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Understanding RFID's Role in an Enterprise
Achieving total business visibility will require a suite of technologies, but RFID will do the lion's share of the work.
Nov 09, 2009—My last few Editor's Notes and blogs have been fairly shrill, a sign of my growing frustration with analysts and journalists who misinform readers about radio frequency identification, and with vendors who sell RFID but don't want to discuss the very technology they're selling. So now I would like to take a deep breath and explain why I believe so passionately that RFID is becoming a critical technology for most companies.
When I first learned of RFID, back in 2000, researchers at the MIT Auto-ID Center (now the Auto-ID Labs at MIT), backed by Procter & Gamble, Gillette (then not part of P&G), Wal-Mart and others, had developed something called the Electronic Product Code (EPC). This RFID technology was designed to provide a way for companies to better manage their supply chains, with accurate near-real-time data. This made complete sense to me.
RFID enables companies to see, track and manage all the parts of their business they can't manage effectively today. Mobile assets don't report on their utilization rates the way salespeople file production reports, or the way fixed machines now report on their output. Inventory doesn't tell a warehouse manager when there is too much of one item and not enough of another. And tools don't shout out when they are left in the wrong location or stolen.
Do companies need to manage these things? I argued in last week's column that they do, even if they don't yet realize it (see Do You Really Need to Justify Your RFID Investment?). The supply chain VP of a major consumer packaged-goods company told me that at any given time, his company has $1 billion in inventory for which it can not account. The inventory is not lost or stolen; it's simply not visible. That amounts to excess inventory the company could eliminate with better inventory visibility, while still meeting demand. And that would free up a billion dollars—a billion dollars!—in working capital, as well as eliminate perhaps $250 million in annual carrying costs.
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