How RFID Tags Are Redefining Inventory Management

April 25, 2024 - 11 minutes read

Radio frequency technology takes the benefits of barcoding to the next level.

RFID tags

©Andyd via

The idea of using radio frequency identification (RFID) to track the position of objects, people, and animals can be traced back to WWII, when radio waves reflected off of airplanes were used to identify friend vs foe. Over the years, RFID technology gradually found its way into highway toll booths, company badges, passports, and dozens of other applications. Improvements in RFID technology and smart labeling have led us to the dawn of the next great RFID application: Inventory Management.

RFID tags expand upon the benefits of barcode labeling by allowing detailed part and position information to be read without directly contacting, or even seeing, the item. As RFID is gradually adopted, the capabilities and benefits have the potential to redefine traditional inventory management practices.

“Any sufficiently advanced technology is indistinguishable from magic.” Arthur C. Clark

What are RFID tags?

RFID tags are tracking devices in the form of small tags or labels that use radio waves and a centralized antenna to communicate identifying information and position. Much like the QR codes found on dozens of common objects (including our TV screens), RFID tags act as smart labels with encoded information including serial numbers, part numbers, expiration dates, and item descriptions. RFID tags can also incorporate security features to prevent unauthorized access. The general categories of RFID tags include:      

  • Passive tags: This form of RFID tag does not require its own power source or transmitter to function. These tags typically have a range of up to 30 meters, which can be sufficient for many warehouse applications.
  • Active tags: Equipped with their own power sources, transmitters, and computer chips, this bulkier, long range form of RFID tag is often used for applications such as medical patient monitoring, vehicle identification, and livestock tracking.

Top applications for RFID technology

There are many other applications that significantly benefit from real time information on asset position, condition, and usage. As the internet of things (IoT) expands, wearable medical products like vital sign sensors are among the devices that continue to improve our lives by streaming information to the cloud for analysis.

In enclosed warehouse spaces, inexpensive, passive RFID tags communicating via high-frequency radio waves establish their own private IoT for retailers, warehouse managers, or distribution center leaders. While logistics pioneers like Amazon and Walmart were among the first to deploy this new technology, the combination of low (and getting lower) cost, ease of use, and efficiency will continue to accelerate RFID adoption.

Boxes in a warehouse

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6 ways RFID tags are redefining inventory management

Many of the benefits of RFID technology for inventory management are obvious. Modern warehouses and distribution centers house millions of continually circulating items, and RFID tags significantly reduce the legwork and repetitive tasks required to accurately monitor the flow of goods.

1. Remote (real time) tracking  

The adoption of barcoding technology 50 years ago represented a quantum leap in real time inventory management, with portable scanners allowing workers to quickly process inventory transactions from any location. RFID tags build upon this technology in two important ways. First, the scanning process can be performed remotely, meaning items can be located, transacted, or counted from a distance. In addition, RFID tag scanning does not require an unobstructed line of sight, making it easier to locate and scan items in a crowded space.

While it might sound overwhelming to track and monitor large swaths of inventory from a single radio antenna location, automation and machine learning are evolving in lockstep with RFID technology to enable real time data to be collected and analyzed more efficiently.

2. Automated cycle counts  

Cycle counts and inventory audits continue to be time-consuming and error-prone processes, dreaded by many retailers and warehouse employees. IRS regulations require public companies to complete physical counts at least once per year, but cycle counts at fixed intervals are a common (and advisable) practice. RFID tags can accelerate and improve the inventory counting process by:

  • Minimizing trips to and from part locations
  • Ensuring less visible items are not overlooked
  • Allowing for simultaneous counts of parts in different areas
  • Reducing the errors associated with manual counts
  • Minimizing disruptions to everyday operations

RFID technology integrated with inventory management and warehouse management software allows updated and reconciled counts to be reflected instantly across multi-channel commerce platforms.

3. Location visibility

One feature of RFID tracking not shared by QR codes or conventional barcodes is the ability to locate objects in space. This capability is the primary benefit of RFID for applications like livestock monitoring, airport baggage tracking, and hospital asset management. RFID readers emit radio waves that allow object tags in range to be read and monitored. This saves valuable time when assets are spread out over a large area.

Location visibility is also a key benefit of RFID for inventory management. As the technology and range of ID tags continue to improve, it will become easier to track millions of items effortlessly, with a virtual representation of inventory status at any given time. RFID tags also speed up processes like shipping and receiving by minimizing manual scanning and human error to improve efficiency.

4. Loss protection   

RFID tags have been utilized in the retail industry for decades, and their deployment has experienced a recent uptick. 61% of retailers plan to use RFID technology by 2026. Unfortunately, this increase is primarily due to rising theft and loss rates, but many retailers also recognize the additional benefits. Much like modern warehouses, large retail spaces present challenges in locating items quickly and tracking inventory in real time. RFID tags make it possible to increase the frequency of retail cycle counts and mitigate shrinkage before it impacts customer order fulfillment.

“Shrink is an issue where you’ve got a problem, but there’s no way to know exactly where the losses are coming from.” Richard Hollinger

5. Improved logistics  

The term logistics is sometimes confused with inventory management, but the overall process of managing how resources are acquired, stored, and transported takes on a much broader scope. As items move through each segment of the supply chain, RFID tags will soon be leveraged along the way to track items with pinpoint accuracy and predict delivery times and delays.

RFID technology will also converge with the IoT to improve the overall flow of supply chain information from end to end. Edge computing will allow data sent from localized readers to be stored and analyzed in the cloud. Enhanced computing capabilities will also make it easier for RFID tags to evolve into multi-dimensional sensors, tracking things like temperature, humidity, and altitude.

6. Operational efficiency  

How can RFID tags improve operational efficiency? Remote access to real time part information is the most obvious labor-saving benefit, but RFID technology has the potential to improve efficiency in many other ways. As the smart factories and warehouses of the future begin to take shape, RFID will be one of the innovative technologies contributing to reduced energy consumption, labor, and time. RFID will improve operational efficiency by: 

  • Facilitating accurate inventory counts
  • Speeding up order picking processes
  • Improving warehouse asset management
  • Optimizing warehouse space utilization

With the help of automation, AI, and other key elements of Industry 4.0, RFID tags will help us eliminate mundane and repetitive tasks and improve access to real time data while contributing to our reduced carbon footprint.

RFID tags and inventory management: Final thoughts

The global RFID market is expected to exceed $40 billion by 2025, with retail, logistics, industrial, and transportation applications leading the way. The self-contained spaces and high quantity of items associated with E-commerce logistics and inventory management make the continued adoption of this beneficial technology inevitable.

With a suite of integrated software tools encompassing inventory management, warehouse management, point of sale (POS), and customer relationship management (CRM), Agiliron is well-positioned to adapt the next generation of inventory management tools. Our mobile-optimized platform allows you to bring our versatile tools (and your store) with you, wherever you go. It’s no surprise that over 2,500 brands now rely on Agiliron to power their business.  

RFID tags are creating new opportunities for inventory and warehouse management, but are they the right tool for your business? Our solution experts can walk you through the benefits and challenges of emerging technologies to help you decide when and how to upgrade your inventory management practices. Contact us today to learn more.