The business case for RFID rests upon the ability to recognize opportunity, assess the risks and to structure and implement a strategy for change that clearly identifies a favorable return on investment.

Opportunities for applying RFID can be found in virtually any sector of commercial endeavor and at various levels of process or service engagement, including for example:

Reduction of supply chain shrinkage - Opportunities for reducing shrinkage within supply chains as a result of diversion of goods or losses are ostensibly in the region of 50% at case level and between 10-15% at pallet level

Sortation of items - Opportunities for enhancing item sortation processes, such as those encountered in clothing manufacture and distribution, wherein time and associated cost savings of greater than 40% may be achieved

Flexible manufacturing - Opportunities for more item-specific manufacturing operations to be performed using automated read and control functions to achieve more efficient processes, wherein process improvements of greater than 10% may be achieved

Item identification in condition monitoring - Opportunities for improved identification of system components and tools for conditioning monitoring purposes, wherein the management may be achieved more efficiently with potential cost savings greater than 10%

Reductions in inventory - Opportunities to reduce inventory by more than 5% or more in appropriately selected circumstances

Improved asset management and maintenance - Opportunities for improved management and utilization of assets, such as reusable containers, wherein savings in time and associated cost and maintenance could be greater than 10%

Enhanced field services - Opportunities for location, plant and item tagging that can facilitate more efficient and effective field maintenance and support services, wherein savings in time and associated costs could be greater than 20%

Labor and more efficient time-and-attendance management - Opportunities for improved labor management and associated costs yielding savings in excess of 20%

 Cost Justifying RFID Applications

Two important considerations impact upon the economics and viability of RFID applications. One is identifying the appropriate opportunities for applying the technology and the other is in identifying the total costs involved in the applications.

Recognizing the Opportunities

By way of summary, the most prominent capabilities include:

• Accuracy of identification and captured data, relatable directly to the items concerned. This is linked with the avoidance or elimination of errors (see below) which will yield significant economic benefits in business processes.
• Speed of data transfer, with attendant benefits with respect to identification, information and knowledge of items – such as real-time inventory and “Quick response” applications, all of which will yield economic benefits and bottom-line improvement.
• Immediacyof information from the item-attendant data carrier or through rapid access to information stored elsewhere concerning the item(s) with immediate usage of that information for decision support and process functionality. This supports the realization of “Just-in-Time” applications. Immediacy of information, appropriately used, will also improve efficiency and yield attendant economic benefits.
• Elimination of errors in manual data entry will be avoided – these are errors and associated misinformation and actions, such as an item being sent to a wrong destination. This can often result in cascading costs in rectifying the error.
• Integratedelectronic working, wherein the use of RFID and other data carriers, suitably integrated into e-business applications can significantly improve process efficiency and reduce the amount of manual data entry and paperwork.

Costs and Justification

One of the benefits of effectively applying data carrier technologies such as RFID is that the return-on-investment (ROI) is often of the order of months rather than years.