Radio Frequency Identification and Retailing

Radio Frequency Identification and Retailing

Introduction

Radio Frequency Identification (RFID) continues to evolve as a major technology for tracking goods and assets around the world. RFID uses radio waves to identify 'things' automatically and in real time. For the supply chain and operations it provides increased levels of product and asset visibility. For example, it can help hospitals track and locate expensive equipment more quickly to improve patient care. Retailers are looking at using the technology to automatically receive shipments, and have greater visibility into the merchandize in the back rooms and on the store shelves. The United States Food and Drug Administration (FDA) see RFID as a compelling technology toprevent the introduction of counterfeit drugs and biologicsinto the U.S. drug distribution chain.

Wal-Mart and the Department of Defense (DoD), along with some other major retailers, now require their suppliers to begin RFID-tagging pallets and cases that are shipped into their selected distribution centers and stores. These mandates are about to impact a large number of manufacturers and distributors around the world. While businesses are looking to use the technology in many scenarios across various industries, the retailer mandates are the main driving force behind the current interest in the technology.

RFID and the Supply Chain

A simple Supply Chain consists of end-customers or consumers who buy goods or services from a retailer at a store or through other channels, such as an e-commerce website. The retailer may stock the goods and tools to provide the services from a wholesaler or a distributor. The distributor normally buys goods in large quantities from a manufacturer who makes the goods in a factory or a production facility. The manufacturer buys raw materials from suppliers.

A simple retail supply chain

A typical supply chain has one or more of each of these entities. There could be multiple tiers of suppliers, manufacturers, and distributors. As materials move from the initial supplier in the chain to the end-customer, value and costs are added at each node. As you get closer to the retailer, the supply chain becomes more complex, with different products sourced from many different business partners; a retailer like Wal-Mart sells thousands of products sourced from thousands of direct suppliers.

Businesses strive to make their supply chains more efficient by improving the information sharing throughout the supply chain. A retailer has to constantly share its forecast, which is based on many factors such as seasonality, price, promotions, and advertising. At each node in the supply chain, forecast and actual sales from the next node are collected, and planning may be done on what and how much to make, which drives what and how much to buy from the previous node. Today large demands are placed on manufacturers, distributors, and retailers along the chain to maximize efficiency, minimize cost, and provide the best value to the end-customer. These suppliers are all learning how to apply new technologies within their sectors to improve business earnings. One such technology is RFID.

Many large retailers have a complex and labor-intensive receiving process. As products arrive from manufacturers, a physical scan is required to read the barcode on the pallet and on each case (box) on the pallet. What was received has to be checked against the Advanced Ship Notice already sent by the supplier, and any discrepancies must be identified and resolved. The pallet is then put away as is, or it is unloaded and individual cases are stored away. As the distribution center (DC) receives orders from stores, new pallets may need to be assembled by loading the cases from the storage facility and shipped to the stores. Large DCs have huge conveyor belts on which cases from unloaded pallets are placed and routed to appropriate store palletization areas. Many of these retailers now require their selected suppliers to RFID-tag pallets and cases. Their goal is to automate the receiving into DCs and stores, to achieve significant labor savings, reduced data-related errors, and improved product availability. However, for the suppliers, this is simply a cost of doing business, unless the retailers share detailed product movement information with suppliers.

While RFID can impact many different areas of the supply chain, the following section presents fictitious scenarios between a supplier, a manufacturer, and a retailer, and identifies various processes that can benefit from enabling RFID.