Businesses whose operations rely on supply chains have to manage inventories of a large variety of assorted items.
Traditional systems of inventory management lead to many inefficiencies. Adapting newer technology can largely eliminate these. To this end, many companies are exploring silent commerce or exploiting the benefits of radio frequency identification (RFID) tags combined with wireless communication and sensors.
Advantages of Using RFID Tags
RFID is a technology that uses radio waves to automatically identify people or objects. An RFID tag or transponder is a microchip attached to an antenna. It stores a serial number that identifies a person or object. The RFID is the size of a grain of sand and sends out an electronic signal when it is near a sensor. Production costs have been significantly lowered and RFID tags are now finding a host of applications in industry. Their use in lowering costs in the supply chain is of particular significance. Typical applications include the following.
Items with RFID tags reaching a warehouse will not have to be registered manually. The information lodged on the tag is read automatically and entered into the inventory database.
Physical counting and sorting is eliminated. Damaged items or those nearing expiration will be automatically identified.
Packing instructions will be displayed automatically on a reader for the warehouse staff to act upon.
Costs can be cut down substantially as many clerical functions and labor intensive processes are eliminated.
Greater warehouse efficiencies are possible due to greater accuracy in order fill rates, faster inventory turnover, and increased customer satisfaction.
It is easy to track lost or misplaced products, thus enhancing security.
Availability of reliable data makes it possible to do demand forecasting and replenishment applications with greater accuracy.
Data Management Issues
Implementation of silent commerce and associated analytic capabilities raises data management issues that companies must address. Below is a list of the issues:
Standards: The Auto-ID Center, an organization comprising more than 90 manufacturers and companies is doing work on Electronic Product Identification Codes (EPC) that will replace the existing Universal Product Code (UPC). This will enable companies to track products on a real-time basis along the entire supply chain globally.
Data Sharing: Organizations are presently in the initial stage of using RFID tags in their supply chain systems. Most implementations exist in closed system environments. As the systems proliferate and companies realize the advantages of cost saving even in closed systems, they will increasingly be convinced about sharing data with trading partners.
Privacy: Having a chip in various products creates unforeseen privacy issues that have to be addressed. Theoretically, anyone with a scanner will be able to locate any product. There are ways to overcome this, but it does highlight the serious nature of the problem.
Modern technology offers many ways to bring about operational efficiencies in a company’s processes and systems. Using RFID tags can bring about substantial cost savings in an enterprise’s logistics systems. Firms planning to use silent commerce can think of starting a pilot business to business project before implementing the technology on a global scale.
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David Gass is President of Business Credit Services, Inc. His company publishes a free weekly e-newsletter on Small Business Consulting at their web site http://www.smallbusinessconsulting.com
