This informational article on RFID comes courtesy of Avery Dennison Printer Systems (Philadelphia). It has been selected and edited by the MHM editorial staff for clarity, content and style.

In 2006, after years of planning and preparation, RFID--the wireless technology designed to identify and track pallets and product shipments moving through the supply chain--will finally become a reality for many U.S. manufacturers. That’s when mandates from top retailers and government agencies really acquire teeth. If you are a key decision-maker for a company facing RFID compliance requirements, it’s important to make a virtue of RFID necessity, and pursue opportunities to realize a return on RFID technology investments.

The costs of RFID compliance are significant. Standalone RFID printer/encoders and print/apply systems can cost $5,000 to $20,000 or more, and completely integrated RFID systems are much pricier. Although RFID label costs are dropping, the typical RFID label still costs about 30 cents. Multiply that cost by the millions of pallets and cases to be labeled, and the size of the investment becomes clear.

To recoup these costs and transform RFID from an expense into an investment, managers must exploit the full potential of RFID technology. This potential goes beyond the obvious benefits of complying with mandates from retailers and other customers, and keeping technological pace with competitors and business partners. At this stage of implementation, two areas look especially promising:

Bringing Transparency to the Supply Chain. RFID technology can illuminate some of the more dimly lit regions of the supply chain, potentially reducing costs associated with shipping, production and product theft.

RFID labels carry more data than standard labels and can be continually updated with fresh information. When RFID labels are first encoded and affixed to pallets or cases, code numbers identifying the shipments can be entered into a manufacturer’s computer system. The attached RFID labels can be updated as they pass through RFID readers positioned at distribution centers, warehouses, loading docks and other points along the supply chain. This data, transmitted back to the shipper, can pinpoint the exact location of product shipments and instantly notify logistics managers when shipments reach their destinations.

Data provided by RFID labels can also affect production decisions by updating managers on the amount of product left in the distribution pipeline. This can help managers determine whether to ramp up or scale down production. In addition, RFID data can help detect thefts and diversions more quickly than conventional methods and possibly deter them before they occur.

Improving production-line efficiencies. In addition to making the supply chain more transparent, companies are also integrating RFID technology into their assembly and production lines. Encoded RFID labels can be attached to products or components during assembly and updated with fresh data as the labeled items move from one assembly point to the next. Apparel and textile producers are among those developing production-line RFID capabilities.

Production-line RFID gives managers real-time data on assembly and manufacturing, allowing them to identify bottlenecks and to monitor the flow and speed of production. Eventually, it can reduce the total cost of production.

As RFID technologies mature, new opportunities in addition to those above are likely to emerge. Managers who successfully exploit these opportunities will position their companies to reap a return on RFID investments.

Dan L. Williams is marketing manager for Avery Dennison Printer Systems (Philadelphia), 215-728-8054.