Issues with RFID - 2

Proving the ROI

As with any other technological investment the RFID investment has high risks. The key driver to mass adoption is proven return on investment, which will require substantial end-user testing to quantify payback. 

On paper the value proposition of RFID is significant- AMR Research, Inc. was an independent research firm has released studies suggesting that the attributes of RFID, compared with other tracking technologies, will enable significant supply-chain advantages, including greater revenue from fewer stock-outs, lower labor costs through increased automation and improving inventory management from better visibility.

The significant supply chain adoption of RFID in recent years goes on to prove the utility of RFID in this area. The great excitement around the data sharing model of Wal-mart is not phony. The model has proved to be strategically beneficial to suppliers of Wal-mart.

In the eyes of RFID enthusiasts the question of RFID proving its ROI does not arise. As RFID Journal editor Mark Roberti says in his recent article the benefits provided by RFID far over-power the need to calculate ROI.

During the era of internet boom many investments were made without a slightest of doubt or ROI analysis. When the dot.com bubble burst millions were lost in thin air. This has created a sense of “once bitten twice shy” attitude. However, today some of the largest fortune 500 companies are internet based.

RFID technology, on the similar lines cannot be ignored. The value that RFID promises to provide is simply not understood by most organizations today. To accept the utility of RFID in businesses, organizations need to realize that there are areas where they are still underperforming and may improve their efficiency by using RFID technology.

Rewe group, a European retail and food group, used to have to replace 10 percent of its roll cages each year because the company had no cost-effective way to track them. Today, Rewe has deployed an RFID system  that can track roll cages in real time as they pass through dock doors, and it hopes to install the system eventually in 29 distribution centers, achieving real-time visibility into the cages' locations at all times. (See Rewe Deploying Long-Range Real-Time Location RFID System)

The point is RFID lets the organization manage what has to date, not been manageable—people, assets, tools, equipment, containers, inventory, vehicles, files and more. If businesses deploy it as an infrastructure technology, it will deliver myriad benefits over time, and then calculating an ROI on a specific application becomes less important.