Playing Tag – Tracking Technologies Can Improve Inventory Management

Is bar coding or RFID technology — or a combination of both — best for your distribution company? Let’s start with the basics.

What technologies can track inventory?

Bar coding and RFID fall under the umbrella of automatic identification (auto ID) technologies. In general, such technologies serve to increase accuracy and overall efficiency in identifying, tracking and distributing inventory. They can also improve customer service and the accuracy of your inventory records.

But they differ in how they work. Bar coding is a line-of-sight technology, meaning it uses scanning devices that see and read bar codes affixed to inventory. To be read, bar codes must be carefully positioned toward the scanning device and be in good condition. Dirty or damaged labels can’t be properly scanned. Bar codes also are limited in the amount of information they can include; for example, they can identify the manufacturer and product but not the specific item.

You may also want to consider Quick Response (QR) codes. A QR code is a type of bar code, but it can hold much more information than a standard 2D bar code. The technology was invented to help Toyota track vehicles through the production process. Switching bar code formats typically creates the need to also switch your scanning hardware and may require new label and/or printing capabilities. However, if a 2D barcode isn’t giving you enough info, this is the way to go.

An RFID system communicates inventory data via a radio frequency channel or wireless technology. A reader device transmits an identification request to an identification tag affixed to inventory. The tag relays the requested information back to the reader device, which then transmits it to a computer.

Data encoded within an RFID tag may include the item type, location (such as in the warehouse or in transit), and any special handling instructions. More expensive tags may include all the bells and whistles, such as tampering indicators, temperature or moisture sensors and encryption codes. RFID tags don’t require a direct line of sight to be read; they can be detected as long as they’re within range of a reader device.

What are the costs and benefits of RFID?

Whether RFID is better than bar coding depends on your organization’s needs and the type of inventory you store. Bar coding generally is less expensive to implement than RFID, and it provides adequate, cost-effective inventory identification and tracking capabilities, especially for distributors that warehouse less expensive inventory items. Bar coding also makes sense if you carry liquid or metal inventory that might interfere with certain radio frequencies. In some cases, combining the use of RFID and bar-coding technologies also may provide a cost-effective solution.

Cost is a key difference between bar coding and RFID technology. A bar code generally costs just pennies. RFID technology prices vary significantly depending on the desired functionality, but fully loaded RFID tags can cost as much as $50 each.

The primary advantage to RFID is that it offers faster data processing and broader ranges for reading data on tags, which don’t need to be positioned outward to be read and offer more specific data. RFID tags also last longer and can be updated, reprogrammed or reused.

Outfitting your material handling equipment with barcode or RFID technologies can help reduce errors and minimize manual handling of products. For example, bar code readers on a conveyor can help maintain inventory accuracy and automatically route products to the correct locations. RFID readers on pallet trucks can assist in proper stock picking and fulfillment tasks.

RFID isn’t only useful for physical inventory. It can also help track the location and usage patterns for fixed assets. This can aid in locating high-value tools and that can move around (like a fork truck).

Data analytics is another benefit of using tracking technologies. Organizations may have an opportunity to gain insights from their inventory tracking data, for example by correlating product location, date/time and production quantities or in monitoring supply chain efficiency from raw material through fulfillment.

Will RFID jeopardize security and privacy?

Some technology experts advise caution with the use of RFID technology. Some RFID applications lack crucial user identification and encryption features or could possess coding errors or weaknesses, making them vulnerable to hackers, counterfeiters, and destructive viruses and worms.

Before upgrading to RFID technology, ask whether your data will be encrypted or password protected to guard against potential security risks. Malicious attacks that exploit such vulnerabilities could wreak havoc on your computer systems.

Should you implement RFID technology?

Modern ERP systems offer the capability to integrate with tracking technologies to automate inventory data collection and/or automatically track quantities of items which are manufactured. If you’re using tracking technologies but they aren’t directly integrated with your ERP system, consider investing in a tighter integration.

Inventory management can make or break a distributor. Bar codes are generally less expensive, but RFID offers a host of additional benefits. Hire a financial consultant to help you determine whether the benefits of RFID outweigh the costs — or whether bar coding is a more cost-effective option.

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