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Playing ‘tag’ – Tracking technologies can improve inventory management

November 25, 2013

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More than half of companies are using, piloting or implementing RFID tags, according to the latest customer survey on RFID trends released by CYBRA, a manufacturer of inventory tracking systems.

But before you invest thousands of dollars in converting to RFID tags and readers, consider whether bar coding — or a combination of these two options — is the optimal choice for your distribution company.

What technologies can track inventory?

Bar coding and RFID fall under the umbrella of automatic identification (auto ID) technologies. In general, such technologies serve to increase accuracy and overall efficiency in identifying, tracking and distributing inventory. They can also improve customer service and the accuracy of your inventory records.

But they differ in how they work. Bar coding is a line-of-sight type technology, meaning it uses scanning devices that essentially see and read bar codes affixed to inventory. To be read, bar codes must be carefully positioned toward the scanning device and be in good condition. Dirty or damaged labels can’t be properly scanned. Bar codes also are limited in the amount of information they can include; for example, they can identify the manufacturer and product but not the specific item.

An RFID system, on the other hand, communicates inventory data via a radio frequency channel or wireless technology. A reader device transmits an identification request to an identification tag affixed to inventory. The tag relays the requested information back to the reader device, which then transmits it to a computer.

Data encoded within an RFID tag may include the item type, location (such as in the warehouse or in transit), and any special handling instructions. More expensive tags may be “fully loaded” with all the bells and whistles, such as tampering indicators, temperature or moisture sensors, and encryption codes. RFID tags don’t require a direct line of sight to be read; they can be detected as long as they’re within range of a reader device.

What are the costs and benefits of RFID?

Whether RFID is better than bar coding depends on your distribution business’s needs and the type of inventory you store. Bar coding generally is less expensive to implement than RFID, and it provides adequate, cost-effective inventory identification and tracking capabilities, especially for distributors that warehouse less expensive inventory items. Bar coding also makes sense if you carry liquid or metal inventory that might interfere with certain radio frequencies. In some cases, combining the use of RFID and bar coding technologies also may provide a cost-effective solution.

Cost is a key difference between bar coding and RFID technology. A bar code generally costs just pennies. RFID technology prices vary significantly depending on the desired functionality, but fully loaded RFID tags can cost as much as $50 each.

The primary advantage to RFID is that it offers faster data processing and broader ranges for reading data on tags, which don’t need to be positioned outward to be read and offer more specific data. RFID tags also last longer and can be updated, reprogrammed or reused.

Keep in mind that continued standardization efforts are also essential to furthering the use of RFID worldwide. In fact, the frequencies used for RFID in the United States currently are incompatible with those of Europe or Japan.

Will RFID jeopardize security and privacy?

Some technology experts advise caution regarding the potential for security risks with the use of RFID technology. Some RFID applications lack crucial user identification and encryption features or could possess coding errors or weaknesses, making them vulnerable to hackers, counterfeiters, and destructive viruses and worms.

Before upgrading to RFID technology, ask whether your data will be encrypted or password protected to guard against potential security risks. Malicious attacks that exploit such vulnerabilities could wreak havoc on your computer systems.

Should you jump on the RFID bandwagon?

Inventory management can make or break a distributor. Bar codes are generally less expensive, but RFID offers a host of additional benefits. Hire a financial consultant to help you determine whether the benefits of RFID outweigh the costs — or whether bar coding is a more cost-effective option.
Please contact Dennis McLaughlin at [email protected] with any questions or for more information on this topic.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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