RFID technology enhances supply chain efficiencies

Mieke Djalil, Contributor, Jakarta

The need for radio frequency identification (RFID) -- patented in 1973 -- has only now caught up with this technology's capabilities.

A combination of industry pressures, operational trends, new regulations and heightened security concerns has recently generated a groundswell of attention for RFID in the consumer products industry.

Today, consumer product manufacturers need to increase operational efficiencies, and at the same time, retailer mandates are requiring that these firms establish better product tracking capabilities. Not only is RDID suited to such tasks, but the component technology has evolved, making RFID a far more affordable solution.

What is RFID? RFID (Radio Frequency Identification) is a powerful, next-generation barcode technology. Like Universal Product Code labels (UPC), RFID tags provide inventory identification. But these new tags are more resilient and can store far more information than UPC labels, including: date and location of manufacture, and product identification numbers.

The tags can also be scanned at distances of 15 or more feet (depending on conditions), operate in harsh or dirty environments and impart information even if the tags are not visible when scanned.

RFID was used in World War II by the British to identify and track their aircraft. They mounted transponders to their aircraft so they could tell if an approaching plane was one of their own.

How does it work? RFID tag readers, or interrogators, send radio frequency signals that are picked up by antennae embedded in the tags. The tags respond back to the reader, transmitting information stored on computer chips. These RFID tags, attached to pallets, cases or individual products, provide essential inventory information that can be used by any member of the supply chain -- the consumer product company, retailer or logistics company. With read and write capabilities, RFID tags can send radio frequency signals that can be used by CP companies, retailers or logistics companies, and the information can be updated as needed.

EPC global, a consortium made up of consumer product companies, international industry associations, retailers and technology specialists, is creating commercial and technical standards that will smooth the adoption of RFID technology along the supply chain.

The global RFID market is far more than promising. According to Allied Business Intelligence, it will grow to more than US$3.1 billion by 2008. This market will include: consumer packaged goods, retail, automotive, military and homeland defense. RFID takes the guesswork out of supply and demand cycles

RFID technology has the potential to create a true, on demand, consumer-driven supply and demand chain for the consumer product industry. RFID technology can optimize real-time response to product needs and product delivery along the supply chain. With its advanced product identification and data capture capabilities, RFID technology can: * Improve communication at each point along the supply chain * Automate and more accurately capture data in real time * Facilitate real time transfer of product information * Enhance inventory visibility all along the supply chain

RFID technology makes good business sense. Consumer product companies have expanded their use of wireless networks and mobile technology to enable real time communication and transactions.

The improved reliability of this technology has increased the attractiveness of RFID technology. Market forces, the recognition of RFID's potential to reduce costs and increase revenue, and the desire for improved supplier collaboration all help explain RFID's rising popularity with consumer product firms.

Consumer product firms can experience potential cost-saving and revenue-generating benefits along both the supply and value chain through: * Efficient staffing -- RFID technology requires less hands-on activity. Fewer people are needed for labor intensive processes such as loading, unloading, picking, packing and stocking products. * Supply Chain Optimization -- Effective, real-time communications and collaboration along the supply chain mean that response to customer demand can be better coordinated. Consumer product firms can reduce back stock, decrease the frequency of inventory errors, expedite orders for fast moving products and limits orders on slower moving items. * Better work-in-process visibility -- Consumer products can be tracked in real-time across the manufacturing floor. Automated manufacturing can be enabled by leveraging "ingredients lists" to make consumer specific products. * Improved product availability -- Desired products can be on retail shelves when needed, resulting in fewer out of stock scenarios, increased sales and potentially enhanced customer satisfaction. * Enhanced shrink management -- RFID technology can also limit revenue losses stemming from lost or stolen products. * Brand authentication -- RFID technology helps clients to distinguish authentic products from counterfeits.

When thinking of whether RFID should be used by an organization, one can think of several ways as to how RFID could be applied in different cases: - Supply Chain Management: leverage RFID technologies to transform supply chains by providing end-to-end visibility of goods and enabling improved inventory management. - Work-in-Process Manufacturing: apply RFID technologies to the manufacturing process to enable effective inventory tracking and management, product line efficiencies, and manufacturing advantages. - Asset Management: apply RFID to track depreciating company assets or monitoring items that are en route. - Consumer Applications: leverage RFID to monitor people movements, personal security, convenience and point of sale applications.

RFID transition strategy: one step at a time, with an eye to the future. Consumer product clients see the value of RFID technology and are pushing to move RFID technology deployment beyond the introductory stage. Hence, several large consumer product firms that will begin deploying RFID technology solutions must realize and understand information technology challenges that can -- and must -- be worked through over time.

Increased data volume and the need to verify system functionality at every stage of implementation should be reviewed.

RFID implementation requires planning and flexibility at the same time to enable an organization add new RFID-related functionalities and capabilities as the technology evolves and business needs change. Consequently, many IT challenges -- such as increased data volume and the need to verify system functionality at every implementation stage -- may impact on companies' technology infrastructure.

Companies need to create an initial infrastructure strategy and investment roadmap to support the improvement of supply chain business processes and collaboration. Many consumer product executives look for help from outside companies to meet short- term RFID goals as well as develop long-term vision.

They want an organization, like IBM, that has both a good understanding of the consumer product industry and expertise in information and RFID technology.

Such technology experts will be able to best guide consumer product businesses through the intricacies of developing business case studies in addition to the creation and installation of RFID technology. With this help, consumer product executives can gain an enhanced understanding in terms of both RFID's capabilities and how their business processes and technology infrastructure may be improved.

The writer is a Business Consultant Services Leader with IBM Indonesia.