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Benefits of RFID systems in inventory management

Published on 09/03/2023 by Sukanya Awasthi

RFID technology may help businesses streamline the process of inventory management. Want to know how? Read the article to know more.

Enhanced security and efficiency are some of the benefits of RFID systems in inventory management

A report by MarketsandMarkets suggests that the RFID market is estimated to reach US$35.6 billion by 2030 growing at a CAGR of 11.9%. This growing market for RFID systems possibly indicates the higher application of these systems across various industries. In this article, we will understand what RFID stand for, its types, its use in inventory management, along with benefits of RFID system in inventory management. Read along to learn more about this technology.

What is RFID technology?

RFID stands for radio-frequency identification. It is a wireless technology that makes use of digital tags which are attached to objects, animals or persons so that they can be tracked and identified. These tags are used and analysed through various stages of the supply chain to extract real-time information like stock count, stock availability, current location etc. These tags come in various sizes and can be easily attached to an item. RFID tags vary from one another in a variety of ways, including their operating frequencies, lifetimes, durability, pricing, and the amount of data that can be stored on them. These are similar to barcodes but can contain much more information within them than barcodes.

How is RFID used in inventory management?

RFID technology can possibly help in inventory management by improving stock accuracy and managing information about out-of-stock items. When the information about the stock is regularly updated, it may become easier to fulfil orders related to it.

Each item is marked with an electronic chip in RFID inventory tracking, which efficiently monitors things in real time. It aids in tracking products from point of manufacturing to point of sale and transmits data from tag to reader wirelessly. RFID read sites in the distribution and warehouse centres gather data on the movement of the items. That information is then used to notify stakeholders about where an item is and when it is likely to reach its destination. The acquired data can also be used to inform business inventory levels or track inventory around a facility. Capturing information this way speeds up the process compared to manually keeping track of inventory.

What are the benefits of RFID systems in inventory management?

There can be many benefits of RFID systems in inventory management ranging from improved security to higher efficiency. Some of the benefits of RFID systems in inventory management are discussed below in detail:

RFID systems can help in reducing labour costs

Managing large-scale inventory often requires the involvement of manual labour. RFIS systems are capable of automating mundane and repetitive processes and digitally passing information thereby reducing human intervention at various steps of the product life cycle. This can result in reducing the cost associated with involving manual labour.

RFID systems can help in error reduction and increased security

Since RFID systems transmit data through radio frequencies, the scope of error is minimised because the scope of error introduced by human intervention is eliminated. These tags are also capable of monitoring access to certain sensitive areas, thereby restricting unauthorised access and preventing potential theft.

RFID systems can improve operational efficiencies

RFID systems are possibly much quicker because they do not rely on transferring information from person to person. All the data pertaining to an item is transmitted through radio frequencies which possibly takes just seconds to deliver data. Coupled with reduced error, as discussed above, RFID systems can potentially help in improving the efficiencies of operational tasks.

What are the different types of RFID systems?

The RFID systems are mainly of two types, active RFID and passive RFID systems. Let us learn more about them in detail below:

1. Active RFID systems

  • Active RFID systems have a transmitter and a power source of their own, which is usually a battery. 
  • Active RFID tags generally have a range of 30m to 100 meters and typically operate in the ultra-high frequency (UHF) range.
  • The cost of producing an active RFID tag is usually higher than passive tags. The price of an active tag can start at US$25 and can go up to US$50.
  • Due to their higher range, active tags find their application in areas which require tracking over long distances like mining, container shipment, vehicle tracking etc.

2. Passive RFID systems

  • In passive RFID systems, the tag is communicated through radio by reading the antenna. They do not require a transmitter or their own power source. 
  • Passive RFID tags are capable of working in low frequency, high frequency and ultra-high frequency and the range of these tags is usually about 25 meters, which is not as much as active RFID tags.
  • Passive tags are comparatively cheaper than active tags and cost up to US$20. 
  • Passive tags are often used in the supply chain, pharmaceutical, and retail industries, among others.

What does the future hold for RFID systems?

As the RFID technology may continue to evolve with time, we may see this technology being used in many other industries and areas as well. With advancements in technology, the future of RFID systems possibly looks promising with increased efficiency and effectiveness. You can also learn more about the five best inventory management software currently available in the market as well.

RFID systems can also be paired with technologies like IoT to speed up the process of data collection and analysis. With time, more advanced analytical tools that analyse the data collected from RFID tags may also be introduced in the market.

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About the author

Sukanya is a Content Analyst for the UK and India market. Committed to offering insights on technology, emerging trends and software suggestions to SMEs. Café hopper and a dog mom.

Sukanya is a Content Analyst for the UK and India market. Committed to offering insights on technology, emerging trends and software suggestions to SMEs. Café hopper and a dog mom.