foothold in manufacturing and supply chain operations, gradually replacing barcodes as the go-to technology for improving warehouse and distribution center efficiency in industries as diverse as agriculture, pharmaceuticals, retail, and logistics. RFID systems make it easier to share, access, and analyze data throughout every stage of your supply chain.

What Is RFID?

Radio frequency identification (RFID) works by transferring data wirelessly using radio frequency waves. Conceptually, it’s a relatively straightforward system. Data is sent from special tags attached to items you’re tracking, to your ERP system via hand-held or automatic scanners. Unlike barcodes where the scanner needs to be able to physically see the barcode, RFID scanners can send data without needing to be in the same proximity as the item.

While costs have fallen in recent decades, RFID tends to be a bigger investment than a traditional barcoding system. The cost of implementing RFID technology in the supply chain depends on the type of RFID tags being used: either active or passive. Active tags have their own battery or power source and can transmit their own signal. Passive tags, on the other hand, rely on power from an RFID reader to transmit. Active tags tend to be more expensive than passive tags. It is possible to further reduce the cost by purchasing simple smart labels that run even cheaper or using tags that can be re-coded after their initial use.

Benefits of RFID

While RFID technology in supply chains still isn’t as prevalent as barcodes, whether because the technology is more expensive to implement, or because there isn’t as much support offered,  there has recently been a growing demand from retailers of jewelry, clothing, and cosmetics. Expect costs to continue to fall and more manufacturers to find ways of incorporating it into their operations. From optimizing inventory management systems and working capital to slashing operational and labor costs. 

Here are some of the additional benefits RFID technology provides:

  • With automation features, RFID ensures a more accurate collection and management of data, eliminating the need for any human interaction and cutting down on human errors.
  • In environments prone to the effects of weather, or in situations where barcode-centric operations could be disrupted by dust or dirt, RFID is more suitable.
  • It meets all major regulatory standards and compliance requirements.
  • Track your inventory more accurately and give your customers more accurate estimates on production times.
  • It reduces carrying charges and eliminates material shortages to improve purchasing and replenishment.
  • When combined with other security measures like biometrics, RFID can mitigate security risks by authenticating identification information.
  • Tags can be encoded with specific product data, as well as a unique ID, preventing any duplicate item scans.
  • It eliminates the need to open every box and scan every item while checking inventory, thereby cutting down on receiving time and improving visibility throughout the supply chain. 
  • Get real-time information about how goods move through your warehouses and distribution centers, see if your entire order has been fulfilled, and check the status of your shipments.

It should be noted that RFID cannot pass through metals and liquids, so before investing in an RFID infrastructure, make sure you know how useful RFID would actually be in your supply chain operations.

DATASCOPE’s RFID Case Study: Kanban

It is possible to implement an effective KANBAN system into your manufacturing plant using RFID technology. This is exactly what we did to help Lumotech. Lumotech is one of the leading suppliers of advanced automotive lighting, energy-efficient streetlights, and warehouse lighting. Over the last decade, Lumotech has greatly reduced its number of manufacturing SKUs while simultaneously focusing on optimizing every stage of the manufacturing process. They were running a Japanese KANBAN system with lots of moving parts, but with the help of the DATASCOPE WMS, they were able to control their process much more efficiently and effectively.

DATASCOPE’s WMS software was integrated at Lumotech during the last quarter of 2013. The typical scanner-based warehouse management solutions were implemented in the materials and finished goods warehouses, ensuring optimal stock control and accuracy. An advanced RFID KANBAN solution was also implemented in the factory to control work-in-progress inventory. This combined the traditional KANBAN card system with RFID tags and readers throughout the manufacturing plant to help track the movement of products from one department to another. It is fully integrated into SYSPRO and can process Back Flush transactions in real-time as the product KANBAN cards pass through RFID read points.

DATASCOPE WMS allows for real-time visibility of stock, allowing you to order the right quantities at the right time. The WMS interacts seamlessly with SYSPRO, and it can be easily adjusted to suit your particular KANBAN system. Ultimately, this leads to a 99.4% improvement in inventory accuracy. It also improved inventory planning and storage while reducing inventory holding, headcount and facilitating control of scrap recording.


If you’re looking to take your KANBAN system to the next level or would like to learn more about the implementation and applications of RFID technology in your supply chain, reach out to us today. We’ll help you assess your business priorities, goals, and your budget before embarking on your RFID journey.


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