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Radio Frequency Identification: Can It Really Subvert Supply Chain Management? [Copy link]

[Abstract] Although RFID technology is both economical and practical in the long run, its disadvantages are as prominent as its advantages: the cost and initial investment are too high.

In recent times, Wal-Mart's suppliers in China have been intensively testing a new technology - RFID (Radio Frequency Identification). In 2005, Wal-Mart will adopt this technology in its global logistics and distribution.

  Maybe many people are not familiar with this technology, but in 2005 when you walk into any Wal-Mart supermarket, including China's, the shopping scene will be beyond your imagination: when you take what you want from the shelf, a radio signal will remind the employee to replenish the goods on the shelf and tell him where to find it in the warehouse.

  If he mistakenly places the item on another shelf, a ping will warn him. Meanwhile, you no longer have to wait in line to pass through the checkout exit. An electronic reader automatically scans the items in your shopping cart and charges your debit card.

  RFID saves money

  If we briefly summarize the benefits of RFID, it is saving money. In 2003, Wal-Mart, the world's largest retailer, announced a resolution requiring its top 100 suppliers to use electronic tag technology when sending pallets and packaging boxes to the company's distribution center before January 2005; and before January 2006, this technology must be used in every single item.

  It is estimated that Wal-Mart can save $8.35 billion per year by adopting electronic tagging technology.

  Unlike barcode systems, RFID systems do not require line-of-sight contact when identifying tags, which means that RFID can be truly automated without manual scanning. Even when the goods are loaded in a truck and cannot be seen from the outside, they can be identified. In addition, RFID tags store much more information than barcode tags. It can record information such as the serial number, color, size, production date, current price, and supply chain links of the goods. Some RFID systems also support information writing, modification or locking, so that the tag becomes a dynamic database. These applications are of great significance to the inventory management of high-end goods, making real-time information and fully automatic sorting and tallying possible.

  This solves the challenge that retailers always face: how to deliver the right goods to the right place in time while keeping them intact. The application of RFID will minimize the labor costs originally used to monitor the flow of goods and inventory , and enable manufacturers and retailers to better monitor the entire supply chain.

  Moreover, RFID can be applied not only to goods, but also to equipment such as trucks, trailers, pallets, and even raw materials. This ubiquitous application of RFID will bring unimaginable changes to the supply chain. Moreover, combined with smart cards, RFID can identify the identity of operators and even automatically alarm if someone steals.

  RFID has been enthusiastically pursued by foreign investors recently. Accenture even predicted that this technology will trigger a supply chain revolution. It is predicted that retailers or consumer product manufacturers using RFID technology can save nearly 3% of the total warehouse labor costs, mainly because the efficiency of receiving and delivering goods has been improved.

  In addition, this technology has great potential benefits in vendor-managed inventory (VMI) systems. Consumer product manufacturers can use RFID identifiers to obtain product information and exchange information through the network to more efficiently replenish their own inventory in important customer factories, saving both parties 20%-40% or even higher inventory and out-of-stock costs.

  Cost is the biggest challenge

  Although RFID technology is both economical and practical in the long run, just like its advantages, its disadvantages are also very prominent: the cost and initial investment are too high.

  In fact, RFID tags have been used in automatic toll collection systems and security identification for a long time, but they have not been popularized due to their high cost. Although the cost of tags has continued to decline in recent years, the cost of tags and identifiers is still relatively high, which has become the main obstacle to the wider application of RFID.

  Even with the continuous innovation of technology, the price of tags has begun to drop, but in 2000, RFID tags were still $1 each, and now the price is 25-40 cents, which is sky-high compared with barcodes. Experts predict that in the next few years, it will drop to a level of no more than 5 cents. However, considering that the tags should be applied to all individual items, 5 cents is still too expensive. But on the other hand, for high-value items such as boxes, pallets, carts and home appliances, RFID has shown some appeal.

  The second issue is the maturity of the technology. As RFID technology is not mature enough, the convenience and cost savings it brings are easily offset by the high recognition failure rate and damage rate. A test conducted by the Auto-ID Center in October 2002 found that pallets with RFID tags still had a 3% failure rate even if they were double-labeled; and only 78% of the information on pallets with individual labels could be accurately read. This shows that this technology needs to be continuously improved.

  Fortunately, many companies, especially some large companies with industry status, have realized the opportunities brought by radio frequency identification technology and are working hard to seize a place in this growing market. Recently, SUN Microsystems of the United States proposed a concept to collect information about every commodity in the mall. A person in charge of SUN said that SUN is about to release a software that can capture information from readers and databases and then pass it to supply chain partners. The attention of more and more large companies has made the prospects of RFID brighter.

  However, any company that is not as big as Wal-Mart will have to go through a difficult period at the beginning of RFID implementation. In addition to spending $13 million to $23 million, it also has to adapt to a lot of new regulations. So far, only a small number of retailers have announced their intention to adopt this technology, and most retailers are still waiting to see what the market leaders will do. Perhaps Wal-Mart will start using it and succeed, and RFID will really become "hot".

  RFID technology has been around since World War II

  RFID is not a new technology. During World War II, radar technology was improved and used on a large scale. Against this background, RFID came into being in 1948. The next twenty years were the development stage of RFID theory and laboratory application. It was not until the 1970s that this technology was put into practical application. Since then, the development of RFID has experienced twists and turns. Due to high costs and lack of unified standards, it has never been widely used. In 1999, the Auto-ID center was established. This center was led by the Massachusetts Institute of Technology and included representatives from five famous universities, software integrators and nearly 100 major target customers, such as Procter & Gamble, Unilever and UPS. The center is committed to promoting the establishment of global RFID standards and enabling RFID technology to truly affect the development of the supply chain. As a result, the development of RFID has entered a golden age.

  Simple RFID system

  A tag with a built-in chip and antenna, the antenna can be printed on the tag like ink.

  An identifier that exchanges information with a tag (similar to wireless LAN). There are many types of tags to choose from for different environments. "Passive tags" are mainly used in retail supply chains. They get energy from the identifier and then feed information back to the identifier. "Active tags" have a built-in battery and support long-distance information exchange. The identifier can be either fixed or portable. The recognition range of RFID systems varies from a few centimeters to tens of meters, depending on the frequency used, whether it is active or passive, and the orientation of the antenna and identifier.

  Source: Tobacco Online, according to Zhidian.com

This post is from RF/Wirelessly
 

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