HOUSTON BUSINESS REVIEW

COST-EFFECTIVE IT: WIRELESS INVENTORY
By Richard Sonnier

Houston Business Show Commentator Richard Sonnier, of the Information Technology Services firm Nimble Services, provides weekly information on our show about information technology issues. Mr. Sonnier can be reached at 281.445.4800 x 250 or via email.

This week I will discuss automating inventory management with the RFID wireless technology.

What is RFID?

Radio Frequency Identification (RFID) is a technology that enables the automation of inventory tracking. The RFID tag is a very small silicon chip. In the picture, the RFID chip is the tiny black dot on the finger. The chips are also very cheap. Many RFID chips cost less than 25 cents, and the latest generation is being priced at between 5 and 10 cents in quantities of 1 billion or more. The RFID tag includes a very small antenna designed to receive radio waves. In the simplest application, RFID devices are Electronic Product Codes (EPCs). Here the RFID chip provides information similar to the UPC barcode. The advantage of RFID technology over barcodes in that RFID can be read at a distance of between 10 to 100 feet. Reading the RFID tag is fast between 30 and 100 milliseconds, and the RFID reader can read a whole pallet full of RFID tagged items at once. It is like a Toll Road EZ TAG for inventory items.

RFID Vision

Wal-Mart and Gillette are two companies deploying RFID technology buying billions of the devices. Even at 10 cents apiece, these companies are spending a lot of money on the technology. These companies expect to save money with RFID by better control of inventory and the supply chain. The vision is:

• RFID tags containing manufacturer ID, model number, and item serial number are included on every product package at the factory.

• The item is tracked automatically from the moment it leaves the factory until the consumer leaves the retail store.

• Thus, the entire inventory in the supply chain is known and optimized.

In theory, you could achieve this result with barcodes today except how can you read the barcode on each item pack on a pallet in a warehouse. With RFID tags you simply install RFID readers in the doors of the warehouse and every item that enters or leaves the warehouse can be reported to the inventory control system automatically. This is something you just cannot do with barcodes.

RFID Reality

It will take years for the technology to roll out completely. In 2005, Wal-Mart is planning to use RFID tags on pallets and cases from its top 100 suppliers. Wal-Mart will use RFID on the pallets and cases to track the inventory:

• As it enters the stockroom

• When it leaves the stockroom and goes to the retail floor

• When the empty cases go to the trash compactor

Wal-Mart expects to integrate this inventory tracking data into its business systems to automate operations like ordering replacement stock. While not the complete item level tracking of the RFID vision, it looks like a significant commitment by Wal-Mart and everyone will be watching to see how the technology performs.

Next week, I will discuss saving money through IT automation.

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