Management Accounting

How RFID Improves Product Tracking

Radio frequency identification (RFID) promises a supply-chain revolution ''akin to moving from tapping out telegraph signals to moving to the Inter...
John GoffSeptember 7, 2004

Simon Ellis can see the future. Indeed, that’s a large part of his job description. As the inventory and logistics guru at Dutch consumer-products giant Unilever, Ellis carries the peculiar title of Supply-chain Futurist. Thus, he spends a whole lot of time thinking about things like ERP (enterprise resource planning), WMS (warehouse management systems), DDSN (demand-driven supply networks), and OMTA (other maddening technology abbreviations).

These days, Ellis especially ponders the future of one particular jumble of letters, RFID, which stands for radio frequency identification. RFID technology, first used in World War II, enables items to transmit information about themselves. RFID tags come in two varieties, active and passive (passive technology was developed in the late 1970s in the United States). Active tags operate off batteries; passive tags are powered by magnetic fields produced by readers.

Either type can be slapped on all sorts of products, from a bar of soap to a beer keg to a 10-ton shipping container. And unlike traditional bar codes, which rely on line-of-sight technology, radio frequency tags broadcast signals that are captured by electronic readers. The readers, in turn, enter the data into a company’s inventory-management system. “There are substantive challenges ahead,” says Ellis, “but RFID is fundamentally better than bar codes.”

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RFID has been garnering much attention in supply-chain circles of late, mostly spurred by executives at retailing giant Wal-Mart Stores, who have made no secret of their affection for the technology. In discussing the promise of RFID-
enabled supply chains during an interview with CFO last fall, Wal-Mart spokesman Tom Williams described RFID as “akin to moving from tapping out telegraph signals to moving to the Internet.”

Others agree. In a recent survey of corporate executives conducted by consulting and managed-services firm BearingPoint, nearly 45 percent of the respondents described RFID as a revolutionary technology that will have widespread impact. Spending on that revolutionary technology — currently pegged at $1 billion — will triple by 2007, predicts the Wireless Data Research Group. (For more, see “Dude, Where’s My Printer?,” in the September issue of CFO magazine.)