Finding the value in RFID implementations

Would you recommend investing in a new system that added cost and complexity to  our business, without giving you the opportunity to derive value? Such investments are actually being made by some companies who are rushing to respond to Electronic Product Code (EPC) RFID tagging requirements imposed by key customers. Often,  compliance-driven companies are making expedient choices because they dont realise they have a choice at all.

There is a choice. You could choose to meet your customers requirements by simply slapping RFID labels on boxes  and pallets, then shipping them out, which adds cost but not value. Or, you can choose to use RFID compliance tags as drivers of new processes that improve your business. That choice is easy to make but not to execute, for it requires planners to focus on what they will get out of their RFID system, instead of focusing on how much it will cost to put in. Critically, think of RFID as an enabling technology enabling processes changes which can yield improvements in operating efficiencyrather than RFID being the total solution in itself.

Manufacturers can take advantage of EPC compliance tagging to reduce raw materials, work-in-process and finished goods inventories 10 to 30 per cent, according to research by Accenture. Manufacturers who develop complementary applications to benefit from the visibility EPC compliance tags provide can also improve revenues from one to seven per
cent, according to Accenture and AMR Research studies. Imagine how these results would improve cash flow and profitability.

Companies who implement slap-and-ship tagging systems to meet minimum compliance requirements will not gain these benefits, primarily because their approach does not achieve integration of the enabling RFID solution into existing systems. They are destined to continually operate at a cost and efficiency disadvantage against competitors with farther-reaching systems. Slap-and-ship systems cost less and may be quicker to implement, but add cost without creating value.

Tag price is the most highlighted yet misunderstood element of RFID implementation expenses.

Required investment

Regardless of your implementation strategy, you will need to invest in encoders (tag programming devices), tags, and a method of applying tags to shipments, readers to validate data, plus software and services to integrate the encoding system with existing business applications. Major cost variables include the number of packaging lines or facilities that must be equipped, the volume of goods that must be tagged, and the complexity of complementary applications that are
developed. Tag price is the most highlighted yet misunderstood element of RFID implementation expenses. According to Bear Stearns (a global investment banking, securities trading and brokerage firm), hardware costs may account for up to 30 per cent of implementation costs; the balance of costs are software and services. In an open supply chain compliance solution, it is important to break out tag (consumable) costs from one-time (capital) costs.

you should not assume there is little or no expense associated with the processes that RFID could radically change.

Systems that pay for themselves

There are ample opportunities to earn a full return on RFID investments by leveraging compliance-driven systems to improve internal operations. While RFID may represent a new expense, you should not assume there is little or no expense associated with the processes that RFID could radically change. Cost is incurred every time an item, carton or pallet is touched in your operations. For example, labour cost is incurred when workers scan bar code labels on cases and pallets before loading them onto trucks, and whenever boxes are oriented on conveyors to ensure the bar code is
visible. Every touch is a cost; every touch made to capture data is an inefficiency. In many cases, these manual interventions have become such a common part of operations that we dont appreciate the costs associated with them. RFID can reduce and sometimes eliminate these costs if you are willing to change your established processes.

Here are just a few ways RFID can enable process changes that save time, reduce labour and improve accuracy of operations:
*eliminate manual handling to ensure proper bar code orientation for bar code scanning systems over conveyors;
*enable item sorting that is unattended, fast and highly accurate;
*facilitate fast and accurate counting of aggregated items;
*provide 24-hour asset monitoring and security;
*eradicate shipping errors by ensuring cases, cartons and pallets are packed correctly and there are no shipment shortages or overages;
*track distribution of pallets, returnable plastic containers (RPCs) and other logistics containers to facilitate more returns and reduced asset inventory.

Details of these applications and their benefits will be described in a future instalment. Using RFID to drive process changes requires more planning than a slap-and-ship system. Only by making this investment in time can you earn a return on investment in RFID equipment. Process changesnot the RFID tagare what deliver value to your business and your customers.

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Chris Hook is director of RFID market development for Zebra Technologies, a global leader in delivering on-demand printing solutions for business improvement and a pioneer in the targeted adoption of RFID in the global business
marketplace. Hook has 20 years of experience in the creation, development, and application of  RFID products and systems. He is a recognized authority on RFID technology, standards, and solutions and holds numerous patents, and is credited as being the inventor of the first RFID system to achieve simultaneous identification of tags. He previously worked for the Uniform Code Council (UCC) where he was responsible for RFID standardisation within the EAN.UCC
system and was closely involved with the business integration and commercialization of research from EPCglobal. To contact Zebra or learn more about the companys RFID solutions visit www.rfid.zebra.com/