Found Money – How RFID Can Boost Your Profitability Over Handheld Barcode Scanning

Treasure Chest

Ask yourself:

  1. How much did I waste on extra physical inventory counts last year? Probably enough to buy another forklift or two or upgrade the dock doors or pay out a holiday bonus.
  2. How many transactions do I process? 1000 a day?  That’s about $50K a year to collect data.  How much more product could you make and sell if you put that $50K back into operations?
  3. How many workers have been diverted from production to “searching” for materials or finished goods that are lost and need to ship? Probably one or two.  How much double ordering or spoilage do you deal with?  Warehouse efficiency can probably increase profitability by over $100K.
  4. What is the cost of bad or missing data? You paid six figures for your ERP system.  How are you generating an ROI if you are not feeding it data?  Were you promised 2-3 points of improved profit margin?  That’s about $500K/yr for a typical manufacturer using ERP in the US and you are probably missing out on most of it because you have missing or bad data.

Together, that’s probably over $500K/year in additional profit for a typical manufacturer.

The necessity of a direct line-of-sight between the scanner and tag in barcode systems can often lead to frustration. Think about that can of soup at the supermarket checkout that the cashier waves over and over and you’ll better understand how your warehouse or production line workers feel searching for the barcode on a pallet or trying to get it to read through the shrink wrap once they’ve found it.

While that wasted time may see miniscule compared to total time of production and distribution, most managers can agree that when added up, those seconds could lead to a major time inefficiency.  At 30-45 seconds per transaction, you are probably spending a lot of money to read barcodes each quarter.  An even bigger risk is that the frustration may build to the point where workers just stop scanning and your six figure ERP system has no data going into it!

RFID eliminates the line-of-sight requirement and makes taking inventory seamless and hassle-free. RFID can also read multiple tags at a time whereas barcode scanners can only read a single tag at a time. This allows you to read tagged “each’s” inside a case without unpacking it.  Or read a pallet without getting off the forklift. You can cycle count an area without pulling out all the pallets.  And don’t forget the times the barcode is unreadable because it gets ripped, smudged, or fell off.   RFID tag durability and the ability to reuse RFID tags make it more reliable option for the manufacturing and warehouse environment.

So now, with RFID, transaction time becomes 10-15 seconds instead of 30-45.  Employees are more likely to scan consistently.  Better yet, moving from a hand scanner to an automated RFID read station or portal allows for the scanning to occur with no human intervention.  That means you are eliminating the human element in your data and you are freeing up worker time to produce instead of capture data.

Addressing our profitability points:

  1. Using RFID will make it quicker and easier to scan items in the warehouse. This means employees are more likely to scan so you have more complete and better data.  Adding an automated RFID portal allows you to audit the “put-aways” and provides the means to enforce scanning and correct errors as they happen.  RFID therefore reduces the number of physical counts required and reduces the time required to complete them since line of sight is no longer required and not every item needs to be pulled from the racks during the count.
  2. Eliminating line of sight requirements by using RFID speeds scanning time from 30-45 to 10-15 seconds per transaction. Easier scanning increases the likelihood that every item will be scanned.  Transactions cost less and employees are freed up to produce more.
  3. As in #1, better scanning and the ability to monitor and enforce it using automated RFID portals means your inventory data will be correct and you will know what you have and where it is. No more “searchers” and no more double ordering or spoilage because you can’t find it.
  4. RFID clearly helps in the warehouse as we’ve described above.  But those same benefits apply in production by using RFID portals and RFID read stations to automatically issue materials and production track with no human intervention.  For ERP systems to deliver on their promises, they need accurate data fed to them and automated RFID scanning allows this to occur.  Not only do you unlock the benefits of your ERP system, your ongoing cost of data capture in production becomes nearly zero since the scanning is automatic.  In addition to the profitability boost, you are also improving your traceability and bringing down cost of compliance!