How RFID will affect warehousing

How RFID will affect warehousing

David Twist has heard the speculation that radio-frequency identification technology will reduce the need for warehouse space. But he recalls hearing similar remarks in the mid-1980s when bar-coding and warehouse-management technology gained popularity. "Since 1980, demand for warehouse space has increased 45 percent," he said.

Twist, vice president and director of research for AMB Property, said that although RFID is touted as a way to speed the flow of products through the supply chain, he doesn't expect it to substantially reduce demand for warehouse space. The proliferation of stock-keeping units, shorter product life cycles, globalization and outsourcing of distribution will offset the increase in supply-chain velocity, he said. Overall, widespread adoption of RFID will reduce the need for warehouse space by just 1 percent, he predicts.

Twist, whose company develops and owns industrial real estate, recently issued a study on the effect of RFID on warehousing. He said that although the technology won't reduce the need for warehouse space, it will change the way warehouses operate.

Once the technology is widely implemented, warehouse configuration, staffing needs and even location requirements will change significantly, the study said.

RFID has attracted attention in logistics circles since Wal-Mart Stores announced last year that it expected its top 100 suppliers to adopt the technology by January. There's wide skepticism about whether that goal will be met, but a growing number of companies are looking to RFID as a way to help them track inventory.

Unlike bar codes, RFID tags can be read without a direct line of sight. The AMB warehousing study predicts that RFID-equipped warehouses will enjoy much lower error rates, with less time and labor needed for quality control and order tracking. Activities such as pick and pack, shipping and receiving will require significantly less labor, and marginally less space.

"Shipping and receiving areas will become less prominent," Twist said. "There's going to be better flow of product through the facility. There won't be a need to stop items, put them in a staging area, and scan them."

Cross-docking warehouse facilities will become more important as movement becomes increasingly time-sensitive and inventory spends less time on shelves, the study said. Dock

doors will become more productive as trucks will spend less time waiting for shipping and receiving operations.

The new technology also is likely to reduce the size of a warehouse's labor force, and change the type of workers needed. Fewer workers will be needed to track and reconcile shipments and inventory, but technology-related jobs at warehouses should increase, as well as the need to store more technology hardware, the AMB study predicted.

Warehouse locations may also shift because of RFID, Twist said, because of the need to move product into the supply chain with greater haste, the study said. "More warehouses will be located near seaports, airports and major roads," he said. "Shipments will be broken down and reintroduced into the supply chain very quickly."

A major question is when these changes will take effect. That will hinge on how quickly RFID will gain widespread use across the supply chain. The report acknowledges that the technology has hurdles to clear, not the least of which is cost.

Twist said RFID technology should gain acceptance in the next three to five years, and be widely used in the next five to 10 years.

But not everyone is so sure. Warehouse consultant Ken Ackerman, president of the Ackerman Co. of Columbus, Ohio, said it's too early to talk about changes in warehouse design because, at its current cost, RFID is simply too pricey for widespread implementation.

"It's a big smokescreen. I'm willing to take a bet that the Wal-Mart initiative won't happen," Acker-man said. "It's great technology, it works, but it's too expensive to implement at the package level. On groceries and items that flow through Wal-Mart, I can't see it happening for a couple of decades. It hasn't changed the way people are building warehouses. I haven't heard anything like that."