RFID and Its Impact To Global Logistics

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Brief #3: RFID and Its Impact

To Global Logistics

I. What's RFID and how it works?

The acronym RFID stands for radio frequency identification. It's the process of communicating wirelessly with unique identifiers from tags (labels) to a reader (RF device). It allows people to track product as it progresses through a supply chain.

Ultimately, it could mean products can arrive at your docks and not have to be detail-received by a warehouse employee (1). "RFID utilizes a small transmitter to send radio frequencies from pallets and cases that allow those items to be instantaneously located by the customer or the carrier" (2).

There are two parts to an RFID system; the tag (either "active" or "passive"), which is data carrier attached to the object being tracked, and the reader that collects the data from the tag. At a minimum, each RFID tag comprises a small integrated circuit-a computer chip-that stores data and a small copper coil that acts as an antenna for receiving and sending signals to and from the RFID reader.

Tags are typically encoded with Electronic Product Codes (EPC), unique identifiers assigned to companies and products by the standards group EPCgiobal. (EPCglobal, by the way, has trademarked the term "Electronic Product Code.") These codes include details about the product, its size, and case count along with other identifiers, such as point of origin, producing factory, and production batch information. When a tagged case or pallet passes a reader, it transmits the product data to that reader, which then downloads it to a host computer, where it can be merged into a company's inventory management database (3).

One of the key differences between RFID and barcode technology is that RFID eliminates the need for line-of-sight reading, which bar coding depends on. Also, RFID scanning can be done at greater distances than barcode scanning.

According to a recent report by Computerworld.com, more than 300 Wal-Mart suppliers now ship RFID-tagged goods to 500 Wal-Mart facilities. "By January 2007, the company expects 600 of its suppliers to be using RFID technology, with the number of Wal-Mart stores capable of handling RRD-tagged items doubling to about 1,000," said the report (4).

II. RFID and logistic industry changes

In the logistic industry, RFID technology has been used in to increase productivity and reduce errors in retailers' warehouse order-picking operations (2). RFID communications network enables an order picker equipped with a belt mounted portable device and head set to communicate with a warehouse management system that in essence talks the picker through the picking operation, without a picking list.

RFID is also used to track and verify quantities of each logistics unit (pallet, case, box) shipped by suppliers from origins to destinations. Content information and expanded data of each unit is carried by its passive, unchangeable RFID tag, which replaces traditional bar code. Now RFID tag has been gradually applied down at the carton level (2).
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The use of RFID technology on the container trailer systems, loading ramps and service stations, it would allow us to track the entire cycle, from storage to transport to the production facilities, raised storage capacity, offer our customers more favorable prices.

RFID to reduce inventory inaccuracies, errors in pallet repacking, man hours associated with warehouse and logistics, employee theft, incomplete deliveries, inefficient stock replenishment and out-of-stocks, and slow velocity.

Indeed, the technology has merit. Results of a University of Arkansas study released in October 2005, for example, indicate that Wal-Mart saw a 16% reduction in out-of-stocks ...

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