Benefits and Drawbacks in Using the RFID (Radio Frequency Identification) System in Supply Chain Management

Abstract

In 2003 Wal-Mart, the world’s largest retailer announced that it would require from its top 100 suppliers to tag pallets and cases of goods with radio-frequency identification (RFID) tags. Radio-frequency identification (RFID) is the wireless non-contact use of radio-frequency electromagnetic fields to transfer data, for the purposes of automatically identifying and tracking tags attached to objects. This system was born in 1999 at MIT (Massachusetts Institute of Technology) when a consortium formed of professors, researchers and supply chain professionals created a global standard system for RFID. This paper explores the benefits and drawbacks of using this technology in supply chain management. Its ten year old history shows that, even at the beginning a lot of professionals were carried away by its implementation in supply chain, many companies found it difficult to measure the return on investment of this system as the cost of deployment is rather high. As a market survey executed by IDTechEx Research shows that the turnover of the RFID market was $7.88 billion in 2013 and no less than 5.9 billion tags were sold the same year, the RFID technology plays an important role as it is deployed in many different application areas, especially in supply chain management. This paper argues that this technology can be very successfully implemented in order to improve the supply chain system and improve the value added offered to the clients, as long as the professionals make an accurate assessment of the investment needed for the implementation.