October 24, 2014

RFID or Barcodes: Which Are Better for Small Businesses?

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This series is commissioned by UPS.

You can hardly have a discussion about RFID and barcodes in the same sentence, without comparing the two.  Which is cheaper?  Which is easier to implement?  Which delivers better results for small businesses?  Let’s take a look.

BARCODES

A barcode is a machine-readable insignia of data about an object.  We’re probably most familiar with barcodes printed on the packaging of items in grocery stores and retail outlets.  You take an item to the cash register, and the clerk scans the barcode using a handheld barcode reader or passes the item over a scanner embedded in the checkout lane.  The barcode yields up data about the item, including its price and any discounts applicable.

PASSIVE RFID TAGS

RFID (“radio frequency identification”) is a somewhat more sophisticated technology.  An RFID tag consists of a small chip with data in it, and an antenna to transmit information from the chip wirelessly.  RFID  tags are often very thin — not too much thicker than a printed barcode.  There is active RFID and passive RFID.  For our purposes here, we’re talking about passive RFID — which simply means that the RFID tag has no internal battery and the wireless signal to transmit the data is activated when the tag is in close proximity to a reader.

Both barcodes and passive RFID tags are useful in a variety of situations and applications.  Both can be affixed to equipment, furniture, computers, tools and other company assets so that you can track them.  Both can be used on inventory to more quickly, efficiently and accurately manage your inventory stock and fulfill orders.  Both can be used in tickets (such as for events), ID badges, and for vehicle identification.  They can also be used for supply chain management, tracking packages, and work-in-process orders.  And the list of uses in business goes on.

WHICH IS BETTER FOR SMALL BUSINESSES

In most instances today, barcodes will have the advantage over RFID tags (Wasp Barcode whitepaper PDF).  Barcodes are cheaper ( a half cent each) than RFID tags (as much as 30 cents a tag).  That price difference may not sound like a lot, but multiplied tens of thousands or hundreds of thousands of times, the price difference is not trivial.  Add to that the cost of software to decipher, interpret and use the data, not to mention the readers required to read the barcode or tag, and the investment in RFID can be considerable.  In a small business, the ROI for installing RFID systems may not be sufficient to justify choosing them over barcodes.

Barcoding is also a more mature technology in business applications. So it tends to be simpler and less complex than RFID-based systems.  And barcodes do the job — why go for a complex technology if a simpler and cheaper one works?

On the other hand, barcodes can be slower and a little more labor intensive to scan. A barcode may have to be passed “exactly so” in front of a barcode scanner, and can be read only one at a time.  RFID tags just need to be within a certain proximity of an RFID reader (not within line of sight), and multiple tags can be read at once.

Still, the cost advantage and lack of complexity of barcode systems make them a better choice most of the time for small businesses.  We small businesses are cost-sensitive.  Margins may be thin, and while technology helps us run our business more efficiently at lower cost, given a choice in technologies, the cheaper option often works well.

17 Comments ▼

Anita Campbell - CEO


Anita Campbell Anita Campbell is the Founder and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses, and also serves as CEO of TweakYourBiz.com.

17 Reactions

  1. “A barcode may have to be passed

  2. This article is not really very helpful. First of all, it is silly to suggest that bar codes only cost half a cent. That’s the cost of creating the data carrier. A bar code that isn’t scanned is worthless, so the real question is what does it cost to capture the information a business needs. The labor cost depends on what the company is paying an employee to scan the bar codes, but some suggest it is around 10 cents. That is about the cost of an RFID tag in high volumes, and RFID requires no labor. There is also the question of accuracy. People make mistakes and the accuracy of bar codes, when taking inventory of a large number of items, can be 80 percent or less. RFID can be much higher on some RF-friendly products, such as apparel.

    It’s not possible to make a blanket statement of which is better for small businesses. It depends on the application. There are many applications for which bar codes are better. There are others, such as file tracking, where the labor savings with RFID can be huge for small businesses. We’ve done many case studies on RFID Journal of small businesses that have deployed RFID successfully, from manufacturing facilities to farms.

    Mark Roberti, Editor, RFID Journal

    • Thanks for your insights, Mark. But I disagree that it’s silly to point out the cost of the barcode. In that statement I was simply trying to compare apples to apples — the barcode compared to the RFID tag. How do the costs of each item compare — that’s the point. Obviously there are other costs involved in a barcode implementation, just as there are other costs in an RFID implementation.

      One thing I know is that professionals disagree on the relative costs — and relative complexities and difficulties — of RFID versus barcode implementations. If you read the PDF whitepaper I cited, you’ll see one of these divergences of opinion, in addition to my own.

  3. Mark:

    A group of investors went to look at Chep’s RFID pallet program. The first thing oddity I noticed is the warehouse folks were sticking the arms into the pallet, up to their arm pit. When I asked what they were doing, the tour guide advised us they were scanning the RFID tag. Apparently, it was easily damaged so it had to be located in the center of the pallet between the upper deck and lower deck. However, because there was so much interference in the warehouse, they had to place the reader right next to the RFID tag to take inventory.

    It was then I knew we were not investing in RFID and the RFID industry had one of the best PR engines in the world.

    Last week I met with a auto-id researcher who is on AIM’s 100 most influential list. He stated they are still testing RFID, but that the read rates have not changed in years. In warehouse conditions, those rates are 80% and then they need to audit with barcodes to find the other 20%.

    If you are getting 20% scan rates with barcodes, you need to spend $100 on a new scanner. My cell phone can read a barcode off my TV screen across the room – without aiming.

    There are niche applications for RFID, but it is not the panacea we all expected in 2004.

  4. How would you classify a QR-code? Does it belong to RDID or barcodes? I recently saw QR-codes on Google’s URL shortener service.

  5. There certainly are issues with the cost and complexity of bar code and RFID implementations, and while there is nothing wrong with stating the cost of two different data carriers, it is far more meaningful to talk about the cost and quality of the data.

    Jon, I don’t question the wisdom of your decision not to invest in RFID, but basing your view of the technology on a few comments or early deployments is a mistake. We have learned a lot since the days CHEP first implemented. And the read reliability has improved to the point the biggest complain I hear now is reading stuff you don’t want to read.

    I would encourage anyone in a small business with an issue tracking the mobile tools, equipment, vehicles, documents, assets, etc., to spend a little time investigating whether RFID makes sense. It might not. ON the other hand, it might save you time and money. This is still a relatively young technology. It has improved greatly over the past 10 years and there are some inexperience integrators. But if you work with the right partner and apply the technology to the right problem in the right way, it can deliver some significant benefits.

  6. I have an interesting perspective in this discussion. I worked with a RFID company a few years ago and now work for a barcode company focused on small business.

    When we research our small business customers, we find over 90% use a manual process or at best Excel to track things in their business prior to implementing a barcode solution.

    There are huge inefficiencies in small business that can be automated. As Mark points out, RFID can find applications in small business, but as Jon indicates practical implementation of RFID is still being worked out.

    Small business owners are short on time and resources. They want solutions that (1) provide rapid results, (2) are affordable, and (3) don

  7. I think it is worth clarifying that there are many different types of RFID. This thread and Anita’s original post seem to focus exclusively on passive UHF. The issues with read rates and maturity simply don’t apply to passive HF systems. These are mature and can be deployed simply and easily. Many active systems are also easy to deploy. Awarepoint, for instance, offers a real-time location system that allows you to plug sensors into electric sockets. The system can be set up and configured very quickly.

    It’s also worth noting that there are things that RFID can do that bar codes simply can’t do. For instance, no bar code system will tell you the precise location of an object in a room. So I go back to my original point — you can’t say whether bar code or RFID is better for small businesses without knowing what the application is. In many cases bar codes will be cheaper in easier. For other applications, RFID will be the preferred option.

  8. First – QR Code is a 2D Symbology – bar code if you like – nothing RFID about it.

    Second – I have seen pallets reading VERY reliably with RFID from a variety of handheld and fixed readers. Back in the early Chep days things were not so reliable. That has changed in a big way. Not sure who told you that reliability is still 80%, it depends on a lot on the implementation and the application. I have systems running much closer to 100% than 80%.

    Third – RFID is not where we expected in 2004 – you are correct and we are suffering from the hype mongers who continue to present it as the panacea for all applications. It is not and never will be. Bar code is a great technology and there will always be a place for it. I am currently installing a 2D direct part mark bar code system that RFID will be very hard pressed to do well, but bar code works very well.

    Finally – Anita – nice article but you have vastly over simplified the issues. Bar codes like RFID tags typically give you a license plate. There are exceptions to both where other data is also stored on the data carrier. The license plate gives you access to a database with a lot more inofrmation. The data carrier (bar code or RFID tag) is an insignificant part of the overall cost of the system. The infrastructure to implement both can be vast and expensive, or it can be simple and inexpensive. The application drives everything and it is irresponsible to draw broad conclusions without looking at the individual requirements.

    Steve Halliday
    http://www.hightechaid.com

    • Hi Steve, on your point about this article being over-simplified: sometimes small businesses need things boiled down to understandable points. Complexity is as big a problem for small business operations, as time and money. A failed implementation that a business owner did not have the ability to see through to completion properly — or simply the complexity of understanding the technology that puts owners off from taking action — are practical issues.

      I think it’s far more realistic to expect small businesses to go for baby steps such as moving from Excel spreadsheets to barcodes, than to expect them to make giant leaps into a technology that they may not understand, and don’t have the time to get educated about, and may not be able to address before the money runs out.

      I used to write a site about RFID technology for two years, and I’ve been involved with RFID technology education in connection with a University Advisory Board I’m on. I’m actually much more of a proponent for RFID than one article like this suggests.

      But I’m a bigger proponent of small businesses, and I tell it like it is when it comes to small businesses, which I define as under 100 employees. Most are better served going the “baby steps” route — lest they find themselves immersed in something bigger than they have the resources (money and staff) to properly see through. I know that from working in a technology company and being part of many many tech implementations — some of which were successful, and some of which were utter disasters.

      Agree with me or don’t — that’s your choice. But this is my viewpoint based on 25 years experience in business — and lessons learned the hard way.

  9. Anita: Lot’s of good points here. Key for small business to understand is RFID can not be implemented without a pilot that allows the tech guys to assess the requirements of that particular installation. Before that can happen, the RFID vendor needs to come up with solid benefit-based reasons for a small business owner to accept these risks. With RFID, failure is always a possibility.

    Mark: Your comment on RFID not requiring labor is exactly how vendors should not sell new technology. First, it doesn’t sound believable. Second, technology that promises reduced labor costs has historically never delivered. IT guys aren’t buying that line after the laptop failed to decrease staffing requirements.

    RFID is not a new technology. It was invented before the barcode. If we put any faith in technology-adoption curves, RFID is never going to scale. The question the RFID industry needs to answer for itself is why has it taken so long. Then it can begin to address why so many feel burned by the technology. It may be that it was just a remarkable PR promise that the platform technology could not deliver. RFID Journal was always wary of these PR campaigns. Keep up the good work, I will be watching from the sidelines.

  10. Jon, Lot’s of good points. But I disagree somewhat on the labor issue. First, IT guys don’t usually buy RFID, so their view is not too important. RFID in many cases won’t reduce your labor costs. What it will do is let you collect valuable data with very little or no incremental cost. If the industry is not going to talk about that, it might as well fold up shop.

    On this issue of RFID adoption, I need to stress again that there are many flavors of RFID. HF tags have been around a long time. They are mature, and they do work extremely well. And there are several billion in circulation. UHF technology, which is what has the performance issues, is only eight years old. And many active systems are newer than that. So HF has scaled. Some active systems have scaled. And UHF is on the cusp in some industries such as apparel.

    I would advise small businesses to think about RFID if existing technologies can’t solve their problem or can’t provide the data they need to achieve the benefits they are looking for. Then, find a good systems integrator to work with who can analyze the costs and benefits, and if it looks like it will deliver a strong ROI, do a pilot. I’ll say again that we have written about small businesses that have done this with enormous success.

    Mark Roberti, Founder and Editor, RFID Journal

  11. Anita:

    I agree with much of what you say but there are some things that need to be stressed. Simple is good but not when you are telling the customer something is simple when it is not. Once you get past the reader (bar code or RFID) the backend to a system looks very much the same and the infrastructure and software are a major part of the system

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