Using RFID to Manage Work-in-Process Is Companies' Top Objective

By Beth Bacheldor

July 16, 2007—More than a third of the businesses using RFID are doing so to improve the cost, safety and reliability of managing work-in-process (WIP), according to a study released by the Aberdeen Group, a market research and consulting firm. But most companies are finding it difficult to quantify, or even estimate, a return on investment from their RFID deployments. Nonetheless, Aberdeen concludes, for manufacturers and other process-intensive companies that follow "best-in-class" practices, RFID technology can reduce labor costs and improve production throughput.

The study included an online survey and follow-up phone interviews with CIOs or other chief officers (29 percent), VPs or directors (27 percent), managers (22 percent) and staff members or consultants (22 percent) from 220 companies in a diverse set of industries. These firms are using, or planning to use, RFID to manage assets with a focus on WIP. Aberdeen conducted the survey in April and May of this year.

Russ Klein

The greatest number of respondents (28 percent) worked for manufacturing and assembly companies, with supply-chain companies accounting for 21 percent. Nine percent worked for health-care, automotive, energy or utilities firms, and the remaining 5 percent included retail, construction/engineering, aerospace and entertainment companies.

The expectation that RFID will help improve a company's bottom line is high: 93 percent of survey respondents said they expect the technology to help reduce the costs of doing business. And 72 percent said the first order of business in optimizing work-in-process is to determine how many items involved in the WIP are on hand, and that RFID can help them collect that information. Managing assets and WIP were cited as the top two pressures driving RFID use (both came in at 57 percent), while managing raw materials ranked third at 41 percent.

Underwritten by RFID technology providers Acsis, Domino Integrated Solutions Group, Reva Systems and TrenStar, the report can be downloaded free from Aberdeen's Web site. Entitled "Where's My Stuff?!," the study was designed to illustrate best practices of RFID applications for managing WIP. Russ Klein, Aberdeen's VP and senior analyst, says RFID's key contribution to improving WIP is that it provides visibility. "Specifically," he states, "you can identify the condition, quantity, movement and movement history of anything without necessarily having line of sight. What that does is allow a much more streamlined automated process."

Aberdeen used key performance indicators (KPIs) to characterize three groups of companies—best-in-class, industry average or laggard—for which the respondents worked. KPIs are quantifiable measurements based on data used to indicate how well a business process or business line is performing.

The characteristics to determine which companies fit into which group were broken into five categories: the ability to adapt existing processes to take advantage of the visibility offered by RFID; a willingness and ability to understand, use and manage RFID-enabled processes; the ability to learn from the collected data and leverage that knowledge to inform key stakeholders; the ability to learn to select and intelligently deploy the appropriate tools; and the ability to measure the benefits of technology deployment—and use the results to further improve key business processes.