Problems with retail inventory? Stockouts, lost goods, and never-ending counts? RFID resolves that. “Techy” should not scare you. RFID is easy to use and advantageous for you.

This guide describes RFID inventory management system in detail, including how it operates and how to use it.

Table of Contents

What is the RFID inventory system?

Radio Frequency Identification (RFID) Technology is used to manage inventory in an efficient way. It makes use of RFID tags that can store electronically information like SKU numbers, product prices and stock levels. An RFID reader allows you to quickly retrieve this data instead of manually counting items or scanning barcodes one by one. In other words, you can keep real time track of inventory, eliminate human error and make the entire process of stock management faster.

What is the process for RFID inventory management?

Let’s see how an RFID inventory system works. It’s a fairly straightforward process:

1. Tag Items

RFID labels are attached to inventory and goods. In the case of your business needs, RFID labels may only be attached to the highest unit of measure (eg, a pallet). In other cases, RFID labels can be attached to individual cases or even at item level product. The RFID labels are serialized so that they can be tracked accurately. A way to streamline this process would be to use an RFID printer to print and encode labels.

2. Read Points with RFID readers

Strategically placed RFID readers capture movement of goods as they move through your warehouse or distribution center. Also RFID handheld scanners can be used to do cycle counts or physical inventory checks. Speed is the biggest advantage here; RFID allows you to collect data much faster than barcode scanning or manual counting.

3. Data Collection will give you valuable insights.

Your inventory management software processes the data captured once the RFID readers have it. This data allows you to monitor inventory through your facility and view real time stock levels. This makes it possible to conduct quick cycle counts and detect inventory discrepancy immediately and enables you to manage your stock more efficiently and cost effectively.

Advantages of RFID Inventory Management

RFID is more than just a high tech solution, it provides real benefits to you in terms of streamlining your inventory process and improving accuracy.

1. Boost Inventory Accuracy

For any business, it is important to keep an accurate stock count. It’s not what you don’t want to promise customers a product and then find out it’s not available. All of this can lead to delayed orders, frustration and lost sales to the competition.

Research proves that businesses that use RFID technology have up to 13 percent greater inventory accuracy than manual counting. This is because RFID scanners instantly capture product data, thus reducing the risk of human errors, like incorrect data entry, miscounts or missed barcode scans.

RFID systems reduce the risk of missing items during inventory check because they can read multiple tags at once.

Pro Tip: Use your inventory management system to set up low stock alerts so you can restock products in advance of running out.

2. Speed Up Order Fulfillment

Quick access to inventory is a must in order to run a store or warehouse efficiently. RFID locates products instantly even in cluttered storage area.

Furthermore, RFID can also automate the shipping verification. You can scan all the boxes at once before sending an order to make sure they are all the same as the packing slip. This reduces errors and guarantees that customers receive the right products.

3. Reduce Theft and Fraud

RFID can help minimize retail theft, which is a billion dollar problem. Exit scanners can also trigger an alarm if an item with an RFID tag hasn’t been scanned properly at checkout to deter shoplifters.

RFID also prevents fraudulent returns. RFID tags make it easier to detect fake returns because they store product history, and some customers try to return stolen or counterfeit goods for a refund.

RFID also offers full inventory tracking on the supply chain, allowing you to identify discrepancies between what you expected to stock and what you did stock—potentially catching theft or shrinkage sooner.

Disadvantages of RFID Tag Use in Inventory Control

The benefits of RFID are many, but there are some drawbacks that you should consider before implementing RFID.

1. Additional Equipment Costs

Unlike traditional barcodes, RFID requires specialized equipment: readers, antennas, and software. It can be expensive to set up the infrastructure and it may be uneconomical to maintain it over time for every business.

2. Potential Security Risks

As these tags are active RFID tags, they can be scanned remotely, so in theory someone with an RFID reader could view product information without authorization. Do not store sensitive data such as customer details or supplier agreements in RFID tags to avoid security breaches.

3. Compatibility Issues

Not all RFID tags and scanners use the same frequency. If you have suppliers or partners that use a different system, you will need to replace your tags or readers so that your system can be seamlessly integrated. Make sure your equipment is compatible with your supply chain before adopting RFID.

How to create an inventory management system using RFID

1. Purchase RFID Tags

RFID tags store product data that is essential for the product. Programming tags need technical expertise, so most of businesses choose to buy pre made tags than to make them scratch.

2. Choose an RFID Reader or Antenna.

The tags are scanned by RFID readers and the data is sent to your inventory system. A basic reader can be bought for around $30, but it needs to work with your existing software.

3. Upload Product Information

Upload product name, SKU, and price of product of each scanned RFID tag with your reader. Use adhesive labels, hang tags, or sew it into the product to attach the tag.

4. Sync with Your Inventory Management System

Integrating your RFID system with inventory software means that whenever you scan an item, stock levels are updated in real time.

5. Run System Tests

Run your RFID setup test to ensure everything is working as it should be. Some test scenarios include:
Tries to leave store with unscanned product and see if exit scanner picks it up.
Checking RFID scan data for accuracy by comparing it to manual stock counts.
To set stock level alerts that will notify you when display shelves need restocking.

An Example of RFID Inventory System Use

RFID is used in many fields. Walmart is one of the best known examples of using RFID to manage inventory in its more than 5,000 stores globally. Walmart is able to track their products in real time, through the supply chain, to ensure accurate stock levels and efficient restocking.

Is Barcode Labeling Better for Inventory Management or RFID Tags?

RFID tags and barcode labels are used for inventory management but each has its pros and cons. If you’re on the lookout for an affordable and highly reliable choice, barcode labels are well established. Barcode labels are created that can take harsh conditions, making them suitable for indoor or outdoor use.

In contrast, RFID tags allow multiple items to be read without scanning directly line of sight. Yet, metal or liquid can interfere with RFID signals, so you may require specific tags to remain accurate. RFID can be more expensive than barcodes because these specialty tags add costs.

The fact remains that barcodes are still the most trusted solution for most businesses due to their ease of use, the low cost and durability. But if you require a high speed automated inventory tracking system, RFID may be your best option.

What is the implementation cost of an RFID inventory management system?

To understand the full cost of RFID, you have to look at initial and ongoing costs. Usually the biggest upfront investment is the equipment — RFID readers, antennas, cabling.

For Passive RFID systems, the reader can range from $1,000 to $3,000 per reader, depending on the infrastructure needed (power over ethernet (PoE) and other wiring). Active RFID systems are less expensive per reader since they don’t need the same level of complexity.

Installation, inventory management software and any alterations to your facility could add to the costs. The expenses for these vary on your setup and business needs.

Ongoing costs include:

Passive RFID tags – Passive RFID tags run between $0.05 and $0.15 per tag; specialized tags that can operate on metal or in difficult conditions can be more expensive.
These are typically at $5 to $15 each because they need built in power sources and extra housing to work.
Maintenance: RFID system needs to be running smoothly, so you need software updates, replacement of equipment, and even service fees.

RFID may be more expensive at first than barcoding, but the long term efficiency, accuracy and security gains more than make up for the cost.

Does RFID Make Inventory More Accurate?

It is proven that RFID technology can increase inventory accuracy up to 13% better than the traditional tracking methods and manual stock counts. It is especially useful in retail as inventory discrepancies can result in lost sales and unhappy customers.

Nevertheless, in warehouse environments the costs of RFID implementation may sometimes outweigh the benefits. RFID is useful if your business needs very high inventory accuracy, but the cost of hardware and the cost of labor should be weighed to see if it’s worth the investment.

Before you begin using RFID, you should evaluate it against other tried and true methods of tracking, like barcode labels. By analyzing the return on investment (ROI), you will know whether RFID suits your inventory management needs. Barcode labels still are a practical and economical solution for many businesses.

Conclusion

Using RFID to manage inventory also allows you to maintain better security, and you will have greater tracking and higher accuracy. The upfront costs for RFID are higher than for the barcode system, but its long-term benefits include reduced human error, faster fulfillment and reduced theft make the RFID worth the price. For you, RFID could be the perfect solution if the key priority is to improve efficiency and accuracy.