RFID: the next wave in technology adoption

Business - RFID

RADIO FREQUENCY IDENTIFICATION TECHNOLOGY: THE NEXT WAVE

Radio frequency identification (RFID) has only been incorporated into business operations within the last decade, but the roots of the field actually date back to World War II and allied efforts to distinguish friendly aircraft from hostile aircraft by their radio signatures. In principle, RFID technology as it is applied in modern business operations performs many of the same essential functions as the standard bar code that has been in use throughout commercial enterprises since the 19060s.

However, whereas bar codes require manual capture in order for scanners to read the information encoded into codes, RFID technology allows merchandise to "communicate" directly with receivers without the need of human manipulation or direct assistance in the process (Gordon, 2006). Today, RFID applications include everything from retail management, wholesale distributions, and automated production processes to tracking equipment used to monitor compliance with criminal home confinement to lost pet identification and recovery through the use of strap-on ankle bracelets and RFID chips implanted under the skin, respectively. Q1. Based on your background readings, what makes RFID such a big deal in managing production and inventory?

RFID is unequaled in its ability to provide accurate measurements of various aspects of commercial production. During the production cycle, RFID technology allows operations managers to track component parts to confirm the completeness of parts packages being readied for automated assembly as well as to monitor every element of the production cycle. By automatically tracking and providing status reports on the whereabouts or component parts and the state of assembly operations, RFID-equipped production processes can streamline their operations significantly. The capabilities of RFID in the realm of production also include efficiency analyses in the form of feedback on various parts of the production schedule to identify areas where improvement is necessary (Byrne, 20042).

Likewise, many aspects of inventory management are much simpler, more efficient, and cost effective with the incorporation of RFID technology. The use of RFID technology allows merchants to minimize inventory outages because RFID systems can recognize when inventory is low in order to maintain a constant supply, thereby virtually eliminating sales losses associated with the unavailability of product at the time that consumers wish to make purchases. This is particularly important in highly competitive industries where inventory outages often correspond to sales lost to competitors who are not out of stock (Byrne, 20041). The use of RFID also allows merchants to economize on shipping costs by shipping amounts of product tailored much more precisely to actual needs of their outlets, which also corresponds to increased stockroom operational efficiency and product capacity (Chatur, 2006).

Q2. What is the nature of the impact that RFID is having on industries, and on individual companies within those industries?

The use of RFID technology has already reaped substantial dividends for some of the largest companies that have pioneered its use, including Walmart, Target, and United Parcel Service (UPS). However, the largest current beneficiary of the field is the United States Department of Defense (DoD), which must coordinate supplies from thousands of individual suppliers and manufacturers (Hartman, 2005).

Walmart in particular has demonstrated the substantial cost savings attributable to RFID technology in the retail industry, but other retailers like Target and Circuit City have also recently increased their use of RFID systems, although on a smaller scale (Byrne, 20041). In addition to reducing shipping and stocking costs by optimizing capacity in both areas, RFID technology has enabled businesses to track packages from shipment to delivery, confirm transit times, identify delays, and confirm delivery (Hartman, 2005).

While most of the potential economic value of RFID technology already proved its value prior to the recent spike in the price of oil, the advantages of increased efficiency in shipping through the optimization of cargo space have obviously increased dramatically in proportion to the increased costs of shipping. Moreover, RFID technology has proven useful in other respects, such as ensuring the proper temperature of frozen and refrigerated goods in transit and even by facilitating the coordination of emergency supplies during disaster responses on the part of the federal government (Gordon, 2006).

In fact, the ability of RFID to monitor other variables besides geographical location suggests additional valuable applications such as the incorporation into manufacturing processes. For example, (as in the case of transporting refrigerated goods), temperature can be monitored and adjusted automatically, improving the quality and safety of everything from crucial medical supplies to pop tarts.

Furthermore, potential cost savings provided by RFID technology transcend the realm of production and supply chain management. Shippers can monitor compliance on the part of their truckers with speed limits and route restrictions, thereby saving additionally on the cost of insuring their employees and equipment, by virtue of the increased ability that RFID units attached to vehicles allow supervisors and safety administrators to ensure compliance with policies and procedures in addition to statutory restrictions. Beyond lowering the costs of insurance premiums, these applications also produce savings by reducing both the likelihood and the severity of accidents in transit (Chatur, 2006).

Q3. Given the current, rapidly changing logistics environment, to what extent do you think a company can afford to "go it alone" when making choices about managing its inventory and production?

In terms of large, highly competitive industries where one competitor fails to incorporate RFID technology while another does, it is likely that the cost savings difference attributable to RFID use could easily make a substantial difference. In some cases, it could conceivably make the difference between profitability and liability, particularly in industries with low profit margins. To the extent that fuel costs are a factor, the comparative savings offered by RFID system technology in shipping and inventory storage could make the difference between long-term success and failure of business ventures.