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Radio Frequency Identification (RFID) for Small Business

business.com editorial staff
business.com editorial staff

Consider implementing an RFID system to improve efficiency and reduce costs.

  • RFID, a form of wireless technology, uses two parts – readers and tags – to search, identify, communicate with, and match an object, pet or person.
  • Small businesses can use RFID not only to identify goods and/or people, but to reduce costs and improve efficiency.
  • Knowing the frequency level needed for your particular type of business is essential to choose the appropriate RFID system, and the type of system you choose can affect the overall cost.

What is an RFID system?

Radio frequency identification is used with an antenna, scanner and a microchip to read and store information. RFID operates through a small electronic device, generally a microchip that contains stored information. The device is typically extremely small, often the size of a grain of rice or smaller, but it can hold massive amounts of data.

For instance, if you have ever had your pet microchipped and used the microchip to locate your pet if it was lost, you have utilized an RFID system. RFID systems don't usually emit electricity; however, some contain batteries or another type of stored power source, and the scanner that is used to read the microchip must provide enough electricity to allow the microchip to be read. Although there are different uses for RFID, the system is most commonly used for tracking animals, products and currency.

What are the different types of RFID systems?

There are different types of RFID systems, each of which is suited to unique applications and has different types of tags, readers and technology. The tags are classified by the radio frequency range and the way the tag communicates with the reader. There are three frequency levels – low, high and ultrahigh – and the tag communication can be either active or passive. Low-frequency RFID systems have a shorter range and read data slower, but they work better in the presence of liquids or metal, which can interfere with some types of RFID transmissions. Low-frequency tags are often used for livestock tracking and other situations where a short reading range can be used. High-frequency systems are often used for hotel key cards, payment cards and security systems. Ultrahigh-frequency systems are used in situations that require faster data transfer, such as retail inventory and anti-counterfeiting.

Implement an RFID system to improve efficiency and reduce costs

RFID is on the rise in the retail, manufacturing and transportation industries. How does the technology work? Usually, a serial number is stored on a microchip that's attached to an antenna. The chip and the antenna are called an RFID transponder or an RFID tag. A reader is used to capture the information from the transponder and transfer it to a computer. Software on the computer allows you to manipulate the data for your needs.

RFID offers several advantages over barcodes. It can identify goods individually with a unique code, whereas barcodes can only identify product categories. Unlike barcodes, which must be read with a scanner pointed directly at the code, an RFID reader can pick up serial numbers from a distance – up to 20 feet away in some instances. They can read hundreds of codes in seconds, while barcodes must be scanned individually. They can also reduce the labor costs associated with reading barcodes. On the downside, RFID systems can be expensive, with readers costing upward of $1,000 apiece and RFID tags starting at about 20 cents and going up to several dollars each.

These are the most common uses of RFID systems:

  1. Asset tracking
  2. Access control
  3. Payment systems
  4. Tracking goods within a supply chain
  5. Tracking work in process

1. Look for vendors who work with small businesses.

To date, RFID systems have been associated with large-scale manufacturers and retailers. However, some vendors have been promoting RFID by working with smaller companies to ensure a positive return on investment.

2. Implement an RFID system in steps.

Determine which areas of your business can benefit from RFID and which business processes must be changed. Create a plan that includes your equipment needs. Do a test drive with your equipment before launching a full-scale deployment. Make sure your provider will be with you every step of the way.

3. Choose the RFID frequency.

RFID tags and readers must be tuned to the same frequency to communicate. The most common frequencies are low, high, ultrahigh and microwave. Note that low- and high-frequency tags are generally recommended for products made of metal or water.

4. Choose your RFID tags.

RFID tags come in three varieties: read-only, read-write and write-once, read-many (WORM). The information stored on read-only tags can't be changed. Read-write tags allow you to add or overwrite data. WORM tags have a serial number written to them once and can't be overwritten.

5. Choose your RFID readers.

Readers can be "dumb", "intelligent" or "agile." Dumb readers are the simplest, capable of reading a single type of tag, using a single communication method and a single frequency. Intelligent readers are essentially computers that can use a number of communication methods, filter data and run applications. Agile readers can use several frequencies and communication methods.

6. Choose RFID encoders.

Special encoders or printers are used to write to RFID chips.

7. Choose RFID software.

To get the most out of the data stored in RFID tags, computers must be outfitted with special software.

  • It's recommended to place a 64-bit or 96-bit number called an EPC (electronic product code) on your RFID tags. You can give each individual item in your inventory a unique EPC so it can be easily identified.

  • RFID tags can be active or passive. Active tags, which require their own power supply, have longer reading range and larger memories but cost more. Passive tags, which are by far the most commonly used today, don't have their own power source and have a limited read range of up to about 5 meters.

As with most products, you get deeper discounts the more you buy. If you order in large quantities, you can reduce the cost per unit significantly.

How much does it cost to implement an RFID system?

The cost to implement an RFID system can vary dramatically, depending on the intended use and the type of system. For instance, small vendors can often implement an RFID system for as little as $15,000, whereas a specialized system that will be used for automated identification, such as at a large department store, may cost anywhere from $200,000 to $500,000, depending on the complexity of the system. The implementation costs for an RFID system break down into four rather broad areas:

  1. Hardware, which includes readers, transponders and tags
  2. Intangibles, which include analysis, consulting, site surveys and training
  3. Changes to your existing system
  4. Storage and analytics
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