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Using RFID Tags to Prevent Theft

RFID could dramatically reduce theft by employees and by shoplifters. We explain what the challenges are and show you how to combine RFID, bar codes and GPS to keep an eye on your products at all times.
By Bob Violino
Jul 12, 2003—By Bob Violino

July 14, 2003 - Theft of goods cost global manufacturers and retailers more than $50 billion annually, and it’s a significant component of product shrink. While RFID is expected to help combat theft by shoplifters and employees, industry observers and practitioners believe that the technology will be most valuable as a means of preventing or reducing theft as products move through the supply chain.
Peter Abell

"The biggest probable benefit is not so much in the stores but bringing accountability into the supply chain," says Jim Crawford, vice president at Retail Forward, a retail consulting company in Columbus, Ohio. "The biggest problem is not some kid taking a package off the shelf, but a diversion of huge quantities in the chain. If you go on eBay, you’ll see people selling Gillette Mach3 razor blades in large quantities. Those are stolen from throughout the chain."

By using RFID to track the whereabouts of items, "you can actually backtrack from any goods you find on the gray market, and see who’s accountable," says Crawford. "It gives companies a whole new level of visibility they’ve never had." For example, when an individual item with an RFID tag shows up on the gray market, a manufacturer could learn where that item was originally produced, which warehouse or retail outlet it was shipped to, and which truck it was shipped on. This would greatly increase the chances of finding out how it got on the gray market.

Pete Abell, former research director of global retail at AMR Research, who recently formed an RFID consulting firm, agrees. "The bulk of theft comes from employees, and that’s where we’ll see the biggest benefit" of RFID as a preventative, Abell says. "People will not be able to take cartons or cases out the back door of a warehouse or off a truck without someone knowing that it’s occurring or did occur and which particular employee did it."

By using RFID tags on cases and pallets, companies will be able to track these shipping units through the supply chain while they’re vulnerable to theft by employees, such as truck drivers or receivers at a dock.

"A company will know which cases left the warehouse, and when the truck shows up at the retailer’s warehouse with 10 missing, it will know those things didn’t just disappear," Abell says. "Of course, someone [other than an employee] could break into the truck and take the cases. But when you know what stuff is being shipped and are tracking it at the case level, you will resolve a lot of theft."

A key for organizations will be placing RFID systems within the supply chain where they’ll be the most effective, Abell says. (To learn how RFID can be deployed to where losses are occurring, see Creating an Audit Trail.) "A company has to put systems in place to determine if it’s the driver of a truck delivering to 30 stores who’s committing the theft, or the receiver, or whether it’s collusion between the two," Abell says. "RFID makes it so much easier to ascertain this."
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