Radio-frequency identification tags can deliver inventory accuracy rates as high as 99%, but the market still doesn’t appear to be willing to pay the price.
Ben Ames has spent 20 years as a journalist since starting out as a daily newspaper reporter in Pennsylvania in 1995. From 1999 forward, he has focused on business and technology reporting for a number of trade journals, beginning when he joined Design News and Modern Materials Handling magazines. Ames is author of the trail guide "Hiking Massachusetts" and is a graduate of the Columbia School of Journalism.
As e-commerce continues to boom and consumer shopping patterns shift in the wake of the pandemic, inventory accuracy has never been more important. Having a precise accounting of the amount of goods in a store, on a truck, or in a warehouse helps companies quickly locate merchandise needed to fill orders, avoid stockouts, and provide better customer service in general.
Suppliers, retailers, and third-party logistics service providers (3PLs) are all seeking ways to improve their inventory management practices. But in a lot of these efforts, one tool is conspicuously absent—radio-frequency identification (RFID) tags.
First introduced as a way to identify Allied airplanes during World War II, the technology slowly expanded into other applications, such as identifying rail cars and pallets of goods. By 2000, the U.S. Department of Defense was widely using RFID to track inventory, and in 2003, the tiny tracking tag hit the big time when retail giant Walmart decreed that its 100 largest suppliers must be ready to attach RFID tags to cases and pallets shipped to its DCs by 2005.
Manufacturers scrambled to comply. Buying the tags and readers was expensive, to be sure, but they risked losing access to Walmart’s marketing might if they refused.
But before that vision came into focus, the movement lost momentum, Walmart quietly shelved its mandate, and RFID began to fade from the headlines.
“With the Walmart initiative, RFID came out of the chute with a bang, but then it fizzled out,” says Doug Sampson, senior vice president at Acme Distribution Centers Inc., an Aurora, Colorado-based 3PL and supply chain solutions provider. “The reason it failed was because of cost and performance; other than that, it was a great idea.
FINANCIAL REALITIES RULE
As Sampson’s comment suggests, one of the primary reasons the vaunted RFID revolution stalled out was cost. In a sector where companies are constantly seeking ways to cut their transportation, labor, packaging, and other costs, few could justify the added expense for tags, especially when they already had a cheaper (albeit less-capable) method of tracking, the bar code.
“The cost never made sense,” says Simon Ellis, program vice president in the supply chain strategies practice for the analyst group IDC Manufacturing Insights. At the time, a consumer packaged goods (CPG) company might have spent 3 to 4 cents per item on the secondary packaging it used for logistics and retail display purposes. “But RFID tags were 10 cents, so they would be looking at quadrupling the cost for benefits that weren’t that great,” he says.
The cost of RFID tags has fallen in recent years to close to 5 cents per unit—especially for the most popular passive tag design (meaning the tag has no power source and cannot actively broadcast a signal)—but that still represents a significant overhead expense, particularly for an item that might cost 99 cents. For that reason, the technology is mainly found today on high-value merchandise, like $200 or $300 items of apparel, Ellis says.
Jordan Speer, a research manager in IDC’s global supply chain unit, echoes that assessment. RFID holds plenty of promise for retail applications, she says, noting that it can bring inventory accuracy up to 97% to 99%—far above the 60% typically found in busy retail stores where shoppers handle the merchandise. But there’s a limited universe of items that merit that level of precision, she says. “It still doesn’t make sense for a bottle of salad dressing, but it might work for apparel from Nike, Adidas, or Lululemon.”
In addition to tagging high-value items, some companies are using RFID for specialty applications such as serialization—where they need to identify each specific instance of a product instead of just the SKU (stock-keeping unit) type. Others are using recyclable tags that are removed by the sales clerk after purchase and returned to the manufacturer for re-use, she says.
Even in some of those cases, operations may still experience performance problems with RFID tags when they’re used with certain goods, Acme’s Sampson says. The radio signals from passive RFID tags can be blocked by the liquids in pharmaceuticals or food and beverage products, by the metal in warehouse racking, or by interference from other wireless systems, he explains.
As for the overall outlook for RFID, “it makes sense for some specific applications, like restocking a supply cabinet at a hospital,” Sampson says. “But the problem is that with mass-market consumer goods and warehouses, there’s just not enough return on investment.”
The technology itself has long since proved its value, Sampson says, citing its use in applications ranging from passports and credit cards to the transponders that allow vehicles to bypass highway toll booths. “But while the technology is getting used, it just doesn’t work well on mass consumer goods, with what we’re doing in logistics,” he says. “It’s just a matter of some company finding the right application to really drive down the cost of the tag, and then it could really be a solution in logistics. But until then, it’s just too expensive except for these specific cases.”
Progress in generative AI (GenAI) is poised to impact business procurement processes through advancements in three areas—agentic reasoning, multimodality, and AI agents—according to Gartner Inc.
Those functions will redefine how procurement operates and significantly impact the agendas of chief procurement officers (CPOs). And 72% of procurement leaders are already prioritizing the integration of GenAI into their strategies, thus highlighting the recognition of its potential to drive significant improvements in efficiency and effectiveness, Gartner found in a survey conducted in July, 2024, with 258 global respondents.
Gartner defined the new functions as follows:
Agentic reasoning in GenAI allows for advanced decision-making processes that mimic human-like cognition. This capability will enable procurement functions to leverage GenAI to analyze complex scenarios and make informed decisions with greater accuracy and speed.
Multimodality refers to the ability of GenAI to process and integrate multiple forms of data, such as text, images, and audio. This will make GenAI more intuitively consumable to users and enhance procurement's ability to gather and analyze diverse information sources, leading to more comprehensive insights and better-informed strategies.
AI agents are autonomous systems that can perform tasks and make decisions on behalf of human operators. In procurement, these agents will automate procurement tasks and activities, freeing up human resources to focus on strategic initiatives, complex problem-solving and edge cases.
As CPOs look to maximize the value of GenAI in procurement, the study recommended three starting points: double down on data governance, develop and incorporate privacy standards into contracts, and increase procurement thresholds.
“These advancements will usher procurement into an era where the distance between ideas, insights, and actions will shorten rapidly,” Ryan Polk, senior director analyst in Gartner’s Supply Chain practice, said in a release. "Procurement leaders who build their foundation now through a focus on data quality, privacy and risk management have the potential to reap new levels of productivity and strategic value from the technology."
Businesses are cautiously optimistic as peak holiday shipping season draws near, with many anticipating year-over-year sales increases as they continue to battle challenging supply chain conditions.
That’s according to the DHL 2024 Peak Season Shipping Survey, released today by express shipping service provider DHL Express U.S. The company surveyed small and medium-sized enterprises (SMEs) to gauge their holiday business outlook compared to last year and found that a mix of optimism and “strategic caution” prevail ahead of this year’s peak.
Nearly half (48%) of the SMEs surveyed said they expect higher holiday sales compared to 2023, while 44% said they expect sales to remain on par with last year, and just 8% said they foresee a decline. Respondents said the main challenges to hitting those goals are supply chain problems (35%), inflation and fluctuating consumer demand (34%), staffing (16%), and inventory challenges (14%).
But respondents said they have strategies in place to tackle those issues. Many said they began preparing for holiday season earlier this year—with 45% saying they started planning in Q2 or earlier, up from 39% last year. Other strategies include expanding into international markets (35%) and leveraging holiday discounts (32%).
Sixty percent of respondents said they will prioritize personalized customer service as a way to enhance customer interactions and loyalty this year. Still others said they will invest in enhanced web and mobile experiences (23%) and eco-friendly practices (13%) to draw customers this holiday season.
That challenge is one of the reasons that fewer shoppers overall are satisfied with their shopping experiences lately, Lincolnshire, Illinois-based Zebra said in its “17th Annual Global Shopper Study.”th Annual Global Shopper Study.” While 85% of shoppers last year were satisfied with both the in-store and online experiences, only 81% in 2024 are satisfied with the in-store experience and just 79% with online shopping.
In response, most retailers (78%) say they are investing in technology tools that can help both frontline workers and those watching operations from behind the scenes to minimize theft and loss, Zebra said.
Just 38% of retailers currently use AI-based prescriptive analytics for loss prevention, but a much larger 50% say they plan to use it in the next 1-3 years. That was followed by self-checkout cameras and sensors (45%), computer vision (46%), and RFID tags and readers (42%) that are planned for use within the next three years, specifically for loss prevention.
Those strategies could help improve the brick and mortar shopping experience, since 78% of shoppers say it’s annoying when products are locked up or secured within cases. Adding to that frustration is that it’s hard to find an associate while shopping in stores these days, according to 70% of consumers. In response, some just walk out; one in five shoppers has left a store without getting what they needed because a retail associate wasn’t available to help, an increase over the past two years.
The survey also identified additional frustrations faced by retailers and associates:
challenges with offering easy options for click-and-collect or returns, despite high shopper demand for them
the struggle to confirm current inventory and pricing
lingering labor shortages and increasing loss incidents, even as shoppers return to stores
“Many retailers are laying the groundwork to build a modern store experience,” Matt Guiste, Global Retail Technology Strategist, Zebra Technologies, said in a release. “They are investing in mobile and intelligent automation technologies to help inform operational decisions and enable associates to do the things that keep shoppers happy.”
The survey was administered online by Azure Knowledge Corporation and included 4,200 adult shoppers (age 18+), decision-makers, and associates, who replied to questions about the topics of shopper experience, device and technology usage, and delivery and fulfillment in store and online.
An eight-year veteran of the Georgia company, Hakala will begin his new role on January 1, when the current CEO, Tero Peltomäki, will retire after a long and noteworthy career, continuing as a member of the board of directors, Cimcorp said.
According to Hakala, automation is an inevitable course in Cimcorp’s core sectors, and the company’s end-to-end capabilities will be crucial for clients’ success. In the past, both the tire and grocery retail industries have automated individual machines and parts of their operations. In recent years, automation has spread throughout the facilities, as companies want to be able to see their entire operation with one look, utilize analytics, optimize processes, and lead with data.
“Cimcorp has always grown by starting small in the new business segments. We’ve created one solution first, and as we’ve gained more knowledge of our clients’ challenges, we have been able to expand,” Hakala said in a release. “In every phase, we aim to bring our experience to the table and even challenge the client’s initial perspective. We are interested in what our client does and how it could be done better and more efficiently.”
Although many shoppers will
return to physical stores this holiday season, online shopping remains a driving force behind peak-season shipping challenges, especially when it comes to the last mile. Consumers still want fast, free shipping if they can get it—without any delays or disruptions to their holiday deliveries.
One disruptor that gets a lot of headlines this time of year is package theft—committed by so-called “porch pirates.” These are thieves who snatch parcels from front stairs, side porches, and driveways in neighborhoods across the country. The problem adds up to billions of dollars in stolen merchandise each year—not to mention headaches for shippers, parcel delivery companies, and, of course, consumers.
Given the scope of the problem, it’s no wonder online shoppers are worried about it—especially during holiday season. In its annual report on package theft trends, released in October, the
security-focused research and product review firm Security.org found that:
17% of Americans had a package stolen in the past three months, with the typical stolen parcel worth about $50. Some 44% said they’d had a package taken at some point in their life.
Package thieves poached more than $8 billion in merchandise over the past year.
18% of adults said they’d had a package stolen that contained a gift for someone else.
Ahead of the holiday season, 88% of adults said they were worried about theft of online purchases, with more than a quarter saying they were “extremely” or “very” concerned.
But it doesn’t have to be that way. There are some low-tech steps consumers can take to help guard against porch piracy along with some high-tech logistics-focused innovations in the pipeline that can protect deliveries in the last mile. First, some common-sense advice on avoiding package theft from the Security.org research:
Install a doorbell camera, which is a relatively low-cost deterrent.
Bring packages inside promptly or arrange to have them delivered to a secure location if no one will be at home.
Consider using click-and-collect options when possible.
If the retailer allows you to specify delivery-time windows, consider doing so to avoid having packages sit outside for extended periods.
These steps may sound basic, but they are by no means a given: Fewer than half of Americans consider the timing of deliveries, less than a third have a doorbell camera, and nearly one-fifth take no precautions to prevent package theft, according to the research.
Tech vendors are stepping up to help. One example is
Arrive AI, which develops smart mailboxes for last-mile delivery and pickup. The company says its Mailbox-as-a-Service (MaaS) platform will revolutionize the last mile by building a network of parcel-storage boxes that can be accessed by people, drones, or robots. In a nutshell: Packages are placed into a weatherproof box via drone, robot, driverless carrier, or traditional delivery method—and no one other than the rightful owner can access it.
Although the platform is still in development, the company already offers solutions for business clients looking to secure high-value deliveries and sensitive shipments. The health-care industry is one example: Arrive AI offers secure drone delivery of medical supplies, prescriptions, lab samples, and the like to hospitals and other health-care facilities. The platform provides real-time tracking, chain-of-custody controls, and theft-prevention features. Arrive is conducting short-term deployments between logistics companies and health-care partners now, according to a company spokesperson.
The MaaS solution has a pretty high cool factor. And the common-sense best practices just seem like solid advice. Maybe combining both is the key to a more secure last mile—during peak shipping season and throughout the year as well.