The Supply Side: RFID advances coming to retail sector, supply chain

Radio-frequency identification (RFID) is going two-dimensional (2D) with enhanced capabilities in the supply chain. While RFID is not new and widely used in retail, 2D adds more transparency and provides customers with more information about the product.

Mike Graen, with Collation LLC, has been involved with RFID for 20 years working in the supplier community with Procter & Gamble and Walmart on various RFID iterations. He said this time is different because tag costs are lower, and the technology now offers more granularity when item tags are serialized with a unique identification number like a car’s vehicle identification number (VIN).

He said the industry is moving toward 2D barcodes that can carry more information. The 2D barcode also provides a single standardized way to meet supply chain needs and evolving consumer requirements.

GS1, which sets the industry standards for RFID, will bring the 2D barcodes into retail by 2027 to ensure that checkout stations can read 2D codes. Gena Morgan, GS1 vice president of standards and technology, is responsible for helping businesses solve supply chain challenges and meet industry requirements by adopting and using GS1 Standards.

Morgan said GS1 has worked with scanner makers to ensure readers could quickly scan the 2D codes. She said most systems in use will require a firmware update to be activated, and most will push that out within the next year, well ahead of 2027.

The information carried by 2D barcodes can provide improved inventory management for retailers and suppliers, greater sustainability and ethical sourcing practices, better product authentication and greater brand trust, Morgan said.

Graen said RFID has become mainstream, and most consumers aren’t aware of when it’s being used. He said toll road tags use RFID technology that is read by scanners through radio frequencies and passed to local software and cloud infrastructure. He said airlines use the technology on luggage tags to ensure the bags get routed correctly and tracked by passengers with their smartphones. He said employers who use badges to enter office buildings likely use RFID. Graen said microchips placed in pets also use RFID technology. The chip is a unique identifier for that pet that can be traced back to its owner if scanned with a reader.

Graen said RFID gives retailers inventory accuracy rates between 95% and 98%, up from 45% to 65% without it. He said the only way a retailer offers consumers shopping online with options to pick up in-store is to have an accurate inventory of 95% or greater. He said RFID has been instrumental in retailers selling products through multiple means (omnichannel) because they can always know where their specific inventory is.

Smaller retailers like Lululemon know when an item goes into the dressing room because of RFID. Macy’s uses RFID with unique serial ID numbers to reduce theft and improve overall asset protection. For instance, when Macy’s receives goods from its suppliers the items are scanned into the inventory system with each unique ID number logged. The retailer knows it has 10 red leather jackets and how many in each size. Each time a jacket is sold and the RFID tag is scanned at checkout, that number is subtracted from the inventory. Macy’s can check the actual inventory against the log at any time and quickly see if any items have been stolen.

Graen said that when the store can prove it had the item and it was never paid for, then the retailer can reclaim those stolen items if found by police at fence locations. Also, the technology prevents return fraud by consumers because the store would know it was never purchased. He said retailers that do not use unique serialized data cannot know what is leaving the store without payment.

He said retailers from Walmart to Nordstrom now use advanced RFID because the benefits far outweigh the costs. While it may never make sense to code a watermelon, he said most grocery items, particularly those with expiration dates, use RFID because the expiration date can be part of the unique serial number.

In the case of food recalls, items with unique serial numbers are more accessible to identify. If there is a food recall, the manufacturer can tell which plant was involved, and the exact products from that impacted line can be located and pulled from shelves or freezers. Without serialized RFID, manufacturers would have to tell retailers to remove all the products off the shelf, even the items not impacted.

Graen said 2D RFID also allows for product authentication and can prevent knockoff products from being passed as the real thing. In the case of pharma, he said retailers requiring unique serial identification from suppliers can guarantee the product is from the manufacturer.

The 2D tags closely resemble a QR Code and include the global trade item number that traditional RFID tags carry but also hold more data in a smaller footprint. Many companies print traditional barcodes and QR codes on their packaging. The 2D barcode will be the only code they need.

Graen said companies like PepsiCo are embracing 2D RFID because they can embed their QR Code into the barcode, which allows customers to scan with a smartphone and get information about Pepsi products and services. He said some progressive brands see the update as an opportunity to provide information to customers who want to know product sourcing and its carbon footprint.

Graen said all major retailers are well aware of the 2D barcode transition period, and most will make a move earlier than 2027 because of the benefits. He said that in the next year retailers and brands should begin testing the technology with their partners and evaluating the results.

“It’s been a long time coming, but the enhanced 2D barcode technology will help retailers and suppliers better manage their businesses on the front and back end, and the costs are low enough to favor adoption,” he said.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Firebend.