Does RFID fit in?

Jul 01, 2005 9:30 PM  By

Want to learn precisely where RFID will fit into your operation? We highly recommend starting with an unusual new study from Forrester Research, “How RFID Improves the Order-to-Cash Process.” What’s unique about this report is that it a) breaks down fulfillment into six vital components, b) uses a hypothetical case study to walk the reader through the analysis, and c) comes up with two key questions that every potential RFID user must ask before splurging on the technology.

According to Forrester analyst Christine Spivey Overby, the six stages of the order-to-cash process are order capture, order routing and tracking, fulfillment, shipping, billing, and payment. Using an imaginary food products manufacturer/distributor, Company XYZ, as a model, Overby discusses the areas in which RFID can and cannot improve the distribution process. In XYZ’s supply chain, RFID deployments generate four types of data: production, pick and pack, shipping and receiving, and product availability. Applied to the order-to-cash situation, these classes of information offer the following benefits:

  • Order capture improves because of product availability data, which trigger automatic reordering by the retailer when stocks are low and help reduce XYZ’s inventory carrying costs.

  • Order tracking gets a boost from shipping and receipt information. When electronic product codes (EPCs) are associated with physical locations, Company XYZ can track merchandise across its entire supply chain, keeping tabs on quality and spotting fraud and counterfeiting.

  • Shipping and billing accuracy go up when the RFID-generated shipping data come into play. A detailed shipping manifest ensures that the right product reaches the retailer; EPCs in the warehouse management system eliminate manual order audits; and automatically generated invoices that include EPCs remove discrepancies between shipments and bills.

  • Thanks to the receiving data, payment receipt problems disappear. All XYZ has to do is match the invoice EPCs and the EPCs listed on the retailer’s receipt of goods. The detailed information already in the RFID data bank will help resolve the few errors that may occur.

The two areas where RFID does not benefit Company XYZ are order routing and locating products as part of order fulfillment. In both cases, bar coding already does an excellent job, and RFID would add minimal advantages.

To figure out how RFID can enhance your operation, Overby suggests asking yourself these key questions:

  • Will the process benefit from automated data capture? Unlike traditional bar coding, RFID does not require physical visibility. This means that products can be monitored at many more points across the supply chain.

  • Will the process benefit from serialization? The latter involves assigning a unique EPC to each case or product. Does your operation require monitoring at this level of detail? Keep in mind that other technologies such as two-dimensional bar codes support serialization and cost less than RFID. In fact, one company tested serialization by using RFID tags on cases and pallets and 2-D bar codes on individual items. It may be that even if your merchandise needs serialization, RFID may not be viable unless faster processing and other attributes of the technology are also required.