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The ROI of RFID in the Supply Chain

Although RFID implementations are not without costs and risks, a number of companies in manufacturing, warehousing and distribution and retailing have achieved a 200 percent return on investment.
By Thomas Pisello
The Bottom Line
The competitive advantage and bottom-line business benefits are significant to the supply chain that implements RFID to its advantage. Early estimates indicate that a comprehensive RFID solution can generate an additional 2 to 7 percent increase in revenue, improve handling productivity by 20 to 30 percent, reduce operating expenses by 2 to 5 percent and reduce days in inventory by 1 to 2 percent. Financial improvements such as these are significant, and it is for this reason that many companies are moving forward with RFID, sooner than later.

Although RFID implementations are not without costs and risks, typical companies in manufacturing, warehousing and distribution and retail have been known to achieve 200 percent ROI (net benefits divided by costs) or more from these projects. What this means is that for every dollar invested in RFID, companies are getting back $2 in incremental benefits (the original dollar invested, plus two more). The high ROI and relatively short payback periods provide the fuel to move from having RFID as a project under consideration, to one where a pilot program is mandatory.

Tom Pisello is the CEO and founder of Alinean, and a former managing VP at Gartner.

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