Once a fringe technology used only by the most advanced logistics providers, RFID is having a resurgence due to its growing adoption within retail. The global RFID market is estimated to be $10.7 billion in 2021 – and is forecast to reach $17.4 billion by 2026.
So what is exactly is RFID, and what capabilities can it offer retailers in 2021?
RFID (Radio Frequency Identification) refers to technology that uses radio waves to transmit information via unique tags or labels. This data is then picked up by sensors in the vicinity that store this digitally for later analysis.
RFID tags differ from traditional barcodes in that scanners don’t have to be perfectly aligned with the code to read it, which can cause difficulties when products or components are moving very quickly through an assembly line or packing station. So long as a sensor is positioned within a certain radius, hundreds of tagged items can be scanned simultaneously. This makes RFID a low-maintenance way for businesses to record accurate, real-time information from across multiple points in the supply chain.
The earliest examples of RFID technology stems from the Second World War, where both the allied and axis forces used transponders on aircraft to identify them as either ‘friendly’ or ‘hostile’ via radar. During the Cold War, RFID became a popular method for sneaking listening devices into the presence of key political figures.
In a particularly famous case in 1945, a ceremonial seal was presented by the Soviets to the U.S. ambassador to the Soviet Union. The seal used passive RFID techniques to go undetected by regular security sweeps, as its hidden antenna (activated when a radio signal was sent from an outside transmitter) didn’t contain any electronic components. The device was active for seven years before being discovered by accident by the British Embassy.
However, it was several decades before RFID was used in a commercial setting. The first true RFID device was patented by Mario Cardullo in 1973, with business plans for passive transponders to be used within security, transportation, and medical settings to authenticate ID and save important information. But the high production cost of RFID tags prevented large-scale adoption by the retail and tech industries.
The real breakthrough for RFID came with improved manufacturing methods, such as making chips smaller and cheaper to produce. This shifted the purpose of RFID tags from actually storing data to serving as a link to the database where the data is stored, making the technology much more economical.
Since 2014, RFID adoption has grown significantly due to falling costs and the growing importance of supply chain visibility. With effective omnichannel retailing more significant than ever before, RFID is set to become one of the biggest technology investments for retailers and logistics providers in the coming years.
One of the biggest strengths of RFID is that the technology applies to a huge number of different settings. Once sensors are installed within a warehouse or facility, they can be used to track everything from apparel to spare parts for automobiles. Once a business knows exactly where an item is and how long it spends there, this data can then be used to measure a variety of metrics, such as:
With such rich sources of data on hand, businesses gain access to in-depth insights on the efficiency of their operation and can identify areas that are causing bottlenecks in production or order fulfillment.
For D2C retailers who have total control over the end-to-end supply chain, inventory accuracy has long been one of the biggest challenges. When stock is moving through multiple selling channels and storage points, even the best inventory management system can struggle to identify exactly where inventory is located and how many units there are.
Traditional barcodes have a big margin of error due to the risk of them either falling off labels or being missed during the scanning process. Giving every garment of product a unique RFID tag eliminates the risk of inventory being duplicated or missed as proximity sensors that don’t require actual contact.
The COVID-19 pandemic has exposed the weaknesses of traditional supply chain management, especially the lack of visibility of products during transportation. Bottlenecks caused by port congestion and delayed shipping have left many businesses scrambling to get information on the whereabouts of their inventory.
By automating the ‘check-in’ of items at each link in the supply chain, RFID gives businesses a complete overview of their current activities and where slowdowns are occurring, enabling them to be proactive about finding solutions.
This real-time visibility also has major benefits once items are on the shelves or in storage. Many retailers have introduced cross-channel shopping initiatives including BOPIS (Buy Online, Pick-up In-Store) BORIS (Buy Online, Return In-Store), and curbside pick-up due to the pandemic, which requires a consistently high level of inventory accuracy. With RFID, every inventory location can report accurate numbers to facilitate rapid omnichannel fulfillment, allocating orders to the place that offers the fastest delivery time.
We’ve seen various iterations of smart packaging in the past few years, from chemicals that ensure product integrity to QR codes that communicate important product information to consumers. But the increasing affordability of RFID tags has made smart packaging a much more viable tool for managing supply chain traceability.
Smart packaging refers to product packaging that offers additional functionalities besides protecting or enhancing the appearance of a product. By integrating digital technologies with physical containers, packaging can communicate valuable information both to the wider supply chain and to the end customer.
For example, a package with an RFID tag could realistically be tracked all the way to the point of delivery. This would enable a retailer to offer real-time tracking of customer orders, helping to alleviate delivery anxiety and increase customer satisfaction.
For high-end brands, combating counterfeit products has been a long game of whack-a-mole; when one listing is removed, another inevitably takes its place. But luxury retailers are now taking an alternative approach by using RFID technology to provide better authentication of their products.
Streetwear brand Adidas has long been a favorite for counterfeiters. It recently strengthened its resale platform Infinite Play by partnering with the digital ID platform atma.io. By placing RFID tags in boxes, garments, and sneakers, Adidas can authenticate that a product is genuine as well as track the entire lifecycle of a product from manufacturing to resale. This transparency gives customers much greater confidence in their purchases.
RFID has gained new visibility with the rapid emergence of blockchain technology, which offers businesses a method for securing sensitive data gathered via RFID sensors. Keeping supply chain data from being hacked or tampered with is a key priority of retailers and logistics providers, especially where personnel are concerned. Digital ledgers allow businesses to establish a single record of supply chain activities that’s free from the human error associated with multiple data entry points and paper-based records.
In addition to confidential information, blockchain also offers an array of customer-facing applications such as supply chain transparency. Merino wool clothing brand Icebreaker was one of the first to launch a specific campaign from sharing this data, using to aptly named ‘baaa code’ system to give all garments a unique code. Customers could look these up on Icebreaker’s website to find out where the wool in their garment was sourced from. When combined with blockchain technology, such an initiative could gain even more legitimacy in the eyes of consumers.
As direct-to-consumer operations continue to grow, we can expect to see RFID become a more attractive investment for retailers who require higher levels of supply chain visibility in an omnichannel environment. As consumers increasingly expect companies to demonstrate their social and environmental credentials, RFID presents a cost-effective option for both gathering and displaying evidence of ethical supply chains. When combined with other emerging technologies like blockchain, RFID becomes an immutable record of business activities that provides immense value in efforts to optimize transparency and efficiency.