Even as improved general-purpose analytics become available, specialized algorithms are also being refined to help make the most of RFID and other Real World Awareness data. Perhaps the biggest payoff, so far, can be envisioned in the area of inventory management, especially in mass retailing.
By providing vastly improved information about where goods are, precisely, at any moment—in this distribution center, in the back of that truck, on shelf No. 17 in store X—and by doing away with the errors that occur when data is entered by keyboards, RFID will greedy improve retailers' ability to make the right goods available exactly where and when customers want to buy them. They will be able to quickly react and adapt to fast-changing business conditions and make their supply chains more consumer- and demand-driven than ever before.
Indeed, better information will help foster significant improvements in existing processes and operations as well as provide the foundation for true business innovation. Scanning RFID tags on objects throughout a supply chain will squeeze inefficiencies from such processes as warehouse management and logistics. Freight shipments will be traceable with much better accuracy and speed. Because RFID data will feed into ERP systems, just about every process those systems help automate will benefit.
As for true innovation, there has been tremendous technologic effort focused on the inventory-management problem for many years, particularly in the consumer packaged goods arena. There, improving the processes of forecasting, planning, and replenishment is critical to continued competitiveness and success. There is perhaps nothing worse in the consumer products business than succeeding with a marketing campaign and attracting many customers to a store, only to disappoint them by failing to provide the very items that they have come to purchase. Not only are they more likely to switch to a competitor's product for that purchase, their loyalty to the original brand and to the store they are visiting may be significantly diminished. Out of stocks, as these situations are called in the trade, are to be avoided at almost any cost.
The supplier now uses this information to plan deliveries of additional items to the retailer's warehouse or individual stores, striving to maintain the inventory there within a predetermined range of minimum and maximum levels. By reducing the amount of extra inventory that would otherwise be kept on hand to prevent a shortfall—so-called safety stock—this scheme can save the retailer significant money. And, it gives the vendor more accurate insight into how its goods are selling, perhaps in response to a new marketing campaign or in the face of a competitor's recent advertising activity.