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Unlock the Business Case for RFID

As companies struggle to find a compelling return on investment in RFID systems, they should look to the lessons learned from deploying other wireless technologies.
By Nicholas D. Evans
Feb 16, 2004It doesn't matter what industry you are in, what region of the world, or what area of the enterprise—chances are you're struggling to develop a business case for deploying RFID technologies. If the costs seem high and the potential returns unclear, consider lessons learned from the deployment of other wireless technologies, including wireless infrastructure, devices and middleware, over the past several years. The business needs driving adoption of RFID are similar to those that drove adoption of these devices, and examining them could shed light on how to begin building the business case.

Companies deployed mobile phones, personal digital assistants and laptops to extend information and transactional systems out to the edges of the enterprise, where they were needed to increase automation and productivity. The result: Midsize companies and large enterprises have saved millions of dollars. Some have achieved a return on their investment in less than three months through improved processes within areas such as parts inventory in the aviation industry, wireless sales force and field force automation in the telecom and manufacturing industries, and elimination of proof-of-delivery write-offs in the retail industry.

RFID extends the reach of information and transactional systems even farther out—to physical objects. As with wireless computers and networks, the initial costs will be high. Beyond just the cost of the RFID tags and readers, there will be integration costs and the pain of reengineering business processes. But the potential benefits are high. They include improved data accuracy, reduced costs of labor and materials, improved productivity and increased customer satisfaction, to name just a few.

One of the barriers companies faced was the cost of the infrastructure—not just the mobile devices, but also wireless access points. There were also recurring costs for service charges and support. The amount of the initial investment varied widely based upon the number of end users involved and the types of devices and transactions supported, but was typically in the range of several million dollars for large companies.

But once companies made the initial capital investment, they found that successive applications could be deployed that leveraged the same infrastructure. Typically, the recurring costs decreased and the benefits increased over time as end users found new ways to take advantage of the infrastructure to improve business processes and become more responsive to customers.

RFID faces the same hurdles in terms of the costs for tags, readers and supporting infrastructure. For example, a large-scale RFID solution deployed within a hospital may require a large investment of hardware infrastructure to support applications such as a real-time location system (RTLS) to provide zonal coverage for high-value asset tracking. But as with other wireless technologies, the hospital would be able to leverage the infrastructure in a variety of ways.

An asset management solution in a hospital may have a lengthy ROI, particularly if it is an RTLS system that requires many readers to cover the various zonal areas and large square footage of the facility. But when combined with other RFID applications that support patient safety, improved operating room efficiency, loss prevention for medical equipment, and even wireless commerce, the benefits start to accumulate.

The ROI for wireless and mobile applications, such as field force automation or sales force automation, was typically measured in terms of increased productivity and improved real-time decision making. It provided the ability to sense and respond faster to events occurring in the field and to improve data accuracy via automation.

RFID will provide similar benefits. As an automatic identification technology, it will provide greater levels of automation than bar codes and enable companies to become more productive. Companies will be able to re-engineer their processes so they are built around a specific task in the field and not around the many trips to computers in the back office.

We are moving computing to the point of business activity so that it becomes more seamless and invisible. For example, in global trade management, electronically tagging cargo can help to incorporate the necessary paperwork and transactions with the physical assets themselves as they move through various ports of entry around the world.

To unlock the ROI for RFID, companies need to apply the same rigor used to determine the ROI for mobile applications. They need to look at specific, end-to-end, business processes and determine the productivity improvements between their old and new processes. For some it might mean looking at bar code-enabled versus RFID-enabled processes and associated labor costs; for others, it might mean looking at completely new processes that are designed from the ground up to leverage RFID’s potential for automatic identification and embedded intelligence. A good example is using RFID to aid patient safety in healthcare by ensuring the right patient receives the right medication at the right time. RFID technologies can help to inform healthcare workers about correct patient care procedures and can also raise alerts to help prevent mistakes.

Most companies are focused on comparing the costs of tags and readers to the costs of bar codes. But to appreciate the business case and return on investment for RFID, companies must look beyond that narrow focus, beyond the initial infrastructure costs and beyond the benefits from a single application. Companies have to look at the overall application scenarios and business processes. The benefits should be studied quantitatively and qualitatively; they can be measured in terms of familiar variables, such as increased safety, increased worker productivity, reduced headcount, improved data accuracy, reduced losses, improved security, improved decision making, and improved customer satisfaction.

Then the deployment strategy becomes simply a question of finding the applications that offer the highest value opportunities and moving ahead aggressively.

Nicholas D. Evans is global lead for emerging technology for BearingPoint’s Public Services Sector. He is the author of Military Gadgets: How Advanced Technology Is Transforming Today’s Battlefield…and Tomorrow’s and Business Innovation and Disruptive Technology: Harnessing the Power of Breakthrough Technology ...for Competitive Advantage. To comment on this article, send e-mail to ndevans@bearingpoint.net, or click on the link below. The views and opinions are those of the author and do not necessarily represent the views and opinions of BearingPoint, Inc.
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