Over the course of the last 15 years, UPCs (universal product codes) have become the dominant product-tracking standard for the CPG (consumer packaged goods) industry. Created by U.S. manufacturers to negate the lure of much cheaper offshore manufacturing labor and championed by industry retailing giants, UPC coding has paid off with improved product tracking over multiple retailers, reduced labor costs, and faster product replenishment. But like all technologies before it, the venerable UPC will soon be replaced by emerging technologies that promise to provide organizations with much greater degrees of control and flexibility in managing goods through the supply chain.
RFID To Transform Retail
One such technology is RFID (radio frequency identification). Accurately seen by many in the industry as the next transformational technology for retailing, RFID promises much higher quality information and real-time tracking of products across the value chain. RFID "smart tags" are essentially microchips with antennas that transmit EPCs (electronic product codes) versus printed UPCs and communicate wirelessly to other devices over radio frequency waves. RFID technology attaches smart tags to physical objects to uniquely identify them. Potentially, the tags can even be embedded in the product itself, becoming an indistinguishable part of product labeling. By attaching intelligent tags to products, RFID creates an enormous opportunity for the CPG industry in the form of real-time product tracking, security against counterfeiting, and accuracy in distribution.
Although each smart tag has the potential to contain vast memory capacity, information costs money. To get the cost of smart tags down to the industry goal of 5 cents, the most likely scenario is that a 96-bit code will be used which will then key to either the company's server or, in the future, a central repository accessed through the Internet. Used this way, RFID tags will provide little more information than UPC tags. The difference, though, is the accessibility (automatic, instantaneous, and without physical access to the product) of the information. Because RFID technology relies on radio waves to obtain information, standard compliant smart tags can be read from 6 to 9 feet away and do not have to be in the direct line-of-sight of the readers, as is the case with UPC bar codes. In fact, the tags are designed to identify individual items residing in multiple-pack boxes. DCs do not need to remove products from cartons or physically touch pallets to read the tags and record inventory.
With smart tags, reduced human interaction results in lower labor costs and errors and makes it easier and quicker to manage inventory. By using shelf-mounted readers, RFID will eliminate the need for annual physical inventory, saving thousands of dollars of labor and downtime associated with closing DCs in the future.
Smart Tags Will Change Your DC
Smart tags allow DCs to track products at any time in the distribution process and divert a product shipment on the fly if necessary, avoiding costly mistakes. This allows DCs to proactively address low or surplus inventory as needed. DCs can also apply passwords to the smart tags for security, which is not possible with UPC coding. What does this mean for your company? RFID smart tags are coming, and fast. To get ready for them, look at your applications that might benefit from the information they will provide and begin to incorporate the ability to use this information when it is available. Smart tags will most likely be ready before your systems are. If you are evaluating packaged software, determine if it is capable of using information from RFID tags. For example, can it keep a perpetual physical inventory updated by RFID readers or can retailers use shelf-read inventories of individual items in your ordering schemes? The chances are good that the enhancements to your systems required to use RFID information would be relatively minor. Forward planning will give your company a competitive edge.