In the last six years as director of accounting, Jeff Thompson has seen huge changes in the warehouse management technology at Woodland Scenics, a Linn Creek, Mo.-based model railroad scenery manufacturer and supplier.Thompson worked with a DOS-based system when he started at Woodland, and tried to mix and match spreadsheets with the database reports to manage the company's receivables and inventory.

"As we grew, it became increasingly difficult to make those numbers match. We started shopping for something to help us. But things were pretty pricey," he said. After surveying the warehouse management system offerings, Woodland decided upon SysPro.

Today, his company uses SysPro's enterprise resource planning and e.net solution to keep control of inventory and sales order fulfillment in its eight warehouses and for its online store, www.woodlandscenics.com.

These leaps in warehouse management technology are almost commonplace for many veteran businesses supplying and distributing goods, and help accountants receive accurate financial data as well as detailed financial statements.

The next advancement in warehouse management technology to increase the accuracy of both financial and inventory figures is coming in the form of radio frequency identification systems. While not at a price-point for mass adoption within the small to midsized business marketplace, the technology is becoming more affordable.

Microsoft, QuickBooks, Sage Software Inc. and SysPro are just some of the warehouse management application providers that are looking to make the technology a part of the work day by including RFID technology in their development road maps over the next several years.

RFID tags are very small tags (as small as 0.4mm by 0.4mm) placed inside or on an item that are able to hold considerably more data than barcodes - which hold just a small amount of data, like a name or serial number. In comparison, some people have implanted RFID tags in their skin with their entire medical history.

There are three classifications of tags available today: passive, semi-passive and active. Beyond those three classes, however, there are hundreds of different types of tags in various frequencies. Today, RFID tags exist for toll collection, pet identification and talking prescriptions for the visually impaired, to name just a few.

Passive tags are the most widely adopted today, and the least expensive, dropping from about $1.20 per tag a few years ago to $0.19 per tag this year, said Randy Johnston, executive vice president at the Hammond, La.-based business and technology consulting firm K2 Enterprises.

These passive tags are the least expensive of the three because they contain no power source. The only way a passive tag can transmit the information it contains is if a scanner is waved nearby, about a maximum of two to three feet away. Once the scanner is waved, the tag's antenna is stimulated and receives just enough energy from the scanner to power up and respond. Reading accuracy is compromised if there is metal, another scanner in use nearby, or if the tag or scanner is near water.

"[RFID tags] are not at a cost-point to be at the item-level yet. They are on pallet-level and are tracked thru portals [RFID scanners that simulate a doorway]," stated Alex Mejia, Sage Accpac Warehouse Management Systems product marketing manager at Sage Software. "We do have an RFID scanner, but it is very expensive technology. A lot of companies are trying to come out with something, but no one is screaming they are the champion."

Whatever Wal-Mart wants ...

Yet some businesses have taken the lead in adopting RFID technology, requiring their vendors to include RFID tags on their shipping pallets. Wal-Mart is at the forefront of this technology in the commercial sector, while the U.S. Department of Defense also requires that their equipment and items to be tagged.

"If you get a pallet of products in your dock, how are you going to see what's inside? You have to break the pallet and scan the boxes, and if you are lucky, the pallet has a license saying what is inside," said Nader Moayedi, application development manager at SysPro. "For retail, it's far away, maybe five to 10 years away because it's cost-prohibitive."

Wal-Mart vendors had from June 2003 to comply with Wal-Mart's RFID tag deadline of 2005. Since the insertion of the regulations, this retail conglomerate has reported, through a University of Arkansas study, a 16 percent drop in out-of-stock items at RFID-equipped stores. The study also showed that those items were replaced three times faster than comparable items using standard barcode technology.

Microsoft was one of the first business application developers to devote an international team to studying RFID development and implementation. Started as a pilot project last year with a top Danish potato chip company, KiMs, Microsoft installed RFID tags on cases of the company's chips being sold throughout Denmark. The tagged cases were tracked from when they were on the production line all the way to shipment.

"Out of this learning experience, we then started to develop an RFID capability for Axapta 4.0, scheduled for release in the second quarter of 2006," said Alex Renz, RFID program manager for Microsoft. "We are building an RFID infrastructure and embedding it into Axapta 4.0, then Navision 5.0 and then GP 10.0. We're taking the cost and risk out of the equation for our customers."

However, the cost to tag every item produced, or even every pallet of items, is not very cost-effective for a small or midsized business, said K2's Johnston, even with the dip in price and emerging software systems. Johnston puts the price-point today of running a full RFID system, with tags, scanners, portals and a software system, at about $60,000. But "RFID prices are dropping like a rock," said Johnston.

There is speculation that one day RFID tags will replace barcodes; however, for SMBs today, barcodes remain the most cost-effective way to ensure accuracy and efficiency, said Johnston.

"Not working with barcodes today wastes just a ton of time," said Gary Wiessinger, group product manager of QuickBooks Contractor Edition.

A relatively cheap hybrid solution was made available in June 2005 by IBM.

The Infoprint 6700 thermal printer is an RFID and barcode label printer that holds a small passive RFID tag under the barcode. The printer costs about $3,000, relatively the same as a comparable IBM barcode printer. Still, it's "just out of reach for SMBs," as they would have to purchase RFID scanners and software, making the price for the system higher than that of a barcode system, said Johnston.

Yet those investing in RFID foresee a near future of complementary bar code and RFID products. "The production quality has gone up for RFID and the costs will likely start to fall now, as they already have. We now have assurance that the user community has confidence in these tags, so supply and demand will down the cost of the products," said Renz.

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