ROI on RFID may be longer than expected

Staff -- Purchasing, 12/9/2004 2:00:00 AM

Two new research reports concluded that the return-on-investment for RFID may be longer than some users and early adopters may be prepared to wait. A new study by the ARC Advisory Group found that 95% of companies surveyed expect the return-on-investment for RFID to be more than two years and that "more efficient warehouse receiving and better management of inbound materials may have to wait until companies have been able to negotiate with their upstream suppliers to engage in more RFID tagging."

ARC interviewed 24 companies actively investing in electronic product code RFID and respondents found that even at 20¢ a tag, a company that ships 50 million cases a year will incur a $10 million cost. And it's likely to incur, says ARC, another $1 million in expenses to prepare the RFID infrastructure. Furthermore, it increases the labor aspect of warehouse processes, adding perhaps another $500,000 in new operating costs.

ARC identified three major hurdles to achieving ROI in RFID: the reliability of reads needs to improve greatly, a significant drop in the cost of tags and a critical mass of retailers with RFID mandates. Regardless, ARC found that companies are continuing to invest in RFID, in part because of mandates from companies like Wal-Mart that says that by January its top 100 suppliers must apply passive RFID tags to cases and pallets headed toward three specific distribution centers.

Another recent study by ABI Research offer much the same conclusion.

"While firms such as Gillette, International Paper, Kimberly-Clark, and Campbell Soup demonstrate the possibility of making RFID work, other companies are still looking for answers," says ABI. "Many logistics and IT management staffs still struggle to integrate RFID hardware and software into enterprise systems for quantifiable long term benefits, without major disruption."

Average Rating:

(0)

Rate this:

Talkback

We would love your feedback!

»MORE

Featured Company

A.T. Kearney

A.T. Kearney Procurement & Analytic Solutions, a division of A.T. Kearney, provides comprehensive strategic services and solutions to clients seeking to improve procurement and supply chain performance, develop in-depth, analytical solutions and... more
LeanLogistics

LeanLogistics, Inc. is the global leader for innovative transportation solutions. Leveraging one of the industry's largest transportation networks, we combine technology and services to tailor transportation solutions to the needs of our customers... more
EMC

EMC Corporation is the world's leading developer and provider of information infrastructure technology and solutions for industries worldwide. EMC creates complete information environments that are reliable, efficient, and secure. The result is... more
Coupa Software, Inc.

Coupa.com helps small and medium-sized businesses control costs and improve purchasing efficiencies with an easy-to-use, web-based purchasing system that automates the entire procure-to-pay process, from requisitions, approvals, RFQs and purchase... more
Exel

We're the leading contract logistics provider in the Americas with 40,000 associates at more than 500 sites throughout the U.S., Canada, and Latin America. Exel is part of the SUPPLY CHAIN division of Deutsche Post DHL, the world's leading... more