RFID: Weighing Costs vs. Game-Changing Gains

Evaluating When RFID Technology is a Profitable Investment for Your Warehouse Operations.

RFID technology is changing how we track and manage products in warehouses. It uses tiny tags that send real-time information about each item’s location and quantity. These tags come in two types: active, which can track items over long distances, and passive, which are cost-effective for everyday use.

While RFID brings many benefits like improved accuracy and quicker operations, it’s important to remember it might not suit every business. The costs can be high, and simpler systems like barcodes might be more effective for smaller setups.

If you’re considering RFID, you’ll need to consider everything from choosing the right tags to integrating them with your Warehouse Management System (WMS). But for those ready to invest, RFID can significantly boost efficiency and insight into your inventory.

This guide offers a snapshot of how RFID can transform your warehouse operations, helping you decide if it’s the right technological step forward for your business.

What is RFID Technology?

RFID technology has revolutionised how businesses track their products and manage their supply chain. With RFID tags comprising a microchip and a radio antenna on a substrate, businesses can easily connect their products to the internet and gain real-time visibility into their location.

Two types of RFID tags are available in the market – active and passive. Active RFID tags come with their power source and transmitter, making them ideal for tracking valuable assets over long distances. These tags can operate up to a range of 100 meters and transmit data at a rate of 1-2 seconds. On the other hand, passive RFID tags rely on the radio waves emitted by the reader antenna and do not have a power source. They are less expensive and require no maintenance, making them popular for tracking low-value products.

By combining active and passive RFID systems, businesses can achieve complete visibility over their products throughout the supply chain. For instance, retailers can use active RFID tags to track high-value items like jewellery or electronics while using passive tags for low-value items like clothing or accessories. Additionally, businesses can use GPS technology to track goods in transit, reducing the risk of theft or loss.

According to a report by MarketsandMarkets, the RFID market size is expected to grow from USD 17.4 billion in 2021 to USD 40.5 billion by 2026, at a CAGR of 18.0% during the forecast period. The report attributes the growth of the RFID market to factors such as increasing government initiatives for inventory management and the need for real-time asset tracking.

RFID Benefits Vs The Costs

Using RFID technology with a Warehouse Management System (WMS) can help manage products, but it’s important to remember that not all businesses will need it. The benefits can be substantial for those with large, complex operations, but for many, the costs might outweigh the gains.


Real-Time Tracking and Easy Location of Products

RFID allows every product movement to be tracked and registered automatically so that you can find items quickly in real-time. However, simpler systems might be more cost-effective unless you deal with a large product volume or a very complex warehouse.


Improving Inventory Accuracy

Integrating RFID can significantly improve how accurately you track and manage inventory, helping to reduce out-of-stock items and enhance efficiency. But remember, investing in RFID might not be necessary for smaller businesses to achieve good accuracy.


Reducing Labour Costs

With fewer people needed for tracking and management, RFID can help save on labour costs. But consider whether your operation is large enough that the savings in labour will offset the cost of implementing RFID.


Minimising Errors and Boosting Productivity

RFID reduces manual work, helping to reduce mistakes and increase productivity. However, if your current error rate isn’t significantly affecting your business, the switch to RFID may not be justified.


Implementing Advanced Inventory Management

Using FIFO or LIFO can positively impact your profitability and tax liabilities. But if your product turnover isn’t very high or complex, more straightforward methods might be just as effective without the extra investment.


Quick Access to Orders and Real-Time Shipping Information

RFID can speed up access to order databases and provide real-time shipping information, ensuring the right products get loaded onto the correct trucks. Yet, traditional systems might provide sufficient speed and accuracy for businesses with a smaller scale of operations.


Advanced-Data Capture and Instant Verification

RFID’s advanced data capture can help with returns and resolving disputes, offering instant verification of picked items. These are great benefits but are most impactful in a high-volume, fast-moving environment.

Enhancing Logistics with RFID: Tips and Strategies

To ensure the successful implementation and operation of an RFID system in your warehouse, consider the following steps:

    1. Choose the correct RFID tags for your needs: Consider factors such as size, type, range, and the environment in which the tags will be used.

    1. Install the tags correctly: This includes placing them in the appropriate location, securing them properly, and testing them to ensure they function correctly.

    1. Invest in a high-quality RFID reader: This device is responsible for reading the tags and transmitting the data to the warehouse management system, so choosing one that is compatible with your system and performs essential.

    1. Integrate the RFID system with the warehouse management system: This ensures that data is transmitted and stored correctly and can generate accurate inventory reports.

By following these steps, you can effectively leverage RFID technology to improve your the accuracy, efficiency, and security of your logistics operations.

Understanding the Costs of Implementing in the Warehouse

When considering using RFID technology in your warehouse, it’s essential to consider how much it might cost. Here are some things that can affect the total price:



The price of RFID tags can change a lot depending on their type, size, and how many you need. Small, one-time use tags might cost about 10p each, but bigger, reusable ones could cost up to £1 each.


RFID Readers

These devices read the tags and send the information to your warehouse management system. Depending on how fast they are and how far they can read, RFID readers might cost between £200 and £1,000 each.



Fitting an RFID system into your current warehouse system might mean you need special software, which can add to the cost. Depending on how complicated your system is, this could cost a few thousand pounds or even more.



Don’t forget that you’ll need to teach your staff how to use the new system, and this training will also cost money.


When deciding whether to use RFID in your warehouse, you need to consider these costs and whether the benefits of using RFID will be worth it. RFID can improve your warehouse by improving accuracy, visibility, and speed, which can save you money and help your business make more profit in the long run.

But it’s essential to carefully look at all the costs like the tags, readers, fitting it into your system, and training your staff. By understanding all these costs and what your business needs, you can decide if RFID technology is the right choice for your warehouse.

Wrap Up

RFID technology can significantly improve warehouse operations by enhancing accuracy, visibility, and efficiency. However, it’s essential to carefully evaluate whether the benefits outweigh the costs for your specific business situation. Traditional barcode systems might be more practical and cost-effective for many, especially those with smaller operations.

By understanding your needs and carefully planning your implementation, you can make the most of what RFID offers or opt for alternative solutions that better suit your business’s scale and budget. To help overcome these challenges and take full advantage of the benefits of tracking capabilities, consider using Clarus WMS. This warehouse management system can help streamline and optimise warehouse operations.

Frequently Asked Questions

What is RFID technology and how does it work in warehouses?

RFID (Radio Frequency Identification) uses electromagnetic fields to automatically identify and track tags attached to objects. In warehouses, RFID tags are placed on products or pallets, containing digital data such as the item’s unique identifier, location, or quantity. RFID readers then scan these tags to manage inventory and track the movement of goods throughout the supply chain.
Using RFID technology in warehouses offers several significant advantages. Firstly, it enables real-time tracking, allowing you to instantly know the location and status of any item. This leads to improved accuracy by reducing human errors in inventory counts and order fulfillment. Moreover, RFID increases overall efficiency by speeding up the processing of receiving, storing, picking, and shipping operations. It also facilitates better inventory management, as the up-to-date information helps prevent situations like stockouts or overstocking. Lastly, RFID enhances security by aiding in the tracking of high-value items and preventing theft, ensuring a safer and more secure warehouse environment.
There are primarily two types of RFID tags used for different purposes. Active RFID tags come with their own battery, enabling them to have a longer read range and a larger memory capacity. This makes them particularly suitable for tracking high-value goods over extended distances. On the other hand, passive RFID tags do not have a battery; instead, they are powered by the electromagnetic energy they receive from RFID readers. These tags are more cost-effective and are typically employed to track lower-value items across shorter distances. Each type has its specific applications depending on the tracking needs and operational scope of the warehouse.
While RFID technology brings numerous benefits, it’s important to be aware of several challenges. The initial setup, including the purchase of tags and readers, can be a significant investment. Additionally, integrating RFID technology with existing Warehouse Management Systems (WMS) might demand extra time and resources. There’s also the issue of interference, as RFID readers might accidentally pick up signals from nearby tags, potentially causing errors if not managed correctly. Furthermore, the lack of universal standards in RFID technology can pose difficulties in ensuring compatibility between various tags and readers from different manufacturers. These challenges require careful consideration and planning when implementing RFID in warehouse operations.
When deciding whether RFID technology is the right fit for your warehouse, you should evaluate several key factors. Assess the size and complexity of your operations, as larger and more intricate setups tend to gain more from RFID’s capabilities. Consider the nature of your inventory, particularly if you deal with high-value or high-turnover items, which might warrant the investment in RFID for its tracking precision. The need for accuracy is also crucial, especially in industries where precise inventory and shipping are paramount. Ensure that the return on investment (ROI) for implementing RFID is in line with your budget and aligns with your long-term business objectives. Finally, think about the future scalability of RFID and whether it can accommodate the growth and evolving needs of your business. Carefully considering these aspects will help you make an informed decision about integrating RFID technology into your warehouse operations.

Ready to see Clarus for yourself?