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What Companies Don't Know

Many businesses don't have a good handle on how badly they are managing their physical assets.
By Mark Roberti

Around the same time, I spoke to a systems integrator who worked on a project for a paper company. The project's goal was to tag rolls of newsprint so they could be tracked, since the rolls look similar but contain different qualities. The integrator suggested tracking forklifts as well, so the company could optimize the route that each truck driver took from the time he picked up a roll until he delivered it to a shipping bay.

"The warehouse manager told me that wasn't necessary," the systems integrator recalled. "He indicated they had already optimized routes and trained forklift truck drivers to follow them. The guy insisted that the efficiency of the drivers could not be improved upon." But when the integrator looked at the data from the pilot, the forklift trucks were driving around 60 percent of the time without carrying a roll of paper.

More recently, Bill Hardgrave, dean and Wells Fargo Professor at Auburn University's Harbert College of Business, gave a presentation at RFID Journal LIVE! Europe in which he described a conversation with the VP of store operations for a retailer that wanted to allow customers to buy items online and pick them up in the store. The first question Hardgrave asked was, "What is your in-store inventory accuracy?" The VP claimed it was in the 90 percent range, so Hardgrave asked how he knew that, to which the VP replied, "Our system says we have a thousand pair of shoes in the store, and when we count we get about 900, so we're at around 90 percent."

Hardgrave explained that aggregate numbers are meaningless, and that a company must look at the inventory accuracy for each individual stock-keeping unit (SKU)—to know, for instance, that it has four of a particular item in-store—if it plans to expose that inventory to a customer who wants to buy a product online and go to the store to pick it up. "When they drilled down," Hardgrave said, "their inventory accuracy wasn't very good at all. It was around 50 percent at the size, color, style level."

The point here is that most businesses don't know how inefficient they are when it comes to managing physical assets—things that move around, have no internal power source and are not connected to the Internet. Some, in fact, are not jumping to employ RFID because they don't believe they need the technology or don't understand how much they can benefit from it. If you don't know what you don't know, then it's difficult to know you have a problem that needs to be fixed.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog, the Editor's Note archive or RFID Connect.

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