Modernizing your supply chain management with RFIDs: From manual effort to data-driven decisions

RFID Supply Chain Management

RFID systems are a game changing to Supply Chain Management. As a tracking technology, RFIDs replace barcodes to provide bulk item scanning, data storage, and real-time data reporting properties. Indeed, the gaining business value to Supply Chain Management from RFID systems resides primarily in data to make better business decisions and improve process efficiencies. For instance, RFID data allows finance, logistics and field operation to discover new patterns in inventory management that provides more intelligence to a business process of the supply chain. Automating Supply Chain operations and management.

Supply Chain Management: Overview

Starting from procurement to delivering the final product, Supply Chain Management is the process of handling the entire flow of goods and/or services to maximize quality, delivery, customer experience and profitability. An effective Supply Chain Management minimizes costs, waste and time in the production cycle. By anticipating a product shortage, the organization identifies potential problems with the product delivery to apply corrective approaches. Another way that an effective supply chain management minimizes costs is through improving the allocation of available to promise inventory, as data help to dynamically allocate resources based on actual demand and orders. This significantly reduces incorrectly filled orders.

What’s a RFID?

RFID is essentially a tracking technology that utilizes from radio frequency waves to identify objects. In contrast to barcodes, RFID tags / labels are not constrained by line-of-sight for scanning, and multiple Tags can be read simultaneously. As well as being able to reuse them and rewrite data multiple times. RFID Tags can integrate with Data Readers (or RFID Antennas) to deliver and store information on location. While Readers are installed to entry and exit points – which is often receiving areas, putaway-picking functions and the shipping areas -, RFID Tags are usually added to current production process, embedded in the box, or added to the unit (box, pallet, etc.) before shipping. Below presents a Sample RFID Data, that displays logs of item location, EPC (Electronic Product Code; consisted of a series of numbers that identifies product types and the manufacturers across the supply chain; it also includes an extra set of digits to uniquely identify items), last date / time seen, and tracking reader.

Source: (Delen et al., 2009).
Source: (Delen et al., 2009).

RFID traces inventory movement to support better business decisions on recalls, ASN shipping accuracy, product quality control, and inventory control

Traditionally, warehouse systems suffer from inefficiencies due to manual efforts and human errors, which reduces the accuracy of inventory levels, lowers throughput and increases labor costs. Most of the labor is devoted to the picking operations in which the verification process on inventory location and product takes place before shipping. As the Readers capture and record the pallet’s Tag data – through a number of RFID read locations -, the RFID system traces inventory movement from its arrival at the Distribution Center (DC) to its end of life at the box crusher, and it records detailed logs of dates / times of movement and location. This supports business decisions on tracking recalls, ensuring ASN shipping accuracy, speeding up shipping time, keeping track of product quality, and ensuring accuracy of inventory levels. For instance, Gillette has used RFID data to move a product from the backroom to the shelf before a promotion started, which resulted in 48% higher sales (Delen et al., 2009).

RFIDs increases accuracy of Inventory Levels while optimizing resources, costs and time in Pallet Receiving and Preparing ASN

The receiving operation is highly time consuming and labor intensive. Organizations utilize from barcode systems – or even spreadsheets – to manage and control inventory levels. However, barcode systems require the organization’s resources to manually scan each case of product individually in pallet receiving, and this can lead to errors on data collection (e.g., miscounting items) and long verification journeys. With RFID Tagging, receiving products and pallets can be read automatically at a receiving door portal, which ensures proper data collection, speeds up data verification, and optimizes resource allocation. Gillette has found a reduction of 20 seconds to 5 seconds in receiving time by using RFID scanning to generate labor and process efficiencies (Delen et al., 2009).

Moreover, RFID Tagging products and pallets eliminate the need of long and expensive wall-to-wall inventory audits, as these can be simultaneously read and verified with a Handheld or Portable RFID Reader for expedited audits – that is, more than 100 Tags can be read each second. All errors or discrepancies can be minimized or eliminated. RFIDs reduce the number of errors and improves accuracy of inventory, which leads to better inventory management and control.

Likewise, mixed pallet loads make preparing the Advanced Shipping Notices (ASN) a lengthy and labor-intensive process. These poses the organization to a potential risk in shipping pallets to the wrong customer. By installing RFID readers to shipping gates, the difficulties in checking the integrity of the order at the shipping dock can be properly addressed, helping to improve ASN levels.

RFID data provides higher visibility on Case Cycle and Handling Processes

Manual order placements and lack of visibility in backroom inventory reflects on unnecessarily wastes on human resources and handling efforts – and cause other potential risks to operation (e.g., product damages). During the backroom process of moving freight to sales floor, RFID data records each stage of the case cycle movement. Meaning that any returns (two trips) to the backroom stocking can be traced and corrective actions applied. One can also use the system to verify if a case currently exists in the backroom, which mitigates the risks of errors on manual orders placements and unnecessarily replenishment. Notice that, if a case exists, one may utilize from a Handheld (portable) RFID reader to easily locate the item on-field. By using RFID data, the retail giant, Wal-Mart, has respectively found a 10% reduction in unnecessary manual orders and 26% reduction in out of stocks, and thus, reflecting on a more effective ordering and forecasting system.

RFID data provides higher visibility on the DC’s Just-in-Time Inventory Policy

Long standing of inventory products at a Distribution Center (DC) affects the Just-In-Time Inventory Policy that eagers to control whether products should arrive at the DC. By using RFID data, one can monitor and determine time spent by an item and its performance metrics in Supply Chain operations. This identifies possible causes for bottlenecks and inventory reordering issue to improve unnecessarily slack, improve forecasting, and streamline Supply Chain Management.

RFIDs reduce Bullwhip effect to promote less Inventory Waste

A great portion of the pipeline inventory derives from the lack of information on true customer and distributor demands – in which the demand volatility is further amplified by the Bullwhip effect. This information and data can be attained with proper implementation of RFIDs to help the manufacturer produce to the distributor’s demand rather than actual customer demand, reducing supply chain inventory waste – while ensuring product availability.

Real-Time RFID data communication helps with SOX Section 409 and 802 Compliance

SOX Compliance is a massive task to be handled manually. SOX Section 409 and 802 require the direct involvement of information systems, such as ERP. On one hand, SOX Section 409 demands the rapid and current disclosure of any material changes in the firm’s financial standing and operation within four days. This means that companies updating their data and systems in weekly or monthly batches are not in compliance with SOX Section 409. By connecting RFIDs to the firm’s ERP, firms can receive real-time data from RFID tracking systems on their fixed assets, inventories, and any other management information, which enables quick and accurate reporting of financial position and operations. On the other hand, SOX Section 802 requires immutable data retention of any material changes in the firm’s information disclosure. With the integration of RFIDs into business processes, RFID Systems records detailed logs of inventory movement and full history of data input. Ensuring proper management of changes and retaining the data for future use and reporting in compliance with SOX Section 802.

Where to start if you think RFID can help

The most appropriate place to start is to reevaluate those business processes and internal controls you wish could be automated. For instance, one may choose to streamline Supply Chain Management tasks with the implementation of RFID Systems to their Warehouses, Distribution Centers (DC) and / or Stores. By integrating RFIDs with ERP or WMS Systems, firms eliminate manual data entry, individual scanning, data verification (reconciliation), and manual pallet searching. As well as creating higher visibility for Supply Chain operations.

CPCON has vast experience in guiding firms to business processes solutions and advanced RFID technology. So let us help you get started today.

Works Cited

Delen, D., Hardgrave, B. C., & Sharda, R. (2009). RFID for better supply-chain management through enhanced information visibility. Production and Operations Management, 16(5), 613–624.

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