Feb. 1, 2005—Many analysts have been quoted recently as saying there’s no return on investment in RFID technology. In one sense they’re correct. Manufacturers won’t achieve an ROI by placing tags on pallets and cases for retail customers or the U.S. Department of Defense any more than they’ll achieve an ROI for adding newly mandated safety features to their products.

But companies that are meeting mandates—and even those that don’t need to—can achieve an ROI by using RFID technology to attack problems within their own supply chain. The key to doing this successfully is to use RFID to achieve lots of small benefits that add up to a big benefit, such as reducing excess inventory, out-of-stocks or losses through theft and/or counterfeiting. RFID Journal calls this the “benefits stack.” (See a list of benefits stacks.)

The problem most companies are encountering is they are taking a top-down approach to the business case. They recognize there are inefficiencies in the supply chain, but solving systemic problems would involve deploying readers everywhere, which is prohibitively expensive. A bottom-up approach is more efficient because small, inexpensive tactical deployments can be combined with one another to solve a systemic problem in a cost-effective way.


The benefits stack is based on a bottom-up business case. Here’s how it works. Let’s say a company can save millions of dollars a year by reducing inventory. Instead of deploying readers throughout the warehouse to achieve visibility, readers can be deployed in areas that target specific problems that contribute to higher-than-necessary inventory levels. And the systems can be linked to provide visibility.

For example, one problem companies have is maintaining accurate records of what’s received by the warehouse. By scanning pallets or pallets and cases as they leave the manufacturing facility and alerting the warehouse to what’s coming, companies can automate the receiving process, thereby cutting labor costs and reducing errors. Now, by having an accurate record of everything that arrives at the warehouse, companies can cut paperwork and reduce theft (workers exploit sloppy record keeping by taking goods that were never checked into inventory).