Radio Frequency Identification (RFID) has been a hot topic throughout the retail supply chain for a few years. However, its adoption has largely been confined to larger retailers like Wal-mart, which championed the technology earlier on and even went so far as to mandate the use by its vendors.

Given Moore’s Law - computing technology will exponentially increase in processing power while lowering in cost - we can expect to see RFID become accessible to the small and mid-size retailer in the near future. Therefore, we thought it made sense to draft a brief primer on this technology and explain how it might be used in the mainstream retail environment.

What is RFID?
RFID is the method of using radio frequencies to track and inventory merchandise. An RFID system allows communication between a product that has been tagged with a small, inexpensive RFID chip and an RFID reader and an in-store server. It can be used anywhere that a unique identification system is needed. Think of it as analogous to a bar code label and bar code scanner, but far more sophisticated and easier to scan (you actually don’t have to scan the item, just have it near the RFID reader).

The RFID system typically has a central in-store server, a reader, pre-encoded labels (tags) and a printer. The central server is the “brains” of the system. It holds all the data that has been collected on-site as well as information that has been transmitted from other stores. It also integrates to the inventory management system or POS system.

The reader communicates with the central server. It contains circular polarized antennae that allow for the reading of multiple tagged items at once. The sensitivity of the antennae can be set for each register it serves, each reader can handle the transmission of up to four registers concurrently.

How can RFID be used for inventory tracking?
Imagine a box of 500 items arriving at the receiving door and it is time to check the items in. Instead of opening the box and scanning each individually all you do is sweep a handheld scanner over them and the inventory count is complete.

Each item that is tagged with an RFID chip can be tracked from the moment it arrives at the receiving door until the time it leaves with the customer. Tags are easily programmed and printed simultaneously while receiving merchandise shipments. A unique identification number is generated for each tag, which is then encoded with a designated store ID and affixed to the item. The tag numbers are associated to each SKU.

Tracking store transfers is simple with RFID, significantly decreasing receiving times. Merchandise is automatically read as it moves from one location to the next. It is as easy as selecting the current store number, then the allocated store destination, scanning the item and saving the transfer. The items are automatically saved as the property of the assigned store.

How can RFID be used at the point-of-sale?
When a customer checks out, the RFID reader automatically detects the merchandise to be purchased as it is placed on the counter and the cashier can complete the sale as usual without individually scanning tags. It “reads” the radio frequency from the encoded labels on the merchandise, virtually scanning them. The information is then communicated to the RFID reader where the data is processed enabling the system to automatically generate the sale at the register.

Returns are as easily generated as the system automatically checks the returned merchandise. A consumer is able to return RFID-tagged items without a store receipt. The tag would reference a database with the time of purchase and original price – even credit card information. Detailed information about customer returns would also help stores refine their inventory selections.

Celerant Technology Corp. recently announced the release of an RFID-integrated POS system, Command Retail. The system is an advanced real-time retail management software that uses RFID to manage all areas of retail including POS, inventory management, warehouse, distribution center, allocation, integrated e-commerce, data mining and back-office in a single integrated system.

The cost to implement Command Retail’s RFID capabilities to an existing POS system is about $3,000, which includes a reader that serves up to four cash registers. It’s been reported that when purchased in volume, the individual RFID tags could eventually have a cost of less than a nickel apiece. This will allow retailers to track even small-ticket items using RFID.

What role does RFID play in reporting?
RFID reports allow for increased visibility of products at all points along the supply chain. This capability helps retailers avoid stock-outs, a significant factor in lost sales and subsequent inconvenience to customers.

The technology also enables the retailer to analyze store space utilization and product location. Knowing where a customer found an item can be particularly helpful when it comes to the placement of seasonal and promotional items.

A variety of inventory reports could be generated in real-time from the central server. Using wireless and offline data synchronization, a retailer could access data at multiple locations to generate up-to-date reports immediately. Authorized personnel could then access the reports over the Internet using a Web browser.

How else could RFID be used?
Possible uses of RFID are expanding every day. Tags can double as theft control devices, since they are easily attached to items and track whether the item has been purchased. They can also be placed in customer cards and once scanned at the checkout counter, offer additional selling suggestions via the POS monitor.

On the floor, employees can use RFID to give immediate help to the consumer to find a particular item or size as well. Scanners can be set to read only selected tags to check the quantity of a certain item in stock, either on the racks or in the stock room.

We are not far from the point where RFID enables an entire cart of merchandise to be scanned instantaneously and a debit or credit card charged as the customer moves through a virtual checkout line. This capability will dramatically reduce checkout time and minimize the opportunity for human error.

Conclusion
RFID is a revolutionary technology. As its adoption makes its way through the major retail channels more mid-size and smaller retailers will begin to see its benefits and uses for significant improvements in operational efficiency, maximum profitability and superior customer service.