How Can RFID Improve and Facilitate Inventory-Taking?

Can you please describe some inventory-management systems and their features? And how does RFID deliver benefits?

—Name withheld

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There are many different types of inventory-management systems, each with its own features. Some companies track inventory at the item level, some at the bin level, and others at the pallet level. And some businesses use extensive conveyor systems, while others do not. So it would be impossible to say exactly how RFID would deliver benefits for your firm. But I will say that in general, RFID is the only true automatic data-collection technology. Therefore, it can be cost-effective to capture data almost anywhere, since you do not have to pay employees to scan a bar code every time something moves.

For example, consider a manufacturer of paper used for newspapers, in rolls weighing more than 1 ton each. (Believe it or not, rolls of this size are often misplaced within a warehouse.) Rolls have different paper thicknesses and quality levels, so each roll has a bar code that either links to data in the inventory-management system or stores information on the bar code. A forklift truck driver is told, for instance, to put roll 123, located in Bay 456. Another driver might need to move that roll to get to the one behind or above it. If he fails to scan the bar code and location code, its new location will not be recorded. It might then be moved two more times before a driver receives an order to retrieve roll 123 from Bay 456. When he arrives at that bay, that roll will no longer be there. Now the driver must search for it, scanning bar codes on nearby rolls. Obviously, this is a waste of time and energy.

With an RFID system, a transponder can be placed in the core of each roll, or in a label on the outside of the roll (see Printing Houses, Paper Mills Test Reel-Tracking Solution and Mondi Uses RFID to Track Paper Rolls). An RFID reader can be placed on a forklift truck, so that each time a roll is picked up, the truck's location within the warehouse can be determined through a variety of methods. One way is to read tags in the floor in front of bays or racks. Another is via bar codes installed on the ceiling and a camera on the vehicle's roof. An active RFID tag could be used with a real-time location system. But whatever technology you use, the truck's location and the roll's ID number are linked, so when a particular roll is put down, the vehicle's location is recorded and the roll is never misplaced.

For systems in which pallets are put on racks, tagged pallets or bins can be associated with either an RFID transponder on the rack location, a bar code read by a scanner, or an alphanumeric designation picked up by a video camera. The association of the tagged pallet or bin with the location is accomplished automatically, with no need for a driver to do anything, so each time something moves, the inventory-management software is updated with the new location data.

In the case of in-store item-level inventory, RFID can automatically record if goods are replenished. Let's say the point-of-sale system records the sale of 12 bottles of shampoo (equal to one case) or all five pairs of size 30-33 jeans. This will trigger a replenishment order. Currently, staff members might or might not replenish goods, and it is difficult for a store manage to know if this occurred. Sometimes, workers with handheld devices and pick lists will indicate that they have replenished an item when they have not done so. As a result, the inventory-management system thinks 12 bottles of shampoo or five pairs of jeans are on the shelf when they are not, leading to customers not finding the goods they want to buy and the retailer losing sales.

With RFID, tagged cases or items can be read while being moved out to the sales floor, so if an item is flagged for replenishment and its tag is not interrogated by the reader between the stock room and the sales floor, then an alert can be issued to the store manager.

In the case of complex stock-keeping units (SKUs)—a single item might have several sizes, colors and styles—regular cycle counts can also improve inventory accuracy. Today, you might walk into an apparel store and see the shelves fully stocked. But if you looked at the sizes, you might find that there were a lot of small and extra-large shirts, but no mediums. Employees and managers might look at a fully stocked shelving unit and assume all sizes, colors and styles were present, but in reality, a quick check with an RFID handheld could reveal that several sizes were not represented. Workers could then replenish them, enabling the retailer to achieve more sales.

To sum up, RFID allows you to perform fast, accurate and often automatic inventory counts, and to record the movements of things without a need for human intervention. This leads to far greater inventory accuracy and visibility. When you consider that inventory accuracy at most retail stores—and even in warehouses for paper rolls weighing a ton apiece—is just 6o percent, this is a massive improvement that can cut inventory carrying costs and, in many cases, boost sales.

—Mark Roberti, Founder and Editor, RFID Journal