RFID in the Supply Chain: Benefits of Implementation
Over the last few decades, Radio Frequency Identification (RFID) technology has evolved into a necessary component of modern supply chain management. With its ability to automate real-time tracking, data capture, and inventory management, RFID has become vital for companies seeking to improve competitiveness and increase operational efficiency.
Below, we outline seven benefits that RFID brings to the supply chain. However, before we dive into those, let's first take a look at the history of RFID use in the supply chain.
Decades of RFID improving the supply chain efficiency
In the late 1990s to early 2000s, RFID began to enter the commercial supply chain space, particularly in the retail and logistics sectors. One of the most significant milestones came in 2003, when Walmart's top 100 suppliers were required to tag pallets and cases with RFID. This was the moment that drew global attention to the potential of RFID in supply chain optimization.
Technological advancements, including lower tag costs, more compact and powerful readers, and cloud-based RFID platforms like FactorySense, have facilitated the wider adoption of RFID technology. By the mid-2010s, companies such as Zara, Amazon, and Delta Air Lines had begun using RFID at scale. RFID also experienced strong uptake in the pharmaceuticals, automotive manufacturing, and food logistics industries, where traceability and compliance are crucial.
In more recent times, as Global Market Insights reports in 2024, the global RFID market was valued at USD 16.8 billion and is estimated to grow at a CAGR of 12.7% from 2025 to 2034 with one of the key drivers for the RFID market is the increasing demand for supply chain visibility and efficiency.
Benefits of The Usage of RFID in The Supply Chain
RFID technology delivers a wide range of advantages that go beyond basic tracking. From automating data capture to save labor costs, to improving inventory accuracy with automated scanning, to reducing operational delays and enabling better partner collaboration, read about six of the greatest benefits below.
1. Location, location, location
RFID provides real-time tracking capabilities that enable companies to know exactly where their products are at any time. That is especially important when third-party logistics providers are involved in handling them. This visibility is essential when multiple partners are involved in the supply chain, as it ensures accountability and reduces delays. Moreover, RFID plays a crucial role in asset tracking, such as tools and equipment, by not only locating items but also monitoring their calibration schedules. Companies can automate checks for tools due for calibration or maintenance, ensuring compliance and reducing manual errors.
2. Tracking and Managing Inventory
With RFID, businesses gain precise control over inventory levels at all stages of the supply chain. This means no more manual counts and up-to-the-minute inventory data. This results in a reduction of stockouts and overstocking while streamlining warehouse operations.
Eskimo Cold Storage, a frozen foods logistics company in Georgia, implemented an RFID system that has saved it $100,000 in four months, with projected annual savings of $233,000. The company installed RFID readers and antennas at the entrances of 20 aisles in its massive cold-storage facility, which holds 32,000 pallet positions, to improve pallet tracking accuracy. This system enhances efficiency by automatically confirming pallet locations as goods are stored or retrieved. In practice it shows in minimizing manual searches, labour costs, and customer chargebacks for missing products.
3. Easier and More Reliable Returning of Items
Many companies face the challenge of managing returnable transport items (RTIs), such as pallets, bins, and totes, especially when third-party logistics providers are involved. These reusable assets are often misplaced or delayed in their return, resulting in unnecessary purchases, increased operational costs, and inefficiencies throughout the supply chain.
RFID streamlines this process by assigning each RTI a unique digital identity that can be tracked. Readers instantly capture location and movement data without any manual scanning, enabling companies to monitor asset usage, return compliance, and condition. This reduces shrinkage, improves asset utilization, and supports sustainability efforts by minimizing waste and overproduction.
4. Combating Counterfeiting
Counterfeit products pose a serious issue in industries such as pharmaceuticals, electronics, and luxury goods. RFID tags help authenticate items by storing unique identifiers that can be traced back to the manufacturer. This ensures that customers receive genuine products while providing companies with the ability to trace products for recalls or fraud investigations. Additionally, RFID technology can track the quantity of products or components by country of origin—data that supports accounting and strategic planning for tariffs and trade compliance
Louis Vuitton began embedding RFID microchips with a unique digital ID, securely storing manufacturing details such as production location, date, style, and serial number. When a bag is serviced or returned, store staff can scan the RFID to instantly confirm authenticity—eliminating ambiguous date-code checks and simplifying verification processes.
FactorySense has helped many defense and aerospace companies achieve similar benefits through RFID monitoring and authentication.
5. Cross-Docking Without Delays
Cross-docking is a way of handling goods in a warehouse where products are not stored for long periods. Rather, they arrive and are quickly moved directly to outgoing trucks for delivery. This process helps companies save time and reduce storage costs. RFID enables cross-docking to be much faster and more accurate by automatically identifying shipments as they arrive. Instead of scanning each item by hand, RFID readers instantly recognize the tagged items as they appear at arrival docks and send that information to the system. This allows workers to know exactly where each product should go, eliminating the need to search or check labels. As a result, goods spend less time sitting in the warehouse, fewer mistakes are made, and products reach customers or stores much faster. It's an efficient way to move items through the supply chain without unnecessary delays.
6. From Parts to Product
RFID WIP tracking allows manufacturers to monitor the progress of materials, subassemblies, or components as they move through the production line. Each item has an RFID label that is scanned automatically at various checkpoints. This identifies bottlenecks, errors or missing steps and provides performance analysis.
An aircraft manufacturer utilizes RFID tags to track components, such as wiring harnesses, panels, and engine parts, during the assembly process. As each part moves through different workstations, RFID readers automatically update its status in the system. This helps the production team know which parts are installed into which work orders or manufacturing orders, which are still in progress, and whether anything is missing or delayed. It also facilitates quality control, as every step is recorded and traceable, which is critical, especially in a highly regulated industry like aviation.
7. Better Collaboration and Communication through RFID in the Supply Chain
RFID enables the collection and sharing of standardized, real-time data between supply chain partners. By integrating RFID with systems like Electronic Product Code Information Services (EPCIS), companies can benefit on multiple levels, like synchronizing operations, reducing disputes, and achieving joint visibility across shipments and processes. This leads to stronger vendor relationships and more agile supply chain networks.
Conclusion
Since late 1990s RFID technology has evolved into a necessary component of modern supply chain management, providing visibility, accuracy, and control. From real-time location tracking to streamlined returns and anti-counterfeit protection, the benefits are broad and deeply impactful. As demonstrated by global leaders, RFID is not a future-facing innovation, it's a competitive advantage. With adoption accelerating and technology costs decreasing, RFID is set to play an even greater role in driving supply chain resilience, agility, and performance in the years ahead.