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Achieving ROI from Mandate-Driven Deployments

There is a recent theme in RFID articles, presentations, white papers recommending mandate-driven RFID implementers look into the ROI equation in lieu of mere slap-and-ship. There is a notable lack, however, of realistic guidance as to how that might be accomplished in any given RFID rollout. This article fills that void.
Dec 06, 2005This article was originally published by RFID Update.

December 6, 2005—I have attended numerous seminars and trade show presentations and read hundreds of white papers and online PowerPoint presentations on the subject of RFID in my 20 years in the business. In more recent perusals there is a relatively common theme suggesting all kinds of recommendations for mandate-driven RFID implementers to look into the ROI equation in lieu of mere slap-and-ship. There is a notable lack, however, of realistic guidance as to how that might be accomplished in any given RFID rollout.

While supply chain applications continue to drive RFID adoption via mandate, recognition of the greater value of RFID for other niche market applications is starting to take hold. In a prior article we looked at a case study for using EPC UHF tags for fixed asset management. Today we will talk about a very simple aspect of asset management using RFID tags and how tremendous the potential value-add proposition can be in ways that might not be so obvious. We will follow this up in a future article that provides a case study supporting the arguments presented today.

In many ways, the supply chain applications that dominate the RFID landscape inherently contain a loss prevention aspect to them. Loss of -- business, CRM opportunities, product and/or assets -- is preventable or at least controllable through an effective RFID deployment. Loss prevention ultimately is a component of any good asset management system. In this context we will discuss the extended value derived from an RFID implementation intended solely for loss prevention by applying these ideas to a simple example of achieving intangible benefit for supply chain activities.

Part of loss prevention is tracking the whereabouts of assets at any given time. In its simplest form, assets might be checked in or out of a facility by authorized persons. By automating the data capture of this check-in/check-out process using RFID, you:
  1. Increase data accuracy as it permeates the enterprise.
  2. Eliminate human inefficiencies and provide real-time visibility of the transaction.
  3. Enable a means to accurately audit the activity to ensure compliance is practiced.
While numerous transaction types can be captured in this application of the technology, simple check-in and -out records can provide a substantial windfall of value via some simple analytical processes or reports.

One possible example might be termed implied asset utilization, in which the movement of an asset through a checkpoint implies some level of use depending on the type of asset. This could apply to laptops, vehicles, or other similar categories of asset types.

What information there is to be derived from the capture of check-in/out data would of course vary from application to application, but let's take the case of vehicles, from which three categories of analysis can be easily extracted:
  1. Asset Reassignment. If you have assigned an equal number of fleet vehicles to a particular area, it is a simple matter to calculate the percentage of capital utilization for each site and adjust assignments as required. This simple exercise would avoid the potential for acquiring additional vehicles at a busy site when vehicles could easily be transferred from a less busy location.
  2. Asset Maintenance. Vehicles come in for regular maintenance where fleet management systems are used, but a review of the records from an RFID deployment might indicate that certain vehicular assets are experiencing far greater use than others such that scheduled maintenance can be better performed relative to actual use, in lieu of anticipated use.
  3. Asset Reduction/Increase. While evaluating the asset reassignment reports mentioned above, the same capacity utilization figures can also provide absolute confirmation of the feasibility of acting on fleet reduction programs or could define the need for fleet expansion.
As to supply chain activities in the warehouse, additional benefits can be derived by analyzing the existing data stream in different ways. This might accomplish the following objectives depending on your operating environment:
  1. Enable quantifiable measurements of productivity by correlating financial data to the various recorded activities using RFID.
  2. Enable identification of bottlenecks in the existing business process paradigm.
  3. Confirm and verify business process efficiencies and evaluate change effectiveness via quantifiable means.
For example, in today's RFID-enabled warehouse fork trucks carry readers and play a role in maintaining internal visibility of supply chain goods in warehouse operations. Using the supply chain application data captured by RFID, large warehouse operations can derive implied asset utilization analysis of fork truck fleets, for instance, by simply analyzing how frequently the fork truck plays a role in moving product around the facility. One could even determine if the actual usage meters on the truck itself correlates well to tagging activities. A lack of correlation of such divergent data collection activities would warrant further investigation. Are the trucks being used for some activity where tracking or RFID data collection might benefit the operation in other ways? Is the warehouse layout and design inefficient such that the net productive use of the fork trucks is diminished, further leading one to conclude that personnel resources are not fully optimized?

I realize this fork truck concept may or may not be practical and is somewhat oversimplified in its application, but the intent here is to get you thinking about the innumerable tangible and intangible benefits that can be gained by way of such automated data collection activities. Assuming you have a valid business process map of your organizational activities, a thought experiment such as this is a possible first step towards using RFID to validate organizational effectiveness and actually achieve a viable ROI by investing just a bit beyond slap-and-ship.
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