Playing the RFID waiting game could cost you a competitive edge

Aug. 29, 2005
In this era of compliance, shippers are having a hard time being convinced theres a definite return-on-investment from their investment in radio frequency

In this era of “slap-and-ship” compliance, shippers are having a hard time being convinced there’s a definite return-on-investment from their investment in radio frequency identification (RFID) technology. And yet, according to analyst firm Manufacturing Insights, logistics professionals should treat their RFID business case as a living document identifying their company's RFID opportunities (options), investing in a scalable RFID platform and empowering management with the flexibility to make the needed adjustments to best leverage identified options.

Many companies, particularly consumer packaged goods suppliers and retail organizations, have felt the pressure to implement immature technology in a narrow, compliance-focused scope. However, according to the manufacturers Manufacturing Insights interviewed for a study on RFID, no substitute exists for hands-on experience. While the cost of RFID tags is definitely their greatest short-term concern, long-term issues focus on physics, integration and process.

In light of these issues, and the challenges and opportunities they illicit, Manufacturing Insights predicts that if RFID is leveraged to its full potential over the next three to five years, it will force companies to redefine the rules of engagement for collaboration -- specifically, how supply chain data is exchanged and utilized, increasing operational visibility and providing a clearer picture of available options.

Manufacturing Insights identifies four distinct stages along the RFID lifecycle. While most manufacturers linger in the "compliance" stage and some have graduated to "identification," only a few industry leaders have made progress into the "process" stage, which focuses on end-to-end supply chain integration and transforming both upstream and downstream processes. The true value of RFID, according to the analyst firm, lies in the sensor networks of the final stage -- "product" -- where current passive RFID solutions will prove to be the stepping-stone to sensor networks for open end-to-end supply chain applications.

With all of the uncertainty and risk factors that exist with RFID today, Manufacturing Insights worked with Robert Fichman, a professor at Boston College, to define and introduce the options thinking IT investment strategy to replace traditional ROI strategy when evaluating RFID technology. Key points include:

* Recognize and create options for RFID investment: Companies must employ a needs-focused analysis of business processes, systems architecture and resource capabilities to identify all organizational options available, as well as existing risk factors and uncertainties.

* Value the options: Companies must place a systematic, accepted value on each identified option.

* Extract value from IT project options: Companies need to establish checkpoints to manage the options approach successfully.

"Waiting for RFID to become 100% proven, understood and standardized may seem to be a safe decision on the surface, but it's a losing strategy," says Mike Witty, program director, demand management strategies, Manufacturing Insights. "In general, companies have focused too much on the cost of compliance and not enough on the business value of RFID. Organizations that develop a comprehensive RFID strategy extending beyond mandate compliance will be poised to gain a competitive advantage once the dust settles from the early pilot projects."