RFID technology is facilitating a major innovation to supply chain management. From an article by John Lorinc in the December, 2006 edition of the Globe & Mail Report on Business Magazine, Every year, according to an expert cited by the Federal Trade Commission, American merchants lose as much as $300 billion (US) in revenues because they've lost track of goods somewhere on the journey between factory and store shelf. Lost revenues are not the only concern in the supply chain, improving the productivity in transporting goods and securing the source of goods are also of concern to professionals managing the supply chain. RFID technology delivers solutions to all these needs.

Overview:

Where does an organization start to realize the benefits of RFID? To answer this, an overview on the technology is a good start. The concept behind RFID is simple; an item (the product, or a pallet) has an RFID tag attached to it. The tag contains a small integrated circuit (IC) chip that contains a unique ID and an antenna that allows it to communicate to an RFID reader. When the tag is attached to the product or pallet and then read by the RFID reader, that unique ID is then associated with the product or pallet through your enterprise resource planning (ERP) system. This unique ID stays for the remaining part of products journey from the factory, right through the consumers purchase at the retailer. The RFID readers are then placed at all key junction points in the supply chain. As the products or pallets pass through these readers, your ERP system is updated immediately on the flow of goods. This automation in the process reduces time spent with manual entry and the potential for human error of bill-of-lading details, provides real time updates on where goods are, makes more secure the integrity of your product shipments and helps you address bottlenecks in the system faster.

A Starting Point:

Therefore a good starting point to deploy RFID technology is at the pallet or carton/container level. Goods assembled in these vessels are then tracked in batches defined at the source. The benefits, here, are that fewer tags are needed, since a single tag is identified with a batch of goods instead of the individual unit of product. Another benefit of tagging the pallets and containers is to continuously track the whereabouts of these vessels used to move the goods and this helps to cut down these assets being lost in the supply chain and needing to be replaced. Another reason to start an RFID solution at the container level is because many individual products pose challenges for RFID technology by the way they are packaged. Metal goods, goods that contain liquids and very small items pose a challenge to doing individual item tracking. RFID solutions are available here, but the cost goes up considerably. The direction of the technology is toward tracking all individual units of products. With advances in RFID technology, costs per tag will be driven lower and this will allow more RFID tagging of individual product units.

Open Standards:

The realization of the benefits of RFID technology is also very dependent on open standards in the industry. Open standards will allow manufacturers, distributors and retailer to use a common type of tag(s) and reader(s) while allowing this hardware to interact with their own ERP needs and deliver the efficiencies promised by RFID technology. EPC global Inc., the standards body that manages UPC (Universal Product Code) information in bar codes, sets the standards for how basic product information is encoded in the RFID chips. The standard set for supply chain management is referred to as "GEN 2". GEN 2 has brought significant advantages over the previous evolving standards of Class 0 and Gen 1 and these include:

(a) GEN 2 can write to tags multiple times,

(b) GEN 2 has longer read ranges,

(c) GEN 2 has greater data storage capacity and

(d) GEN 2 has more reliable and faster read rates.