How RFID Transforms Inventory Management

If you are a retailer, managing your inventory must be a great challenge. Companies are under constant stress to reduce the operational challenges to improve customer satisfaction. It is always important to focus on inventory management efficiency more effectively. 

Of course, there are several traditional methods used for inventory management. I am sure you might be using techniques like manual inventory tracking and barcode scanning systems. However, businesses today are looking to explore new technologies. They want the solutions for the best possible competitive advantage. 

One such innovation is RFID (Radio-Frequency Identification) technology. RFID has the potential to transform inventory practices in warehouses, retail stores, logistics, and manufacturing facilities. 

This blog will take a deep dive into using RFID for inventory management, its pros and cons, and cost factors. We will also discuss the applications and how it compares to barcode systems.

What Are RFID Tags and How Do They Work?

So, what is RFID, and how does it work? Before we can utilize technology for efficient inventory management, we must first learn the basics of RFID tags. 

RFID uses the radio frequency for identifying and tracking the items through the small and smart devices called RFID tags. Each tag contains a microchip and an antenna. These tags store and transmit data. An RFID reader sends out signals that activate the tags. This allows the data to be read or even updated in real time.

The best part of the RFID tags is that it is in complete contrast to the barcode scanners. A bar code scanner needs you to have a clear line of sight. RFID tags can be read from anywhere. They can be checked even when placed in challenging environments. Their protective covering also makes them versatile for use on various surfaces, from cardboard to plastic containers and even industrial equipment.

Types of RFID Tags Used in Inventory Management

Primarily, there are two types of RFID tags used in most of the industries. Both find a practical usage in inventory management. 

Passive RFID tags 

These RFID tags do not have an internal battery. In fact, they are powered by the signals from the RFID readers. One of the best benefits of the passive RFID tags lies in the fact that they are lightweight and highly cost-effective. 

You can use these types of RFID tags in retail inventory systems, libraries, and supply chain tracking.

Active RFID tags 

Obviously, these RFID tags have an internal battery. The presence of a battery makes them capable of being read from longer read ranges. In fact, they have a range of hundreds of meters or even more. 

However, the active RFID tags are more expensive than the passive tags. They are typically used in tracking large equipment, shipping containers, trucks, and railway cars.

Tip - Passive tags are ideal for high-volume inventory tracking, while active tags are suited for logistics, transportation, and asset monitoring.

Pros of using RFID tags in Inventory management 

Well, adopting RFID technology in warehouses and retail stores helps you in several ways. It comes with multiple benefits –

Improved visibility and speed 

A few ways that RFID tags speed up the inventory management include 

• You do not need line of sight, as in the case of bar code scanners. 
• The tags are easy to read from any angle or orientation, as well as from longer distances. 
• It helps you with real-time inventory tracking and stock updates.
• The real time scans can help avoid the stockout, understock or overstock situations. 

Reduced labour costs 

The RFID tags do not need a huge workforce to handle them. 

• These tags help with an automatic check-in, stock counting, and shipment verification.
• You do not need to depend on manual scanning and human labour. 
• It can be helpful in achieving a higher degree of efficiency in peak sales seasons.

Tracking returnable items 

• The RFID tags can also access pallets, bins, and shipping containers.
• This can help avoid the possibility of theft, loss or even misplacement
• You will be able to save a lot on returnable transport items (RTIs).

For companies with large-scale operations, RFID can significantly increase operational efficiency and reduce errors.

Cons of Using RFID in Inventory Management

Well, RFID is a really promising technology. However, just as with any other technology, it also comes with a few disadvantages. 

How about checking out a few disad      vantages that you are likely to face with the use of RFID tags? 

Limited scanning ability

RFID tags have a great scanning ability. However, that does not mean they are all-powerful. 

• They cannot be scanned using smartphones. This is something only bar codes are capable of
• You need to have specialised RFID scanners or readers 
• It is still not accepted universally as yet.

Higher costs for scaling

This can be a limiting factor in small scale industries.

• RFID implementation may be a bit expensive. More so when you compare them to the bar code scanning 
• You will need specialised hardware, tags and antennas. 
• You may also need vendor specific services, and that may affect the flexibility.

High infrastructure demands

RFID tags may require a significant investment in infrastructure. 

• It can be a bit complex to set up in a large warehouse 
• It needs a complete integration with inventory management software.
• You may also need to implement upgrades in the IT infrastructure and networks. 

Security issues

Sometimes, RFID tags may also raise a few security concerns. 

• The RFID tags can be hacked or cloned. This can give rise to risks in the retail industry.
• It may also give rise to unauthorised access and thus result in a leak in the sensitive supply chain data.

Thus, RFID provides automation and speed. But businesses must weigh these against infrastructure demands and security vulnerabilities.

RFID Tags vs. Barcode Labels

While bar codes are widely used in warehouses and other related industries, RFID technology is gaining an entry into the sector. 

Advantages of Barcodes

Here are a few advantages that you stand to gain with barcodes –

• Low cost and widely adopted.
• Highly accurate and reliable when scanned.
• Durable solutions like Metalphoto barcode labels work in harsh environments.
• Universal compatibility with mobile devices

Also read: RFID vs. Barcode for Inventory Management: A Detailed Comparison

Limitations of RFID tags

• Struggles with metallic and liquid surfaces.
• Requires special measures to avoid signal interference.
• Costs significantly more than barcodes.

In many of the industries, barcodes remain the most practical and cost-effective option. However, RFID has been making inroads in the sectors that need automation, speed, and asset visibility. 

Costs of implementing RFID

The cost of implementing RFID may be a bit prohibitive, but you stand to gain a host of other advanced benefits. However, the actual cost would largely be based on multiple factors. It would depend on scale, industry, and infrastructure.

The initial costs of RFID implementation

Here is a cut down of the possible initial costs of implementing RFID tag technology –

• RFID readers: $1,000 to $3,000 for passive readers.
• Cabling, antennas, and installation expenses.
• Integration with warehouse management software (WMS).

Costs of the tags

• Passive RFID tags: $0.05–$0.15 each.
• Active RFID tags: $5–$15 each (up to $50 for advanced versions).

Ongoing costs 

In addition to setting up the RFID technology, there are a few costs that are ongoing in nature. 

• Licensing and software maintenance.
• Replacement of damaged or lost tags.
• System upgrades and security enhancements.

Looking from the cost perspective, it may remain a major drawback for the small and medium scale industries. However, the implementation may prove to be effective for the large enterprises. 

Partnering with the providers like retailcloud should help you get the best deals on the best possible RFID implementation for your business. 

Also read: How a Warehouse Management System Can Transform Any Business

How RFID works in a Warehouse?

The way an RFID implementation works in a warehouse may differ slightly. It should be based on whether you are using passive or active RFID technology. However, the overall functionality of the technology in a warehouse remains the same. 

Here is the process involved:

• When an item is sent to the warehouse, it will have an RFID tag attached to the consignment. The tag may be attached to the entire load or to the individual items. The tag contains the info on the items in the consignment. 
• As soon as the items arrive at the warehouse, the scanners will read the information on the consignment. These scanners are strategically placed in the warehouse. 
• The read data is transmitted to the central database. The system will record the data that includes Real-time stock levels, Automated verification of shipments and Movement of goods within the warehouse.

This automation reduces manual errors, speeds up receiving and dispatch processes, and improves inventory visibility across the supply chain.

Real-World Use Case: RFID Adoption in Professional Sports

The impact of RFID technology extends far beyond warehouses and retail, professional sports teams across the United States are leveraging it to optimize their operations. From managing massive inventories of uniforms, gear, and merchandise to ensuring that equipment is ready and accounted for on game day, RFID provides the accuracy and efficiency that traditional manual methods cannot match.

Many of the most recognisable names in American sports have already embraced RFID inventory management. In the NFL, teams such as the Dallas Cowboys and Buffalo Bills utilise RFID to streamline equipment tracking. In MLB, the New York Yankees and Tampa Bay Rays rely on the technology to manage uniforms, bats, and other essential items. Within MLS, clubs such as Austin FC and the Columbus Crew ensure that training and matchday gear are always organised and accessible. 

The NBA has also adopted RFID widely, with elite teams like the New York Knicks, Chicago Bulls, Los Angeles Lakers, and Philadelphia 76ers implementing it to bring new levels of precision to equipment management.

The NHL showcases similar adoption, with the Chicago Blackhawks, Tampa Bay Lightning, Los Angeles Kings, New York Islanders, and Philadelphia Flyers leveraging RFID to track everything from jerseys to sticks and skates. Even the rapidly growing NWSL is seeing adoption, with the Kansas City Current applying RFID to streamline their logistics and inventory processes.

Across all five major U.S. sports leagues, as well as in emerging professional leagues, RFID is proving indispensable. It not only reduces human error and saves time but also ensures that teams can focus on what matters most: performance on the field, court, or ice. The widespread adoption of this technology by world-class organisations underscores its value as a trusted solution for modern inventory management

RFID and Inventory Accuracy

Well, yes. That is a valid question. Does RFID improve inventory accuracy? Studies have shown that RFID tags and RFID systems improve the accuracy levels as they help in avoiding human errors. 

In fact, it is shown that the inventory accuracy has improved by over 13%. It is also shown that the possibility of out-of-stock situations is reduced to as much as up to 70%. The better product availability should further increase the customer satisfaction. 

In warehousing environments, the ROI depends on balancing accuracy improvements with system costs. Businesses handling high-value or fast-moving inventory gain the most benefits.

Conclusion

RFID in inventory management offers transformative benefits like real-time visibility, automation, and improved accuracy. It significantly reduces manual errors and enhances supply chain efficiency. However, its high implementation costs, infrastructure demands, and security risks make it less practical for every business.

For large enterprises managing high-value goods or critical assets, RFID can deliver a strong ROI. But for small to medium businesses, barcodes remain the most cost-effective and widely adopted solution.

Ultimately, the decision comes down to balancing cost, scale, and operational needs. RFID is not a one-size-fits-all solution. But for industries requiring automation, traceability, and precision, it is undoubtedly a game-changer.

FAQs

Can we have an example of RFID implementation? 

A good example that should help businesses understand the RFID implementation is that of Walmart. They have implemented the system in more than 5000 stores globally. They have shown to the world how it helps in real time stock tracking and faster reckoning. 

What is the approximate cost range of RFID implementation? 

The cost will largely depend on the type of RFID tags used. A typical passive RFID implementation should cost around 10 to 15 cents per tag. Of course, the prices would be lower if you buy the tags in large quantities. Advanced or active tags would cost around 50 cents to $50 per tag. 

What are the benefits of using RFID in warehouse management?

The use of RFID tags in the warehouse ecosystem can be helpful in many ways. A few ways that it can be helpful can include 

• Automated inventory transactions.
• Improved shipping accuracy.
• Reduced labour dependency.
• Prevention of stockouts and overstocking issues.