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Study Finds High Economic Gains from RFID Deployments
"When you start talking about billions and billions of dollars," says Reynaerts, "it's the size of those numbers that is most impressive."
To calculate the economic gains, researchers at the university's Center for Research in Electronic Commerce, part of the McCombs School of Business, developed a forecasting model of RFID's potential impact by quantifying broad classes of benefits (such as better tracking of assets), then translating them into financial benefits. The researchers culled data from a number of sources, including case studies of RFID trials and deployment. For example, the study leveraged U.K. retailer Tesco's RFID item-level tagging trial, which indicated a 50 percent increase in product availability and a 40 percent reduction in shrinkage. Other sources of data included government agencies such as the Bureau of Labor Statistics (BLS), and industry associations such as the Healthcare Distribution Management Association (HDMA). Additionally, researchers leveraged results from prior RFID studies.
"We didn't have too many benchmarks, so we took a more holistic look," says Anitesh Barua, a professor of IT at McCombs School of Business. Barua, along with fellow professor Andrew Whinston and IT doctoral student Deepa Mani, authored the study. "The impacts are quite sweeping, even though the RFID adoption level is still low."
The study indicates that RFID technologies have already added $40 billion in benefits to the retail and health-care sectors, despite relatively low adoption of item-level RFID tagging. Those benefits, the study further notes, are derived from $4.4 billion in infrastructure investments in those sectors, implying a collective return on investment of more than 900 percent.
Barua acknowledges that the study assumes all RFID implementations to be successful. "But of course, we will see failures. Even if 50 percent of implementations fail, you could still see a return of at least 400 percent," he says.
According to Reynaerts, the study should serve as a discussion piece for companies to start thinking about RFID. "There's an increasing scientific base that supports the necessity for industries that want to become or remain competitive, to look at what RFID could mean for them," he says. "And companies need to think about RFID from outside the existing box, which is typically bar-code based."
The complete study, entitled "Assessing the Financial Impacts of RFID Technologies on the Retail and Healthcare Sectors," is available online for downloading.
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To calculate the economic gains, researchers at the university's Center for Research in Electronic Commerce, part of the McCombs School of Business, developed a forecasting model of RFID's potential impact by quantifying broad classes of benefits (such as better tracking of assets), then translating them into financial benefits. The researchers culled data from a number of sources, including case studies of RFID trials and deployment. For example, the study leveraged U.K. retailer Tesco's RFID item-level tagging trial, which indicated a 50 percent increase in product availability and a 40 percent reduction in shrinkage. Other sources of data included government agencies such as the Bureau of Labor Statistics (BLS), and industry associations such as the Healthcare Distribution Management Association (HDMA). Additionally, researchers leveraged results from prior RFID studies.
"We didn't have too many benchmarks, so we took a more holistic look," says Anitesh Barua, a professor of IT at McCombs School of Business. Barua, along with fellow professor Andrew Whinston and IT doctoral student Deepa Mani, authored the study. "The impacts are quite sweeping, even though the RFID adoption level is still low."
The study indicates that RFID technologies have already added $40 billion in benefits to the retail and health-care sectors, despite relatively low adoption of item-level RFID tagging. Those benefits, the study further notes, are derived from $4.4 billion in infrastructure investments in those sectors, implying a collective return on investment of more than 900 percent.
Barua acknowledges that the study assumes all RFID implementations to be successful. "But of course, we will see failures. Even if 50 percent of implementations fail, you could still see a return of at least 400 percent," he says.
The complete study, entitled "Assessing the Financial Impacts of RFID Technologies on the Retail and Healthcare Sectors," is available online for downloading.
