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Six Myths (and Truths) about RFID in DCs

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Despite the fact that RFID is quickly becoming a mainstream supply chain technology, certain myths persist about its use in distribution centers. Here are six that I’ve come across:

#1: DCs are already automated, so RFID adds little value

It’s true that distribution centers currently have many sophisticated capabilities, including robotics, voice and other technologies. But unless they also employ RFID, DCs aren’t fully taking advantage of process automation and shipping/receiving verification benefits.

Phil Morrow is Senior Director of Enterprise RFID Solutions at Checkpoint Systems.

Without RFID, DCs rely on container IDs to provide basic information about what should be inside each box or pallet. Without opening each and every box (or using RFID), the accuracy of this information is unknown. Actually, it is known to some extent. A study on retail shipment accuracy conducted by Auburn University in 2011 showed that the discrepancy between Advanced Shipping Notices (ASNs) and physical shipments in retail averages 5.8 percent. As a result, if a retailer handles one million cases annually, 58,000 cases will be inaccurate relative to the ASN.

RFID helps ensure that boxes contain the correct quantities of merchandise, in the correct assortments (size, color, etc.) as they enter and leave the DC, since the technology provides precise merchandise information about the contents of every box in every pallet – even as they speed quickly down hanging rails or conveyors. In this way, DCs can accurately track everything coming in and out of the building without opening anything.

#2: Using RFID in DCs is less important when you have omni-channel operations

Remember the old expression “garbage in equals garbage out?” Well, it pertains to inventory tracking as well, because if you have inaccurate information about shipments leaving the manufacturing plant and entering the warehouse, then information about what leaves the warehouse and enters the store will also be wrong.

So whether the customer goes in store and can’t find merchandise or orders it on the web, only to be told later that it isn’t available, you’ve got the same accuracy — and retail profitability — problem. For a retailer with an average transaction of four items, missing a core product can result in losing the sale of three or more complementary items. So having the right inventory on shelves for customers is crucial.

Without RFID, a retailer can only assume that because the container ID is identical to the one that entered and left the warehouse, it has the right merchandise. But we know that isn’t always the case. So using RFID to garner exact information from the point of shipping, through the warehouse and across all retail locations is critical to a successful omni-channel program.

#3: Every DC and third-party logistics provider is different, so out-of-the-box solutions don’t work

Of course each company has a unique way of doing business. But every DC and 3PL I’ve seen all use standard conveyor, dock door, hanging rail and application solutions. And RFID systems use standardized interfaces that integrate with automated warehouse management solutions. As such, RFID systems work well in almost any DC environment.

#4: The only good use case for RFID is inventory management

While inventory management is a great use case, RFID offers other advantages such as loss prevention, protection against diversion, omni-channel fulfillment and expiration date management. By gaining visibility into accurate shipping information throughout the supply chain, you can easily see if and when specific merchandise goes missing, either from theft in DCs, diversions on trucks or even from packages falling off vehicles. In addition, RFID can be used to determine when old inventory has passed its shelf life, so only usable merchandise is sent and arrives at retail locations. Earlier this year I outlined steps for improving omni-channel operations in DCs and stores using RFID.

#5: RFID is too difficult to implement; we can’t afford downtime for our warehouse or integration problems with our WMS

As retail operations become more and more complex and supply chains become less linear, it is too difficult to run a DC without RFID. There should be no DC downtime when implementing RFID, particularly if you deploy RFID one line at a time. As noted earlier, RFID systems provide standard integrations with warehouse management systems.

Now consider the missed opportunity costs. What does it cost for you to not know what you are actually receiving and shipping? How much time and money is spent on auditing shipments to see if they are accurate? What do warehouse thefts cost your organization if they aren’t identified and halted immediately? What is the cost of lost customers who receive incorrect, incomplete or late orders? In the end, RFID has proven over and over to provide a rapid ROI.

#6: RFID only makes sense for retailers

Actually, RFID can be used in any environment that involves shipping and receiving. Manufacturers, distribution centers, retailers and service providers all need to have automated ways of knowing what leaves or enters a building, the status of each shipment and if there are any exceptions that require immediate attention.  This automated logistics/chain of custody tracking is true for a variety of industries — from complex aerospace value chains to luxury fashion houses.

Phil Morrow is Senior Director of Enterprise RFID Solutions at Checkpoint Systems. He has responsibility for the OAT Foundation Suite enterprise RFID platform and has provided business process consulting for numerous RFID retail and supply chain deployments in North America and Europe.

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