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Return of investment is the most talked about topic
in just about every RFID conversation – and it’s
unique to every company. Doing an ROI study on RFID
is a great way to become reacquainted with your company’s
business processes (BPs). In doing the analysis and
performing the calculations, you visit and revisit almost
every process in the product life cycle. To work through
this process, you need to consider some primary areas
within your company that will be greatly impacted by
an RFID implementation to understand how your business
can benefit strategically and economically. These areas
range from the impact to your legal department because
of governmental compliance issues to changing the equipment
and automation in the manufacturing process. The general
areas to look at include:
• Customer requirements (compliance)
• Customer expectations (marketing)
• Customer value (marketing)
• Industrial risk (manufacturing)
• Internal efficiencies (supply chain and logistics)
RFID can deliver tangible benefits for many types of
enterprise businesses:
-
Improve
Warehouse and Distribution Productivity from 7%
to 40%: Companies can replace the
point-and-read, labor intensive process of tracking
pallets, cases, cartons and individual products
with an RFID process. RFID sensors can track these
items as they move from various key locations. Because
the process is automated, labor costs can be reduced,
improving productivity, and enabling the reallocation
of resources for more strategic tasks and better
scale operations. Productivity improvements can
be significant, delivering realized labor costs
reductions of 7.5% or more in warehouse applications,
and 5 to 40% in regional distribution centers3.
As one example, Wal-Mart experienced a dramatic
reduction of pallet build from an already fast 90
seconds to an amazing 11 seconds, a reduction of
almost 90%4.
-
Improve
Retail and Point of Sale Productivity by up to 20%:
The use of RFID at the product level can help retailers
reduce the labor costs and service fees of regular
stock management and store shelf inventory. As one
example, handling out-of-stock restocking and replenishment
tasks can be reduced by 15% to 20% with RFID.
-
Reduce
Out-Of-Stock by up to 50%: When
an item is out-of-stock, 20% of the time the customer
either does not buy or buys a competitive product.
In grocery stores, as much as 8.3% percent of revenue
is lost each year due to out-of stock conditions.
In broader studies of the retail marketplace, the
overall economic impact is estimated to be $69B
in lost revenue due to out-of-stocks8. Eliminating
out-of-stock conditions via better RFID product
tracking, inventory visibility and forecasting can
have an immediate top-line revenue impact by retaining
lost sales and recapturing lost market share. AMR
Research of Boston, Massachusetts suggests item
level RFID tagging can yield significant benefits
today if managed correctly. When targeted at specific
consumer goods categories, item-level tagging can
yield an astounding 50% improvement in stock availability
according to these studies. And the benefits are
not isolated just to select consumer goods. RFID
is proven to deliver an average 16% reduction in
product out-of-stocks. If an out-of stock does occur,
RFID enables a retailer to restock three times faster
than that of the non-tagged items within the same
store10. At the retail level, out-of-stock savings
can yield a 3 to 4% increase/recapture of sales.
-
Improve
Inventory Management: Inventory
accuracy is important to help improve visibility
and insight into what specific raw materials have
arrived, helping to assure the right materials are
available and to better manage just-in-time production
models, track work in process, and speed finished
goods through the supply chain. The use of RFID
improves these processes, and helps minimize costly
inventory errors, reducing production delays and
lowering production reconfiguration costs that often
result from material or demand planning issues.
Additionally, visibility can be improved into distribution
and retail channels to more accurately and in real
time track delivered goods and better manage and
match demand. Accurate and real-time visibility
throughout the supply chain helps to improve inventory
forecasting, manage just-in-time workflow and eliminate
excess inventory. Savings are realized by reducing
required inventory via lower safety stock requirements,
a net 10-30% savings. Better inventory management
also leads to proportional reductions in out-of-stock,
lower inventory carry costs and reduced write-downs
on obsolete inventory.
- Reduce Shrinkage (loss
and theft) by 18% or more: Losses
due to theft are estimated to cost retailers over
$30B per year, and are estimated conservatively at
1.7% of overall sales. With RFID, pallets, cartons
and individual products can be tracked through the
supply chain to pinpoint product location and eliminate
inventory errors that can cause shipments to go missing.
Better yet, it enables one to find where in the process
the product was lost. AMR Research estimates an 18%
average reduction in shrinkage using RFID.
-
Reduce
Supply Chain Errors: By replacing
manual bar code scanning with automated RFID information
capture, data entry errors can be eliminated, reducing
not only inventory and tracking mistakes, but also
the costly labor required to resolve such mistakes.
Additionally, because RFID automates data entry,
more collection and tracking can occur throughout
the process, helping to more specifically pinpoint
asset location and workflow. And not just labor
costs are driven higher by mistakes — retailers
and manufacturers each lose $2M for every $1B in
sales due to bad data and predict that eliminating
bad data could save $10B per year.
-
Improve
Capital Asset Tracking and Management:
In many businesses important assets such as shop
equipment and containers are often difficult to
track, maintain and secure. RFID can be used effectively
to better locate movable assets, ease maintenance
scheduling and assure maintenance performance, as
well as help prevent loss. In applications such
as warehousing and distribution where containers
and tugs need to be tracked, scheduled and maintained,
workflow can be optimized by 20% or more and losses
prevented.
-
Reduce
or Eliminate Counterfeiting and Improve Security:
In many industries, counterfeit or non-secure goods
introduced into the supply chain cause large direct
losses of revenue. RFID increases brand protection
and helps mitigate safety, security, regulatory
and liability risks. Improved tracking using RFID
can identify and isolate issues more efficiently
and effectively than manual bar code scanning by
introducing automated and more frequent checks and
balances.
-
Improve
Accounts Receivable (AR): With more
accurate and real-time tracking of what has shipped,
the accounts receivable process can become much
more efficient, with shorter billing and payment
cycles. For example, RFID allows vendors to automatically
produce customer invoices as soon as items are shipped
and enables payment automation as well. This helps
to reduce the time to collect and the improved accuracy
and elimination of manual data entry or tracking
errors helps reduce AR disputes. The results surveyed
include a dramatic reduction in accounts receivable
down from 30-45 days to just minutes.
-
Meet
Market Mandates and Protect Revenue Opportunities:
Many industry leaders have set the stage by making
RFID functionality and compliance a prerequisite
for to participating in their ecosystem. RFID can
help meet these mandatory requirements, or provide
an advantage for those who proactively implement
the technology over those that are struggling to
meet these new market demands. Longer term, RFID
can help create new revenue generating applications
and innovation to help grow market share. In many
cases, RFID is not just a business benefit, but
a requirement for doing business.
-
Improve
Customer Experience: RFID can help
to improve the overall customer experience. First,
RFID enables better management of inventory, ensures
proper deliveries and shipments, better forecasts
demand, better manages promotions and new product
introductions, and reduces out-of-stock conditions.
Elimination of supply chain issues and product availability
results in customers getting what they want, when
they want it. In one case, a documented 29% increase
in promotional execution resulted in a projected
20%-60% increase in sales.
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