By Angela Fernandez, vice president, community engagement, GS1 US
In the retail world, radio frequency identification (RFID) has been used to track inventory from source to store for more than a decade. Major retailers like Macy’s and Target have been vocal supporters of RFID technology, stating its inventory management and visibility benefits are critical to providing exceptional shopping experiences.
Learning from the successful implementations of RFID in retail, members of the Foodservice GS1 US Standards Initiative, a collaborative group of foodservice industry supply chain partners, are now actively exploring the technology to test similar efficiencies and to better serve increasingly demanding and discerning guests. RFID implementation has several common benefits across industries. Watch for these three parallels to be further explored in the foodservice industry in 2020: inventory visibility, warehouse efficiency and preparing for digital transformation.
RFID helps companies answer two important questions in inventory management: “What do I have?” and “Where is it?” When RFID tags are used, all supply chain partners that possess RFID readers have the opportunity to enhance their real-time view of the product as it moves from stop to stop.
In general, RFID reduces ambiguity and uncertainty in the supply chain. RFID can raise inventory accuracy from 63% to 95%, according to the Auburn University RFID Lab. More than a third of inventory that was previously invisible becomes visible. Retailers favor RFID because it helps them gain insights into their inventory down to the exact item, and foodservice operators may also find this useful. If an RFID reader is placed in a restaurant’s refrigerator, for example, the operator will automatically know when there is a spike in a particular item being removed. So, when a popular chicken sandwich starts selling quickly, the restaurant will have realtime visibility about how much product is in the back of the house to fulfill consumer demand.
There are some inventory management differences between the way RFID is used in retail and how it may be used in foodservice. While retailers have “last item” visibility that comes with tagging individual items, foodservice will obviously not tag, say, each individual chicken breast. Foodservice will likely see tags applied at the case level, simply due to the nature of how products are stored and shipped. Nevertheless, tracking food expiration and first-in first-out inventory management may be invaluable to foodservice.
The warehouse represents a major opportunity to increase efficiency in the foodservice industry. Using RFID in foodservice warehouses doesn’t require line of sight reading like barcode scanning, thereby human intervention is not a necessity. And unlike barcodes, RFIDs can reduce manual processes that usually take 3-4 hours down to 3-4 minutes, decreasing the chance that warehouses might accidentally scan the same boxes over and over again. This can free up warehouse staff to perform other valuable tasks. In fact, the RFID Lab states cycle count times can be cut up to 96% when RFID is used.
Once foodservice warehouses are equipped with all the necessary infrastructure to read RFID, the cost savings will be hard to ignore, too. According to Avery Dennison, RFID enabled efficiencies can cut labor costs by as much as 50% in the food supply chain. This is good news for companies concerned with the ROI on RFID. For a long time, the dominant perception of RFID is it’s too expensive, however, the cost of implementation has recently come down considerably. Today, it’s around five cents a label, as compared with 25 cents in 2008, and this will continue to decline further as adoption ramps up. Similarly, the price of RFID readers has also been falling. They vary in price depending on different factors, ranging from about $100 for a basic short-range reader to $2,000 for a high-performance reader.
Preparing for Digital Transformation
Consider how much change the industry underwent since RFID was first introduced in the retail space for inventory management purposes. Around 2006, the iPhone was still a year away from taking the world by storm, and the idea of a sensor-filled Internet-of-Things world was only seen in science fiction movies.
Today, we live in a more hyperconnected world where “smart” devices are increasingly common, with many used to share and collect our data. Digital transformation is top-of-mind for the entire supply chain industry and leadership teams are far more focused on efficient ways to use and enhance product data to build long-lasting relationships with consumers.
The foodservice industry is part of this movement, looking at the benefits of using RFID now to help futureproof its businesses. RFID means increased automation, which can feed into a number of potentially beneficial technologies, like blockchain, that are being explored for more precise product traceability and more granular data sharing.
Additionally, as more prepared food is offered in a convenience store or grocery setting, or as meal kits and quick-service delivery options grow in popularity, the industry will need agility to sustain these diverse dining options. RFID can simply help the industry move faster to accommodate rapidly changing consumer demand.
The year ahead will be a pivotal moment for RFID exploration in foodservice. In 2020, the industry will be conducting pilot programs and seeking to confirm the possible benefits of RFID to all supply chain partners, including manufacturers, logistics suppliers, distributors and foodservice operators. Based on decades of evidence and real-world deployments from retail, RFID can be a valuable tool to gain efficiencies and better serve today’s empowered and demanding guests faster and with greater accuracy.