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RFID and Distribution
Radio frequency identification technology implementation is poised to revolutionize the entire supply chain, with some large retailers even mandating that their suppliers implement it, operating under the precept that RFID alone can double, or even quadruple, product turns. Supply chain management, in-store operations and other related key business practices stand to experience a revolution as well. It is a movement that both suppliers and retailers must watch closely and make preparations to adopt, rather than be left behind by their closest competitors.

RFID is not new technology, but an enhancement of earlier technologies that used barcodes, magnetic stripes, smart cards and global positioning systems. It is an enhancement that many cpanies have not chosen to implement, primarily due to cost. However, costs are expected to diminish and more companies adopt the technology. The beauty of RFID is that it make it possible to identify and track multiple activities at once. It can track events, inventory, orders and shipments - with data that is complete and accurate - and provided in real time.

Predictions are that as RFID becomes both more effective and less costly that distribution centers will readily adopt it, first for shipping and receiving and for other applications as it evolves. Within the next five years it is expected that in-store shelf applications will follow.

One of the difficulties with RFID at present is that there are no established global standards, which creates some uncertainties. It is likely that different systems will be developed around the globe, with no single global standard. Companies may have to pioneer the way to a global standard or adopt different standards in the multiple locations where they do business. Difficulties have also been reported with the systems themselves, including signal distortion, reader accuracy and speed, and the limitations of tag transmission capabilities. Development of information management tools for RFID has lagged somewhat behind the RFID technology itself, which limits its usefulness in some scenarios. The tags are costly - about 30 cents each at present - which contributes to the cost factor. It is expected, however, that tag costs will drop into the five cent apiece range when production of them increases due to demand.

There may be no compelling reason for companies (particularly retailers) to adopt RFID technology at this precise moment and there may be some distinct advantages to be realized from waiting - at least for a while. Most retailers will be able to hold back and watch as the countrys largest retailers develop standards and perfect the technology.

At some point, however, and in the not too distant future, RFID is expected to become the standard, a movement driven by its real-time data tracking capabilities. It is highly likely to become simply a cost of doing business and a necessity for remaining competitive.

Companies that want to prepare themselves for what seems to be the inevitable can take some proactive steps now to prepare for adoption of RFID technology later. Knowing which supply chain practices need to be adopted before RFID, how the technology would be managed and how information would be shared are steps in the right direction. Optimizing a businesss supply chain and even possibly conducting an RFID pilot project can help position an organization for the RFID revolution that seems to be inevitable.

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