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10 Things CEOs Must Know

Deploying RFID successfully is no simple matter. Here are the essential truths CEOs need to understand about the technology to establish a successful deployment strategy.
By Bob Violino
CEOs also need to understand that with all infrastructure technologies, the upfront costs can be steep and the benefits come over time as the incremental cost of using the infrastructure declines. Once RFID readers are installed for one application, everyone within the company needs to look for ways to use the data gathered to cut costs, reduce out-of-stocks and improve customer service.

RFID is not a panacea.
There’s a lot of talk about the huge potential benefits of RFID, but the technology will not fix underlying problems. In fact, it will probably exacerbate them. “RFID can be a very dangerous tool,” says Jonathan Loretto, global technology lead for RFID at Cap Gemini Ernst & Young. “If you do it correctly, you can add a lot of value to your organization. Do it badly and you can detrimentally affect your profitability in the medium term.”

CEOs need to light a fire under the senior executives on the steering committee to make sure that the company is well prepared for RFID. The IT department may need to get the company’s global data synchronization efforts into high gear and upgrade its warehouse networks to handle RFID data traffic. Supply chain and logistics managers have to fix any broken business processes. It may be possible to use RFID to turn an operationally inefficient company into a top performer, but only if the CEO communicates a plan for taking the company to another level.

RFID is only the beginning.
RFID will change the supply chain from one in which products are pushed to shelves to one in which products are pulled by real demand signals (see Think Strategically). But to achieve the enormous efficiencies this change will bring, such as less inventory across the supply chain, companies need to invest in more than just RFID tags and readers. They have to build an IT infrastructure capable of using real-time RFID data to make real-time decisions.

“In today’s world, events occur and the data is stored for a while before being processed and acted upon,” says Cap Gemini’s Loretto. “That paradigm doesn’t work in the new world. When an event occurs, you need to make decisions dynamically as close to the event geographically and temporally as possible and then store the information related to the decision.”

Getting there will take time—and money. CEOs need to communicate a vision of a new kind of highly adaptive supply chain, so the company as a whole understands where RFID is leading. CEOs also have to ensure that incremental savings achieved with each application of the technology are reinvested in new systems needed to achieve the long-term vision.

Collaboration is key.
Many of the benefits of RFID can be achieved only through cooperation between supply chain partners. But sharing information on, say, inventory levels is a big change for many companies used to protecting data. It will take pressure from the CEO to get people inside the company to work with those outside the company, and it will require the CEO to reach out to partners to encourage them to seize opportunities.

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