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.”
Consulting firm Accenture has taken another step to bulk up its supply chain advisory capabilities, announcing Monday that it has acquired Allitix, a California-based consulting and technology company specializing in Anaplan solutions with capabilities across financial planning and analysis, sales performance management, and supply chain.
Anaplan is a Florida provider of corporate performance management (CPM) systems, which it defines as enterprise cloud software that empowers organizations to see, plan, and lead better business outcomes by aligning their strategic objectives and resources.
Allitix provides tailored Anaplan-based solutions across finance, sales, supply chain, and human resources functions, with specific competencies in the manufacturing, consumer, technology, media and telecom, and financial services industries.
“Demand for connected enterprise planning is on the rise, given its ability to unlock business value and spur total enterprise reinvention,” David Leckstein, senior managing director and lead, Americas Technology at Accenture, said in a release. “Allitix’s highly skilled talent, deep domain expertise, and agile approach to implementation complements our broader digital capabilities and further expands our ability to deliver integrated enterprise planning transformations for our clients that drive better, faster insights and bottom-line value.”
Terms of the deal were not disclosed, but Accenture said that the acquisition adds 73 employees, including over 60 Anaplan functional and technical professionals to Accenture Technology in North America, with expertise across solution architecture, model building, integration, and data management.
Terms of the acquisition were not disclosed, but Mode Global said it will now assume Jillamy's comprehensive logistics and freight management solutions, while Jillamy's warehousing, packaging and fulfillment services remain unchanged. Under the agreement, Mode Global will gain more than 200 employees and add facilities in Pennsylvania, Arizona, Florida, Texas, Illinois, South Carolina, Maryland, and Ontario to its existing national footprint.
Chalfont, Pennsylvania-based Jillamy calls itself a 3PL provider with expertise in international freight, intermodal, less than truckload (LTL), consolidation, over the road truckload, partials, expedited, and air freight.
"We are excited to welcome the Jillamy freight team into the Mode Global family," Lance Malesh, Mode’s president and CEO, said in a release. "This acquisition represents a significant step forward in our growth strategy and aligns perfectly with Mode's strategic vision to expand our footprint, ensuring we remain at the forefront of the logistics industry. Joining forces with Jillamy enhances our service portfolio and provides our clients with more comprehensive and efficient logistics solutions."
In addition to its flagship Clorox bleach product, Oakland, California-based Clorox manages a diverse catalog of brands including Hidden Valley Ranch, Glad, Pine-Sol, Burt’s Bees, Kingsford, Scoop Away, Fresh Step, 409, Brita, Liquid Plumr, and Tilex.
British carbon emissions reduction platform provider M2030 is designed to help suppliers measure, manage and reduce carbon emissions. The new partnership aims to advance decarbonization throughout Clorox's value chain through the collection of emissions data, jointly identified and defined actions for reduction and continuous upskilling.
The program, which will record key figures on energy, will be gradually rolled out to several suppliers of the company's strategic raw materials and packaging, which collectively represents more than half of Clorox's scope 3 emissions.
M2030 enables suppliers to regularly track and share their progress with other customers using the M2030 platform. Suppliers will also be able to export relevant compatible data for submission to the Carbon Disclosure Project (CDP), a global disclosure system to manage environmental data.
"As part of Clorox's efforts to foster a cleaner world, we have a responsibility to ensure our suppliers are equipped with the capabilities necessary for forging their own sustainability journeys," said Niki King, Chief Sustainability Officer at The Clorox Company. "Climate action is a complex endeavor that requires companies to engage all parts of their supply chain in order to meaningfully reduce their environmental impact."
Supply chain risk analytics company Everstream Analytics has launched a product that can quantify the impact of leading climate indicators and project how identified risk will impact customer supply chains.
Expanding upon the weather and climate intelligence Everstream already provides, the new “Climate Risk Scores” tool enables clients to apply eight climate indicator risk projection scores to their facilities and supplier locations to forecast future climate risk and support business continuity.
The tool leverages data from the United Nations’ Intergovernmental Panel on Climate Change (IPCC) to project scores to varying locations using those eight category indicators: tropical cyclone, river flood, sea level rise, heat, fire weather, cold, drought and precipitation.
The Climate Risk Scores capability provides indicator risk projections for key natural disaster and weather risks into 2040, 2050 and 2100, offering several forecast scenarios at each juncture. The proactive planning tool can apply these insights to an organization’s systems via APIs, to directly incorporate climate projections and risk severity levels into your action systems for smarter decisions. Climate Risk scores offer insights into how these new operations may be affected, allowing organizations to make informed decisions and mitigate risks proactively.
“As temperatures and extreme weather events around the world continue to rise, businesses can no longer ignore the impact of climate change on their operations and suppliers,” Jon Davis, Chief Meteorologist at Everstream Analytics, said in a release. “We’ve consulted with the world’s largest brands on the top risk indicators impacting their operations, and we’re thrilled to bring this industry-first capability into Explore to automate access for all our clients. With pathways ranging from low to high impact, this capability further enables organizations to grasp the full spectrum of potential outcomes in real-time, make informed decisions and proactively mitigate risks.”
According to New Orleans-based LongueVue, the “strategic rebranding” brings together the complementary capabilities of these three companies to form a vertically integrated flexible packaging leader with expertise in blown film production, flexographic printing, adhesive laminations, and converting.
“This unified platform enables us to provide our customers with greater flexibility and innovation across all aspects of packaging," Joe Piccione, CEO of Innotex, said in a release. "As we continue to evolve and adapt to the changing needs of the industry, we look forward to delivering exceptional solutions and service."