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Wall Street Journal Assesses RFID Risks and Rewards

The Wall Street Journal has published another story about RFID adoption. Appearing in Saturday's edition, the full-page piece is likely to be perceived as more balanced than the damning , which ran a few weeks ago and elicited major pushback from the RFID industry.
Mar 05, 2007This article was originally published by RFID Update.

March 5, 2007—The Wall Street Journal this weekend published another story about RFID adoption in retail, manufacturing, and the supply chain. Appearing in The Journal Report section of Saturday's edition, the full-page piece is likely to be perceived as more comprehensive and balanced than the damning Wal-Mart's Radio-Tracked Inventory Hits Static (subscription required), which ran a few weeks ago and elicited major pushback from the RFID industry.

In Search of RFID's Sweet Spot begins by offering a brief introduction on the state of RFID adoption and the technology itself. It then considers how RFID can be applied -- and whether it should be -- to each of five key stages in the supply chain: planning, receiving and storage, manufacturing, delivering, and returning.

For planning, the WSJ is essentially pessimistic, asserting, "RFID's benefits in planning are unlikely to be big enough to justify an investment." Challenges to planning include convincing trading partners to share data, as well as managing the resulting multitude of data-sharing relationships. Receiving and storage saw a more positive analysis. By offering visibility into cases and boxes without having to open them, RFID can benefit organizations like retailers and complex-good manufacturers (think auto- and plane-makers) that receive a wide variety of goods on a high-volume basis. Manufacturers that receive high volumes of the same supply, like raw materials and other commodities, will see less opportunity for RFID since it is often known what is inside received containers without having to open them. For storage, the WSJ notes that more efficient and timely stock checks are a key RFID-enabled benefit. Echoing a conclusion from research firm ABI Research (see MRO is Major RFID Opportunity for Aero and Defense), the article also pointed to maintenance, repairs, and operations (MRO) in certain industries as an area of benefit for RFID. "An airline, for example, may prevent, a plane from being grounded by using RFID to locate a critical aircraft component quickly."

In manufacturing, the article indicates that RFID benefits are most achievable for goods that are customizable, though if a manufacturer already has a bar-code system in place, RFID may not provide much added value. The article is bullish on delivery applications of RFID, as there is so much room for automation and paperwork reduction. "The business case [for RFID] is strongest for using the tags to track merchandise moving into stores. This allows companies to cut receiving, handling and storage expenses without incurring big costs or risks." Finally, on returns the prognosis is mixed. Benefits to intra-supplier returns are not likely high, according to the WSJ, because volumes of such returns are low. On the other hand, returning by consumers to retailers could see major improvement from RFID, with the caveat that it would require expensive item-level tagging. "The more efficient handling of returns can add to the value of item-level tagging, but it is unlikely to be big enough on its own to justify such an investment."

In addition to analyzing the five stages of the supply chain, the article includes a litany of familiar retail store-level benefits, including out-of-stock (OOS) reduction, its cousin automatic replenishment, and theft prevention. Oddly, one of the most talked-about sources of ROI at the retail level, promotions tracking, goes totally unmentioned.

Lastly, the article lists a number of risks associated with RFID, many of which will be familiar. Examples include the possibility of RFID vendors being acquired or going out of business, technology blips that cause junk data, consumer privacy concerns, security issues, and RFID's marching evolution causing the rapid obsolescence of a technology investment.

Ultimately, the Wall Street Journal's verdict is selectively optimistic. In its own words: "Electronic tagging can be worth the investment. The key is finding where in the supply chain it makes the most sense."
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