RFID (Radio Frequency Identification) tags

Tracking your inventory is a key requirement in running a business. Whether you do it manually with stock cards or bar code scanners, you need to know how much you have to sell and when you run out of stock. You want to make sure you have enough to cover your market’s needs and allow for enough stock to hold you (lead time) between the time you order and the delivery of the new stock. This is very important since you don’t want to lose a sale because you run out of stock.

Unfortunately, most of our retailers still prefer to be low on stock and therefore, the infamous response from the saleslady is "out of stock." (Why these retailers don’t care about being out of stock is the subject of another column.) The other side of the inventory spectrum is having too much stock. This means your working capital is tied up with a slow moving product. You need to hit a balance.

For globally competitive companies, technology has evolved into something more accurate. They are now using RFID (radio frequency identification) tags.

This technology is not new. It is the same technology currently used here with the E-pass for the South Luzon Expressway toll booths.

The cost of these RFID tags, normally the size of a ballpoint pen, has been declining in the last few months; they now run between 10 US cents to a dollar. (Hmmm…I wonder how much the supplier charged for the South Luzon Expressway that the toll way operator is charging motorists about P2,000 each or $30 plus; what a margin.) The readers run up to about $2,000.

RFID in healthcare. According to Forbes Magazine, mistakes in prescribing, delivering and taking drugs cost $75 billion a year in medical care, lost work time and lawsuits. More importantly, these mistakes cost about 100,000 lives a year. Better tracking of drugs could also curb counterfeiting, which accounts for up to 10 percent of the world drug market.

Johns Hopkins, the famous hospital and medical school, will use it to keep track of medicines. In a pilot project, the hospital plans to embed tags in each intravenous (IV) bag label, holding data on the patient and the dosage. The bag is tracked at several points on the route from the pharmacy to the nursing wards’ medication rooms. Pharmacists will be able to follow the progress online, just as FedEx packages are tracked on the Web. Each lost IV bag costs about $6, but what is more critical is if the bag is served to a wrong patient. The cost may be the life of the patient and the loss of the hospital’s reputation.

The Red Cross is planning to run a pilot test using RFID to track blood packets, and several drug makers are experimenting with RFID in distribution and packaging centers. Pharmacy chains, hospitals and HMOs hope to use the technology on boxes of drugs to aid in recalls.

RFID and consumer goods. Walmart is now asking its top 100 suppliers to tag the cases the goods are shipped in. This is still reasonable since they are not yet requesting to tag down to the product. However, when Walmart asks, you better comply or else you are off the suppliers’ list. This tagging will enable Walmart to see the goods in process from China to the stores’ shelves.

In consumer electronics, Dell, which has always been ahead of the curve in both business model and supply chains, is RFID-tagging its parts worldwide for assembly in its plants. Once an online order is received, it is transformed into radio signals that wake up machines picking up automatic parts to assemble each PC. It also transmits the assembly blueprints to the workers and the shipping tags. The whole process can be tracked online.

My Two Cents: In a few years, for those who are security-conscious, it might make sense to RFID-tag your kids. Then again, some ingenious wives may just tag their wandering husbands and track their extra-curricular habits.

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Dickson Co is CFO (C is for Cheap) for Dfnn, Intelligent Wave Philippines and HatchAsia.com. For comments or suggestions, e-mail [email protected].