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BlogsAsk The Experts ForumWhat Is the Cost of Using RFID Versus Bar Codes?

What Is the Cost of Using RFID Versus Bar Codes?

Posted By RFID Journal, 06.26.2012
How different are prices for the two technologies?

—Name withheld

———
That's a very difficult question to answer. It you are inquiring about the cost of everything—hardware, software, services and data-capture—it would be very hard to estimate price, since that would vary with so many factors, including the type of facility (retail store, warehouse or factory), the layout (the number of points of sale or dock doors) and the type of data that that needs to collect.

In addition, it is important to understand that although bar codes are inexpensive (they can be printed on a box, along with the rest of the packaging design), scanning those bar codes in order to obtain data is what's important (the bar code itself is useless if not scanned). So let's do a quick comparison.

Let's say you have a store containing 10,000 items, and that you want to perform an inventory count. We'll assume that your labor costs will be $10 per hour. A worker can scan roughly 650 bar codes per hour, according to a time and motion study conducted by the University of Arkansas' RFID Research Center. That means it would take 15.4 hours to read all of the bar codes, costing the store $150.40 in labor. If you were to count inventory once weekly at 500 stores, each containing 10,000 items, that would amount to $3,910,400.

With RFID, you could read 18,000 tags per hour, according to the same time and motion study. So it would take about 40 minutes to read 10,000 tags. At $10 per hour, that would cost $6.67 in labor. If you were to inventory 500 stores, each containing 10,000 items, that would cost $173,420 in labor. That's a huge savings.

Now, let's assume that each of the 10,000 items at every store turns over four times annually. So each store is consuming 40,000 RFID tags, or 2 million tags for all 500 locations. Let's assume the cost of putting RFID into hangtags is 12 cents per hangtag; this would cost $2.4 million for the RFID tags. So the total cost for performing weekly inventory counts with RFID would be $2,573,420, versus $3,910,400. That's a savings of $1,337,000 with RFID.

The RFID Research Center's study showed that workers make more mistakes as they scan bar codes for several hours, thereby leading to lower inventory accuracy. Of course, no store chain spends $3.9 million a year to count inventory—they perform one or two yearly inventory audits, and otherwise rely on spot-checks. As a result, inventory accuracy is down at around 65 percent at most retail stores. By investing $2.5 million annually in a radio frequency identification solution, stores can bring inventory accuracy up to 99 percent—and boost both sales and margins in the process, since they would sell a lot more goods at a higher price.

—Mark Roberti, Founder and Editor,
RFID Journal

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