Tracking Technology Using RFID in Supply Chain Management

Published by MBA Skool Team, Published on December 27, 2014

Benefits of Tracking Technology using Radio Frequency Identification in Supply chain Management

RFID technology has recently become one of the revolutionary element in supply chain management. Companies these days want to reduce the costs of their Supply Chain without affecting the service. Here automation and smart techniques play an important role, thus leading to these organizations using RFID solutions in transforming their global supply chain. RFID has proven to increase end-to end visibility of the equipment, inventory and business process. With the help of these technologies, manufactures and logistics companies are able to track in real time their assets shipment status, up-to-date information also detecting operational anomalies, eliminating manual errors and reducing labour costs, thereby streamlining the supply chain. This complete process increases the efficiency by reducing operational inefficiencies and easing the inventory management.

RFID or Radio-Frequency Identification as the name suggests uses Radio frequency for identification of a particular object. It is similar to a bar-code, scans to retrieve a particular and unique information for identification. It consists of a chip, capable of carrying a maximum of 2000 bytes of data and an antenna uses electronic devices (small in size). The major feature of RFID above other electronic identification mechanisms is that the RFID device need not be precisely positioned wrt the scanner. Its usage in Supply chain has led to hefty cost reductions and greater visibility over the Supply chain.

The major advantages of this technology are: Orientation independence, Information capabilities, Asset security and monitoring, Tag Durability and Real-time data capture


Basic version of RFID Process flow for a Manufacturer-To-Retailer Supply Chain: The first and foremost requirement of this process in collaboration of all trading partners and adapting the business process accordingly.

1. At the manufacturer’s facility, RFID tags with the Electronic Product Code either on the product or the packaging. This allows tracking of the item and maintain history of its usages and shipments.

2. The product codes or EPC’s are then referenced for linking to cartons and consignments for shipping, advanced notifications and package sortation.

3. Throughout the distribution lifecycle, RFID readers capture and publish time and location data (at every touch point in the supply chain) to provide visibility to supply chain trading partners. This necessitates the collaboration of all partners. Subject to implementation guidelines, the information would reside on servers accessed via PML queries using the Object Name Service described above.

4. The wholesaler or the retailer receives the notification of the shipment in advance which contains the product code and on receipt, posts the information without any human intervention.

5. Checkout, inventory management and replenishment of the inventory are automated because of RFID enabling at the retails stores.

IMPLEMENTATION: Implementation of RFID is not as easy as it seems. It involves 4 phases to check the suitability of the technology for your business. It is as follows:

1. Business Analysis: Deploying RFID in any organization affects many domains and operations. Hence it is important to identify the business problems that can arise out of this deployment and existing issues that will be solved. A cost-benefit analysis has to be done.

2. Testing: This allows companies to experience the system on small scale and help all stakeholders to adapt to it.

3. Pilot Implementation: The previous stage will help to understand the best way for tag system to work at individual trade partner level. However, this stage will make all the components work together. Sources of problem can be detected and rectified. This will help commitment of human resources.

4. Full Deployment: Implementation in Phases in recommended by industry experts

With the success of full deployment, following activities are triggered benefitting the whole system:

Process Automation: RFID events can trigger parallel and downstream processes

Labour Reduction: Passive readers reduce scanning and handling labor Compliance Documents, product expiration, etc. can be indexed or stored on the chip

Inventory Management: “Smart” tags report physical inventory counts or movement

Asset Tracking: Accounting for unit load devices, vehicles, or other assets can be automated

Asset Security: Anti-counterfeit, anti-theft, intrusion detection and environmental monitoring

Automated sortation: Packages, etc. sorted to correct dock door via tag information

Auto-replenishment:“Smart shelves” generate orders based on tag and inventory data

Payment processing: Automated authorization (e.g. pre-payment for gasoline purchase)


The major stakeholders for the RFID system implementation are: Manufacturers, Retailers and Customers

1. Manufacturers cannot benefit much from this system unless they are able to redesign their business process and take advantage of the real-time availability of the data. Proponents of RFID state that manufacturers can benefit primarily from:

- Increased revenue due to decrease in no. of stock-outs

- Working capital efficiency will be improved ad asset utilization is better with RFID

- Improved product returns management

- Asset or Product Counterfeit prevention

2. Retailers have immediate benefits with implementation of RFID

- Studies have proved that as much as 5% of total inventory is reduced

- Due to automation, costs of labour will reduce by 7.5%

- Shrinkage by theft is also taken care of to some extent. It is currently a multibillion dollar issue

3. Consumers: Though customer is not directly involved in the process, the benefits which he can get out of the process are higher availability of items, improved service quality as manufacturers will take care of faulty products more easily now. Also if RFID enabled card readers are used, faster checkout is possible.

Companies that have implemented RFID in their Supply Chain since 2001:

We will not find many Indian companies employing this technology as the scale of operations is small, hence the cost of the implementation for them outdoes the benefit obtained. However, few Indian companies like TCS, HPCL Nasik’s Plant employing RFID of IBM, Mahindra and Mahindra the automobile company, a huge boom of RFID in jewelry industry is also expected.

A few international companies that have successfully used RFID are:

Harley Davidson : Bins carrying parts of custom motorcycles, It displayed the manufacturing instructions for the employees at every stage of the assembly automatically

Toyota: Carriers containing frames of the car while moving through paint shops, Vehicle tracking was easy now

Gap: There denim apparel was tagged, Led to better inventory management thereby improved customer service

Raxel: Reusable plastic containers that were used for carrying bio hazardous waste, Assets visibility led to proper cleaning of the waste and thereby avoiding contamination

Las Vegas Airport: Baggage was tagged, Accuracy of 99.5% was achieved over barcode system for sending each baggage to the correct airline


Though the technology comes with huge number of advantages, there are pitfalls of the same too which every organization must take care of:

1. Cost: Cost of implementation and the EPC tags has been very high. Hence with small scale it is difficult to implement it.

2. Tag Readability: This is the major issue disrupting the system: Whether readability is an issue may well depend on:

- Tag frequencies and ranges

- Reader capabilities and locations

- Operating environment (interference from other devices, temperature, humidity, static, vibration, and shock)

- The type of assets being tagged (metal objects and liquid containing items tend to create problems for read integrity of passive tags)

However, manufacturers of RFID equipment are improving and fine-tuning the equipment to reduce the problem

3. Data Management: With whole lot of Real time data available the problem arises when your ERP and WMS system are not compatible to it. Hence, upgradation of the complete system is essential

4. Data Ownership and Sharing: A self-contained RFID implementation for tracking high value assets would not be subject to the same issues as other implementations. The EPC vision where multiple trading partners post and retrieve item specific data as it progresses throughout the supply chain will be much more difficult to accomplish, due to the issue of data ownership

5. Standards: Which standards to follow has always been an issue with every technology. The same issue exists with RFID

6. Privacy Concerns: While we may be several years away from individual retail item being tagged with electronic product codes, the media has focused on the concerns of individual privacy. The main concern is that consumers do not want themselves or the items they purchase to be tracked once they own the item.

The pitfalls can be overcome if there is proper understanding and collaboration of all trading partners. The promises of tracking technologies are much higher. The other trending technologies are GPS systems and Electronic procurement for Supply Chain Management. There is risk in both: adapting or ignoring the technology. However, ignoring it may lead the organization to stay behind the new supply chain practices being adopted by other organizations.

This article has been authored by Pooja Punjabi from IIM Kozhikode


1. RFID in Operations and Supply Chain Management, Prof. Dr. George Q. Huang and Prof. Doc. Fabrizlo Salvador, Textbook on Operations Management

2. Demystifying RFID in the Supply Chain, An overview of promise and pitfalls, Micheal Sullivan, Susan Happek, UPS Supply Chain Solutions

3. RFID Technology Information for India,

4. Roadmap for RFID Implementation in Central Library, Ms. Seema Vasishta, PEC university of Technology, Chandigarh

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