RFID for Inventory Management

RFID For Inventory Management: The Pros & Cons

By Team TranZact | Published on Apr 1, 2024

In the manufacturing industry, companies use various techniques and tools to optimize their inventory management. An RFID inventory management system is one such technology that helps streamline inventory tracking and reduce labour costs. SMEs are using RFID in their warehouse management system to improve their current capabilities. It provides real-time visibility of inventory, automated tracking and detailed data storage.

But despite these benefits, there are also some drawbacks to using RFID for inventory management. In this blog post, we will understand the use of RFID tags. We will also look at their pros and cons and their overall impact on inventory management.

Definition Of RFID Tags

RFID (Radio Frequency Identification) tags use electromagnetic fields to automatically identify and track tags attached to objects. These smart tags allow wireless transmission of data to identify the items without opening the package. The RFID inventory management requires scanning of these tags to get all the information stored in the tags. These tags are mostly wrapped in plastic-like materials to prevent them from sticking to various surfaces. There are two types of RFID tags used in the inventory management system.

1. Passive RFID: These tags are most commonly used for inventory tracking in warehouses. They do not contain any battery. They are operated by the wave of the scanner.

2. Active RFID: These tags need a power source to operate, and therefore, they are expensive. These are mostly used for longer-range tracking, such as scanning railway cars.

How Do RFID Tags Work?

Whether you use active or passive RFID, here is the step-by-step process of how they work:

1. Tagging: Each item to be tracked is tagged with an RFID tag. These tags contain a tiny radio transponder, a radio receiver, and a transmitter.

2. Reading: An RFID reader device sends out an electromagnetic interrogation pulse. When an RFID tag comes within range of this pulse, it gets triggered.

3. Responding: Once triggered, the RFID tag transmits digital data back to the reader. This data includes an identifying inventory number.

4. Identifying: The identifier in the RFID tag’s memory lets each individual RFID tag be read and identified.

5. Tracking: The inventory number transmitted by the RFID tag can be used to track inventory goods.

Pros Of RFID For Inventory Management

The use of RFID tags for inventory management can be beneficial to reduce costs and provide effective inventory control. Here is how an RFID system can improve inventory management and supply chain efficiency:

  • RFID provides fast scanning and visibility of data.
  • RFID readers allow you to access data from a distance.
  • RFID inventory management system minimizes manual tasks, reducing labour costs.
  • RFID is more sustainable due to its plastic or hard shell coating.
  • RFID tags for inventory management contain more information than barcodes.
  • RFID systems are used to track inventory levels and prevent stockouts or stack overflow.

Cons Of RFID For Inventory Management

Implementing RFID technology in inventory management also contains some disadvantages. It is important to know the cons of RFID before getting it. They are:

  • RFID systems are usually expensive to install in the inventory management system.
  • RFID tags can be copied if you do not use an authentication mechanism.
  • Signals can overlap due to their ratio frequency function.
  • Active RFID need a power source like a battery, which means they need to be replaced occasionally.

RFID Tags Vs Barcode Labels: Which One Is Best Inventory Management

When you compare RFID tags vs barcode labels, barcode is considered a more reliable, cost-effective, and accurate solution. But in terms of durability, RFID can withstand extremely harsh conditions both in indoor and outdoor applications. Barcode labels can be generated using a computer, printer, and a barcode inventory system. This makes it less expensive than RFID.

Barcode labels can be fixed to any surface without affecting their accuracy. The accuracy of RFID tags can be disrupted in metal surfaces due to their ratio frequency signals. However, RFID can store more data than barcodes, and you can scan data in bulk using an RFID inventory management system.

If you want to reduce labour costs with the automation of large data scanning, then RFID inventory management systems will be the best Inventory management system for you. If you deal with limited products and want a cost-effective solution, then the barcode inventory software is for you.

How Does RFID Work In Warehouse?

All the items that are needed to be sent to the warehouse should have RFID tags. Your warehouse should be equipped with an RFID warehouse management system to transmit the data automatically. As soon as your inventory arrives in your warehouse, the following functions start automatically.

  • When the shipment arrives, the RFID readers start scanning each item in the inventory.
  • This information is further sent to the central warehouse management system.
  • The same data is modified and sent to inventory tags placed in the products for recall later.

The Pros Of RFID For Warehouse Inventory Management

RFID can note the arrival and departure times of inventory in the warehouse. RFID warehouse management systems can provide faster and more real-time inventory tracking than barcode systems due to instant scanning. Warehouses equipped with RFID can reduce the risk of human errors.

The Cons Of RFID For Warehouse Inventory Management

As far as RFID inventory management is considered for warehouses, they are not yet standardized, and they can differ across industries or countries. Though RFID can store more data than barcode technology, it can become difficult to manage and maintain that information. The initial setup cost for RFID systems can be high too.

How Much Does It Cost To Implement An RFID Inventory Management System?

Implementing the RFID inventory management system can be expensive as it requires RFID readers, antena, and dedicated software. The installation process can also be time-consuming as it requires cables and a computer system to capture the data and store it in the database. You also need to set up a LAN network to facilitate effective communication between the RFID tags and the system.

This is the one-time investment that you need to implement in your warehouse management process. It can be a fruitful decision in the long run as it can save lots of time and labour costs by providing the best inventory management system. The inventory tag generation is also cost-effective.

Have Efficient Inventory Management With the TranZact RFID System

RFID technology is a powerful solution for SMEs that has transformed inventory control and streamlined supply chain operations. RFID inventory management software helps you automate the tracking process and provides real-time inventory visibility. If you want a cost-effective RFID system in your manufacturing business, TranZact is the right choice.

TranZact offers complete software that can help you manage many aspects of your operations. It includes sales, inventory, product, planning and purchase. It also gives you the functionality to RFID and integrate it with the other parts of your manufacturing process. Get RFID tags for inventory management now to reduce operational costs, increase supply chain efficiency, and improve customer service.


1. How Accurate is RFID Inventory?

A good RFID inventory system can provide data with 90 to 98 per cent accuracy.

2. How is RFID used in Inventory Management?

RFID systems use electromagnetic waves to transmit data through an RFID reader and antenna for inventory management.

3. How is RFID used in warehouse management?

RFID system uses the following steps to send inventory data to the warehouse.

  • The shipment containing RFID tags is placed in a specific position where the antenna can receive the signal.
  • RFID system scans each item or entire pallet of the system in the warehouse.
  • The collected data is sent to the database through LAN cables.
  • The same information is modified and sent back to the tags.

4. Which is better: RFID or barcode?

It depends on your needs. If you want a system that speeds up inventory tracking, then RFID can be best. If you want a cost-effective and reliable inventory tracking system, then barcode scanning is for you.

5. How RFID tags are being used in conjunction with inventory management systems?

The RFID tags are being used in conjunction with inventory management systems through wireless communication using electronic waves to transmit the data.

6. How RFID technology has changed inventory management?

RFID technology has changed inventory management due to:

  • Reduced cost in inventory management.
  • Increased customer satisfaction through on-time delivery.
  • Storage of more information about the product.
  • Help in making better decisions in business.

7. What are the main advantages of RFID technology over barcode technology in inventory control systems?

The main advantages of RFID technology over barcode technology in inventory control systems are:

  • Reduced manual task
  • Bulk scanning capability
  • Increased accuracy
  • Reduced risk of theft and losses

8. What are the issues and challenges of RFID?

The Issues and challenges of RFID are:

  • It may not work properly on metal surfaces.
  • Signals overlap due to radio frequency functionality.
  • RFID systems can be hacked, and even tags can be recreated.
  • Bulk data stored in RFID can be difficult to manage.

9. What are the benefits of RFID in a warehouse?

The benefits of RFID in warehouse management are real-time visibility of inventory, automated tracking and detailed data storage.

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TranZact is a team of IIT & IIM graduates who have developed a GST compliant, cloud-based, inventory management software for SME manufacturers. It digitizes your entire business operations, right from customer inquiry to dispatch. This also streamlines your Inventory, Purchase, Sales & Quotation management processes in a hassle-free user-friendly manner. The software is free to signup and gets implemented within a week.