Manufacturers may not think they have much in common with the retail companies beyond producing the products that stock store shelves, but there could be a lot to learn from the latter as the manufacturing headwinds of the last few years carry into 2023.
Labor shortages, inflationary pressure, recessionary risk and supply chain disruption will all persist, at least to some degree, through 2023 and we all know there’s no sure way to safeguard your operations.
Manufacturers and their suppliers the world over are looking in every nook and cranny for opportunities to build resilience against disruption and I believe some retail companies have found one that deserves another look: radio frequency identification (RFID) technology.
As I discussed in a recent article in RFID Journal, RFID technology has changed a lot since 2005 and could be the secret to ensuring greater visibility and inventory accuracy this year.
What is RFID Technology?
RFID is a type of automatic identification and data collection (AIDC) technology. Gartner defines it as a technology that uses radio frequency waves to automate data collection and track items throughout the value chain. There are two types of RFID tags commonly used in logistics and transportation:
- Passive RFID tags utilize the power in radio waves emitted by fixed or portable readers to rebroadcast their unique identification. They don’t have an internal power source, so range and data storage is sacrificed to gain cost efficiency and lifespan. Passive Ultra High Frequency (UHF) tags are frequently used to track consumer products.
- Battery-enabled RFID tags use either battery-assisted passive (BAP) or active RFID technology. The internal power sources in these tags sacrifice cost efficiency and lifespan to gain range, data storage and self-initiated broadcasting. BAP and Active RFID are more common in asset tracking and near materials that impact radio waves (like water and metal).
If you work in the automotive, aerospace and defense industries or, of course, the consumer goods industry, you’ve probably been working with RFID technology for years. The Department of Defense began requiring suppliers to use RFID tags in 2005 and many major companies have followed suit. The technology is even making inroads in the NFL to track player performance. Honda, Toyota and Stellantis, as well as many big box retailers like Walmart and Target, also require RFID compliance for packaging and products – and it’s easy to see why.
RFID tags are one of the best technologies for quickly and accurately tracking goods throughout the value chain. Nearly 50% of all retailers view out-of-stocks as the greatest barrier to success in today’s market. RFID tags can reduce out of stocks by up to 80.3% and bring inventory accuracy up to an impressive 99.9%. Given these figures, retail investment in passive UHF RFID is a no-brainer.
Walmart Has Embraced RFID Technology – Should You?
Walmart is somewhere you might go to stock up on personal care products, snacks and gardening supplies, but is not a typical case study for manufacturing operations. That said, Walmart didn’t become one of the largest retailers in the world by accident and it’s clear the company knows a thing or two about inventory management.
The retail giant expanded their RFID program by requiring tags for home goods products, as well as some automotive, hardware, entertainment and toy items, on September 2, 2022. Soon after, Senior Director of Merchandising Shelly McDougal said via LinkedIn, “We recently launched RFID in Walmart #apparel. This has improved inventory accuracy but more importantly, has helped us better serve our #customers! Looking forward to partnering with our suppliers to expand #rfid to additional categories this year.”
My takeaway? RFID helped Walmart boost inventory accuracy while dealing with labor shortages and other challenges, so much so it plans to scale the technology to other departments. Walmart embracing RFID isn’t a reason for everyone to jump on the bandwagon, but the technology has changed a lot since the DoD’s mandate took effect in 2005 and might be worth another look for your organization – especially if it has the potential to take inventory accuracy to 99.9%.
How Has RFID Technology Changed Over the Last 20 Years?
RFID technology has been on many manufacturers’ radars for a couple of decades, but it’s changed a lot since the early days. Research and development efforts have paid off and the average RFID tag cost has declined by 80% over the last decade, while reader costs are down by 50%. Read accuracy has doubled and range has increased four-fold, enabling companies like Walmart to improve results while requiring fewer readers.
Initiatives like the Chain Integration Project (CHIP) out of Auburn University’s RFID Lab are making the technology more secure and conducive to collaboration across the supply chain, which is great news for manufacturers working to enable one source of truth across their enterprise. The PolyGAIT Center at California Polytechnic State University also provides students with practical RFID and IoT education (including 150+ industry collaboration projects), producing scores of hireable and RFID-knowledgeable engineers every year.
Inventory tracking is the most successful use case for RFID technology. With accurate production-location data in hand, companies can streamline inventory management, accelerate picking and packing and ensure on-time delivery.
Item-level tagging is what makes that elusive 99.9% level of inventory accuracy possible, and it’s the key to achieving a return on investment (ROI). Lot- and serial-level track and trace and container and package-level identification are still important, of course, but these activities combined can give manufacturers a much more granular look at their environment.
Only you know which level of detail is best for your organization, and the answer likely has a lot to do with your enterprise software. I recommend taking a look at your inventory management, ERP and warehouse management system (WMS) to determine whether they can support a high degree of granularity. Be sure to do your research and assess the situation with ROI in mind. This isn’t a task for an Excel spreadsheet.
Closing the Gap on Inventory Accuracy with Enterprise Software
I don’t need to tell you how important accurate data is to your organization, but ensuring inventory accuracy should definitely be a focus. In an ideal world, you have an ERP solution that pulls your data into a centralized database in real-time and helps keep your organization on one source of truth. With a high level of inventory accuracy, companies are able to quickly fulfill picklists and everyone at your organization is able to do their job more efficiently and with confidence.
Manufacturers can also use RFID to work effectively with suppliers and minimize supply chain disruption. RFID technology enables real-time inventory tracking and, in turn, more accurate inventory counts and order forecasting. It also makes it easier to track sensitive or high-value materials, automate warehouse processes and maintain a high level of quality. With RFID, you can eliminate orders for out-of-stock items and trace potential product issues faster.
I think Walmart has the right idea about RFID, but it’s also headed in the right direction on what matters most – delivering an excellent customer experience. For manufacturers, these customers are often sitting at a desk somewhere within your organization. It’s the vice president of purchasing working on a supplier resiliency program or the vice president of operations/manufacturing preparing to launch a new product.
When these individuals and their teams stop worrying about inventory accuracy, they can focus on more important parts of the business, like securing a major contract or accelerating its digital transformation. Instead of waiting for RFID mandates to arrive in your line of business (if they haven’t already), now is the perfect time to get ahead of the curve with a solution that can position your organization for the next stage of growth.
Your blog post about RFID technology really stands out!