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Can RFID Deliver a Competitive Advantage?

Maybe it can—but what's more important is that the technology can be used to reinforce an existing competitive advantage.
By Mark Roberti
May 17, 2010I'm often asked if radio frequency identification technology can provide a competitive advantage. Generally speaking, most technologies don't provide one—and if they do, it doesn't last long. What RFID can do is enhance or reinforce your existing competitive advantage.

New technologies can provide a major competitive edge when they are central to your product. When diesel-powered excavators were invented, for example, they were cheaper and simpler than steam shovels. Then, after World War II, the invention of hydraulic-powered excavators offered benefits over diesel-powered machines. Companies selling new products with advanced technology won out.


But when a firm uses new technology to improve the way it does business, the advantages are less pronounced. The first company to utilize a diesel-powered excavator got the job done faster and, perhaps, won new business, but its competitors, no doubt, soon purchased diesel-powered machines and caught up. Similarly, companies that were among the first to deploy an enterprise resource planning (ERP) system had the ability to share data across their enterprise, but it didn't lead to their gaining a huge market share over their competition.

Radio frequency identification is no different. Put RFID in your credit cards to enable faster payments, and pretty soon your competitors will do the same thing. Start using RFID in your supply chain to reduce costs, and before long your competitors will employ the technology to track goods in their supply chain.

So why should you deploy RFID before your competitors? Two reasons: First, RFID can solve some problems that other technologies can not. If you have poor inventory accuracy, RFID can increase it dramatically without a lot of additional cost. If you are losing assets and spending money to replace them, RFID can help you track them. And so forth.

The second—and more important—reason is that RFID can extend your existing edge. Isn't it curious that two of the first retailers to deploy RFID systems in stores were Wal-Mart and Prada? There couldn't be two more different retailers—one focused on everyday low prices, the other on extremely expensive clothing. Both sought to use RFID (not entirely successfully) to enhance their existing competitive edge.

Wal-Mart saw—and still sees—RFID as a way to reduce the cost of handling goods and getting them to the shelves when a customer wants to buy them. The technology is deployed in service of the company's larger strategic goal: to always be the lowest-cost retailer.

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