Ian Alberts, CPA
10.23.2018 | Berdon Industry Insights
Many manufacturing, distribution, and retail companies have implemented radio-frequency identification (RFID) in their warehousing as a means to efficiently communicate data and track inventory through the supply chain.
Types of RFID Tags
There are two types of RFID tags that are currently used in today’s market, passive or active.
Passive RFID tags have internally unpowered chips, programmed with product data, that require to be near “readers” to be read. The readers power the chips, ensuring the chip remains active perpetually. Additionally, passive RFIDs are standardized, enabling them to be mixed and matched with reader hardware.
Active RFID tags are internally powered, which enables them to broadcast a low-level radio signal carrying product data. These signals can range up to hundreds of feet and can be detected by a single centrally located reader. Active RFIDs are proprietary, meaning that they cannot mix and match with other tags and reader hardware. Additionally, active RFID tags have batteries, and, therefore, do not have an indefinite life as would a passive RFID tag.
Are RFID Systems Worth the Cost to Implement?
Although RFID systems range from $0.10/unit (for non-metal passive RFID tags) up to $20/unit (for active tags), the question remains as to whether or not the advantages outweigh the upfront costs.
Consider the following:
Impact on Labor Costs and Efficiency
With an RFID system comprised of tags or labels, readers (fixed or handheld) and printers, companies may reduce their labor costs. Manual responsibilities—such as inventory check-in, inventory counts, and shipment verification—are accomplished in a fraction of the time when using RFID. Additionally, unlike manual scanning, which requires physically repositioning boxes, RFID readers do not need line of sight for scanning to capture data, resulting in enhanced productivity and efficiency.
Enhanced Data Storage, Streamlining
RFID tags store pertinent tracking information, such as manufacturing date, serial number, expiration date, etc. These tags have the capability to store more extensive information than barcodes, which is important for a warehouse management system. For companies using returnable containers or pallets, RFID can track those items across the supply chain, streamlining warehouse operations.
RFIDs also improve inventory visibility, by providing real-time updates, faster scanning, and, most importantly, increased accuracy. With multiple RFID readers in the warehouse, companies can track inventory movement, which facilitates greater precision for ordering, picking, and tracking processes. Such visibility can also improve return tracking, by providing updates on the return of inventory to the warehouse. Alternatively, with barcodes, employee error can occur when products are moved about and not scanned, resulting in improper activity reporting, which would negatively affect data accuracy.
Less Room for Human Error
Some companies that have implemented RFID tagging technology require their suppliers and manufacturers to use their RFID tags as well. Tagging products at manufacturing or at the supplier point provides a greater degree of inbound and outbound information, as well as more efficient receiving and shipping procedures at outside locations. By using readers and portals throughout the supply chain, data can be updated wirelessly and information can be readily available in case of a recall or counterfeit issue. RFID tracking capabilities allow for increased automation of verification processes, by reducing the potential for human error.
RFID technology is more durable than barcode technology. Barcode labels can fade or fall off when exposed to the elements, extreme temperature, and sunlight. RFID technology is not only weatherproof, it can also survive severe conditions and fluctuating temperatures.
Overall, with a proper management system, companies switching to RFID technology, can potentially offset the upfront costs associated with implementing the system. An RFID system has the potential to reduce operating costs as well as increase speed, accuracy, and dependability, which will also enable companies to better align with the expectations of their customers and suppliers.
Please contact Ian Alberts at 516.806.3479 | email@example.com, or your Berdon advisor.
Berdon LLP New York Accountants and Advisors