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RFID Tracking for Small Business: Advantages and Pitfalls


I've been watching RFID for several years, and always felt that the technology -- small radio frequency-enabled tags or labels that can identify themselves and transmit information -- is underused in business. Sure, plenty of big companies employ RFID, and major purchasers like Wal-Mart even require some suppliers to use it. But the far more small companies continue to pass up this technology when it could be boosting their business.

There's one good reason why small businesses would choose not us implement RFID systems: the cost for major installations of RFID, for example in shipping hubs, can run six or seven figures. But the great thing about RFID is that is has a range, so unlike a barcode, it's about more than just tracking goods. RFID transmitters have been attached to expensive devices for loss-prevention; some filing systems use tags to help keep track of hard-copies, and broadcasting tags applied to trucks help automatically log when drivers arrive and depart. Thermometer-equipped RFID keeps freezers uniformly cold, and you can even ask employees to have RFID chips implanted to act as security key-cards (handy for folks like me who misplace their keys a lot).

Implementations can get even more creative. Try picking up an industry publication or Googling RFID, and you'll find a proliferation of smart business uses for RFID. One example that impressed me: Custom Cupboards, a company with a large production facility making (you guessed it) custom cabinets and cupboards. By slapping tags onto individual components as they're produced in its workshop, Custom Cupboards pulls off a complex orchestration of thousands of moving parts, resulting in an impressive 10 percent increase in throughput.

If you can imagine a similarly brilliant scheme for your own company, it may be time to jump into RFID. Just beware of charging ahead without a good cost-benefit analysis. Most businesses find that they can recoup their investment in an RFID system within a year or two, but this is as much the result of careful implementation as it is of the inherent merits in RFID. A badly designed system can fail to save money and incur high ongoing costs.

You'll need to plan for most of these expenses, roughly ordered by how much of the total cost they represent:

  1. System integration with your existing processes; aside from the actual equipment purchases, this is the biggest outlay for most companies.
  2. Purchase of the RFID reader, tags and any necessary software; this figure varies wildly, but can cost as little as a few thousand dollars if you're using cheaper passive tags.
  3. Ongoing replacement of tags; this total will need to include an estimate of the failure rate for new tags, which also varies but can run as high as one in five.
  4. Any other new equipment purchases, like automated devices to apply tags during manufacturing, as well as software.
  5. Employee education and retraining.

Along with these expected costs, you may find potential pitfalls in the implementation and logistics of the system. The most common complaint for small businesses: RFID systems not saving any money or man-hours versus using barcodes or manual logging. Sometimes businesses are right to hold off on the newest gadgets. operates one of the Web's premier business sites, providing practical information and services for business professionals and growing businesses. See more at

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