The case for RFID
October 1st 2006

Given the column inches that have been devoted to RFID adoption, you might be forgiven for thinking that the business case to make the switch is straightforward. Printronix looks at the wider issues

If your business deals with major retailers or supply chain specialists you move to RFID, right?

In reality, the value proposition for each company is somewhat different and the decision has as much to do with the boardroom as it does the shipping bay. Virtually all parts of the organisation could feel the effects of such an implementation, as well as suppliers and customers. Boardroom participation is essential - a failed RFID implementation could disrupt supplier or customer relationships and may even risk an organisation's brand itself. Finding the right strategy is fundamental to success and, while some companies will experience significant returns even in the short term, not all companies can expect to see an immediate return.

Making a case A key driver for many has been customer compliance. Mandates from Wal- Mart, Metro Group AG, and the US Department of Defence ordering suppliers to use RFID tags on shipments have spurred many organisations into action. If a customer insists that, as a supplier, your business comply with an RFID mandate, the final decision has to rest on the value of that customer. If the customer represents a considerable percentage of your business, the decision can be fairly straightforward.

However, if the request is made by a smaller company, the cost of noncompliance with that request can be preferable to the cost of implementing an RFID strategy. The issue only becomes more complicated if additional customers announce RFID mandates, leaving suppliers with little choice but to adopt RFID in one form or another.

Once decided, building the case for current RFID adoption is not dissimilar to that for Internet access in the mid-nineties.

At that time, any forward looking companies invested in servers, routers, and networks in order to prepare for a range of applications which were, at that stage, still undefined. As a result, such organisations found themselves at a competitive advantage as new applications and business processes were developed based on Internet technology. It is much the same with RFID. Companies shouldn't base the decision solely on compliance, instead looking at the potential impact of RFID or the risk of being at a competitive disadvantage in the future.

Three easy steps In order to begin, it is worth considering how RFID might fit with the rest of the businesses plans. Identify potential valueadd opportunities as well as looking at how RFID might fit with what your company is doing today. Examine the entire distribution network, from manufacturer to end customer in order to identify potential uses beyond the simple barcode replacement.

Following this examination, you should be able to assess if RFID implementation is right for your business and ways in which it may bring value.

Secondly, gather any measurement-specific data which can help to identify the potential benefits and costs for your RFID initiative. This will help to define a strategy based on actual, realistic deployment costs. This type of cost/benefit analysis is more effective when assessing your company's capability to increase sales, reduce supply chain costs and protect assets through RFID adoption. Using current data, you can calculate the ROI for each potential RFID investment and put a value on the cumulative costs and benefits, in addition to the timing of the project costs.

Thirdly, assess the potential impact of RFID on various drivers of your company's enterprise value.

Once this is completed, incorporate all the information into an RFID strategy which can provide an overview of both the qualitative and quantitative aspects of each potential RFID initiative. Implementing RFID does not have to cost the earth if the application areas are well-circumscribed.

Smaller, more isolated implementations, for example, those restricted to a warehouse, can offer significant ROI at a relatively low investment cost while ambitious end-toend supply chain applications can be too complex and expensive to roll out effectively.

Getting the most from RFID In order to obtain the maximum benefit from this technology, organisations should develop a comprehensive business case for RFID that goes beyond simple compliance with mandates, taking into account the state of the technology, the type of investment, and the organisation's own value drivers. Building your RFID business case is only one step toward successful adoption of RFID — but it's undoubtedly the most important.

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