RFID vs. Barcode: Why Inventory Processes are Seeing Red

At a company I previously worked for, we implemented solutions for tracking inventory. We were using a 3rd-party-supplied mobile platform to track inventory and push all the data into a big, expensive, well-known asset and business process management suite. The companies involved were all Gartner magic-quadrant vendors, but the reality was that the solution still generally sucked, as most all such software applications do. Don't get me wrong, these companies are pushing hard, but they're still light-years behind where they could be.

It turns out that inventory management is hard to improve upon without taking on a big, risky investment. Thus, in most companies, cycle-counting is still a drudgery and though mobile apps have improved this a bit, its still a big tedious effort. And yearly inventory audits are generally still nightmarish. You would think that there's enough money tied up in these processes that someone would have solved it by now.

They tried to solve it with RFID. That was the darling concept of the mid-to-late nineties. Companies fell over themselves trying to find out the merits of this ground-breaking idea. Some, such as America's largest retailer, even made bad PR mistakes by touting their forward-thinking inventory requirements which all hung on implementing RFID. Turns out, most business analysts couldn't get past the one sticking point with using RFID for inventory:

• It doesn't really solve any inventory problems.

The core of inventory management is knowing what you have in stock, not just guessing. Waving an RFID wand at a box or a shelf or walking a box of parts through an RFID gateway may give you a warm fuzzy feeling, but what it doesn't guarantee is an accurate count. It provides a guess. And by that I mean, unless you open the box or climb up on the shelf, you can't really tell if the inventory count is correct, or if some sneaky person just left the RFID tags and took the item or if there is a piece of lead sitting on top of your item.

RFID is generally an expensive way of giving you a guess as to whether there is really inventory that you expect to be there, and that really is the best case. Its expensive because the good tags aren't cheap and the inexpensive ones aren't detectable from a distance. If you have a warehouse of any size, rolling out an RFID implementation can run in the 6-digits from the expense of the tags themselves to the labor cost of training of workers and the actual installation of the tags. And when its all said and done, you have software and hardware that lets you guesstimate the inventory count. Nice.

Where RFID shines is in larger assets where you only want a sanity check. For everything else, its line-of-sight plus paper or good old red-laser barcoding.