Whilst I was studying supply chain management in the late 90’s it was expected that Radio-Frequency Identification (RFID) was going to transform the supply chain for Retail and Consumer Packaged Goods sectors.
The idea was that RFID tags would replace the bar code as a low cost method to collect data as a package was transported through the supply chain.
It occurred to me recently that with all the hype from years back; RFID wasn’t as prevalent as I’d expected. Or is it?
Why was RFID conceived?
Trials of RFID took place in 2003 with 8 large consumer packaged goods companies such as Unilever, Walmart and Proctor & Gamble. These were successful and resulted in substantial investment by many large CPG manufacturers, venture capitalists and technology companies who envisioned that RFID tagged cases would provide end-to-end, real-time visibility of inventory from manufacturer to store shelf.
Although RFID progressed and thrived in some segments, plans for retail and CPG use of RFID did not roll out as CPG companies discovered that lower margin products could not support the cost of RFID tagging in comparison to higher margin products and some other non-CPG consumer products. This called for more analysis of the financial and operational challenges faced by CPG companies to calculate the cost impact versus the end benefits.
Many companies believed and possibly still do that there is great ROI of RFID in some product categories but concerns over the high cost and low returns, plans for RFID did not materialise in the supply chain world.
What is it used for today?
More recently RFID is being used to help retailers much more significantly on the sales floor rather than in the supply chain. It is now actively used in the retail industry for high-value goods and items requiring traceability, for example apparel and high end fashion.
A new demand has been recognised for the use of RFID, helping retailers to become more competitive with omni-channel sales, including in-store, online, social media or through a combination of these channels. By tagging items with RFID, retailers can check the inventory of an entire rack of clothing by simply walking around the display with a handheld reader. Software then displays a list of sizes or styles that need to be replenished, enabling much higher accuracy in inventory.
So it seems that RFID will never replace barcodes as initially conceived, as it will never be cost effective. It does however continue to have significant advantages across inventory management.
As with everything in supply chain; it’s a constant question of ‘trade off’.