tracking inventory
with RFID technology

Author: Sue Poremba

Retailers may already be familiar with real-time radio-frequency identification (RFID) technology thanks to contactless credit cards, but there's more to RFID than offering an easy way to pay for merchandise. Retailers can use RFID tags for tracking inventory and to follow its supply chain from stock levels to customer order history, all in real time.

How does RFID work?

RFID is a technology with code embedded into tags or labels that radio waves then send to a reader device. It is part of the Automatic Identification and Data Capture (AIDC) technology family, and it uses automation tools to identify, track, store and verify an array of products. The most familiar AIDC technology is the barcode found on just about every item today, but it's also the basis of RFID.

RFID technology is used across most industries, often in subtle ways, such as employee badges that grant access into a building or restricted area. Businesses can use RFID integrated with GPS to integrate a computerized maintenance management system (CMMS) to track and manage assets, both on-site and spread across locations. This is particularly helpful for companies with large vehicle fleets or remote sites with equipment that needs regular maintenance or needs to be managed from a distance.

How does RFID work in retail?

As an inventory tracking system, RFID offers visibility throughout the entire supply chain journey. But RFID has three primary use cases in retail: tracking inventory, store operations and in-store product patterns.

Tracking inventory

An RFID inventory tracking system helps provide accurate, real-time inventory availability data for buy online, pick up in store (BOPIS) or buy online, ship to home sales. Tracking inventory with RFID tags helps stores know what is in their inventory at any given time, so retailers are less likely to be caught short on popular items while more easily identifying which items are not selling very well. When new shipments arrive in the store, they are instantly entered into the inventory system rather than requiring an employee to individually scan each item's barcode. The inventory within the store can also be produced quickly for audits.

Store operations

For the second primary use case—store operations—store floor space is limited, and retailers want to offer as diverse a selection as possible for customers. But as any shopper knows, it can be frustrating to search through a selection of popular products only to find everything except the exact one a customer needs. How does RFID work in this case? The technology can alert store employees to the missing size/color/design on the floor or can direct them to find it quickly in the stockroom. As more customers are ordering online for in-store pickup, RFID tagging can offer quick and accurate product updates so that customers know if the item they want is out of stock or on order.

In-store product patterns

While the two above areas may seem like clear-cut uses for RFID technology, retail managers who use RFID for in-store product patterns are thinking outside the box. Tracking inventory through RFID offers retailers a glimpse at how shoppers move around the store, which means displays can be set up to maximize purchases and improve the overall shopping experience. For example, will a shopper be more likely to purchase a pair of sneakers if they're located closer to athletic wear, or does that shopper purchase more items if they have to walk past the jeans and sweaters to get to the shoe section? How does grouping ingredients for meals improve the grocery shopping experience? RFID can help create the right flow throughout the store and may enhance the entire customer experience, which could increase sales.

How does RFID work beyond inventory?

Tracking inventory efficiently is a top benefit of RFID tags. With better inventory control, RFID gives retailers more control over their profit and loss margins. But control over these margins goes beyond tracking inventory. RFID tags let retail management track:

  • Items taken from shelves and racks: With GPS-enabled tags, retailers know where items are at any time—including items that are in fitting rooms and items randomly dropped off in other locations. That's especially valuable for perishable items taken from refrigerated cases or small items like nuts and bolts dropped in the wrong bin at the hardware store.
  • Theft: Shoplifting is a serious problem for a retailer's profit/loss margin. RFID tags create real-time alerts for theft, and the data sent to the software offers valuable information, such as the time of day the theft occurred and the items stolen. This information can also be used to help in prosecution.

RFID technology can take retail into the age of digital transformation. Digital enhancements that improve supply chain and inventory management only improve the customer's shopping experience, and in the end, it improves the retailer's overall profit and loss margin.

The author of this content is a paid contributor for Verizon.